Philipp Hildebrand, BlackRock’s Vice Chairman, and Rachel Lord, Head of Europe, Middle East and Africa discuss the company’s pivot towards sustainable investing.
• Blackrock discuss the drivers behind its January announcement of a significant push towards sustainable investing.
• They see global warming problem as the most significant challenge facing humanity in the next decades. But policy and private sector behaviour will enable the transformation away from carbon. The result will be changes in global capital allocation and relative prices which will be reflected in investment portfolios.
• Europe is very supportive of the shift to ESG.
• Finance industry can be catalyst for, or amplifier of, change. It’s an opportunity for the industry to redeem itself from the crisis if they get it right on climate change.
• More generally, Blackrock underestimated the extent to which clients want transparency. They will report on engagements on key votes, including on climate-related issues but this will take time to play out.
• Blackrock’s ESG focus should put enormous pressure on other asset managers to adapt business models. It will be too disadvantageous not to follow ESG.
• Private/Public initiatives are needed as the significant investments to facilitate transition to low carbon economy required private capital. Blackrock announced a climate finance partnership with French and German government to enhance sustainability.
• No global convergence yet on carbon pricing. But Europe will move ahead on this regardless of US position.
• Hardest piece will be in emerging markets. Allocation to Africa in climate finance initiative partnership but not easy to execute. Must rise to challenges.
• A lot needs to be done. There is no taxonomy around language on sustainability / ESG or broadly established analytics or reporting benchmarks. This makes it difficult to assess risk.
• Stress testing of banks is starting. ECB President Christine Lagarde confirmed climate will be part of the strategic review.
Why does this matter? Blackrock’s January sustainability push with their very clear message that climate risk is investment risk has pushed the ESG conversation forward this year. Much remains to be done on establishing industry-wide standards and increasing knowledge, but companies will now face more pressure for climate-related disclosures and asset managers for the ESG rationale within their investment rationale. [Bullish ESG]
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