This article was originally published on ETFTrends.com.
BlackRock is aiming to becoming a global leader in "sustainable investing" as the world's largest asset manager highlights its line of ETFs that cover environmental, social and governance principles.
“Sustainable investing will be a core component for how everyone invests in the future,” Larry Fink, BlackRock chairman and chief executive, told the Financial Times. “We are only at the early stages.”
Fink projected that assets in these sustainable investments or ESG-related ETFs will grow to more than $400 billion in a decade from the current $25 billion.
BlackRock's iShares offers some of the largest and oldest ETFs that cover the sustainable investment theme. For example, the iShares MSCI KLD 400 Social ETF (DSI) has close to $1.2 billion in assets under management. DSI include sstocks with strong environmental, social, and governance records in areas that are relevant to their industries, including carbon emissions, labor management and corporate governance.
Additionally, the provider has a line of "ESG Optimized ETFs" such as the iShares MSCI USA ESG Optimized ETF (ESGU) , which tracks U.S. stocks taken from the MSCI USA Index that have positive environmental, social and governance characteristics; along with the iShares MSCI EAFE ESG Select ETF (ESGD) , which tracks developed markets in Europe, Australasia and the Far East; and iShares MSCI EM ESG Select ETF (ESGE) , which follows emerging market companies.
BlackRock is trying to capitalize on the growing demand to invest more responsibly. However, Fink argued that sustainable investing did not mean investors had to sacrifice returns, adding that the group’s in-house research department was working with MSCI to produce quantifiable data backing up that view.
ESG factors have been and are important to the basic understanding of a business and can be additive to investment performance since ESG characteristics also matter in a very real economic sense. ESG miscues can even harm a company’s ability to create economic value.
The iShares ESG-related ETFs' underlying indices follow a quantitative selection process to exclude companies with unexpected costs in the mid- to long-term. The underlying index can calculate each company’s exposure based on business segment and geographic risk and analyzes the extent to which companies have developed strategies and programs to manage ESG risks and opportunities.
“We are going to see evidence over the long term that sustainable investing is going to be at least equivalent to core investments. I believe personally it will be higher,” Fink said. “When I go to the Nordics, the Netherlands, and France, it is almost a requirement to look at all forms of investment with sustainability in mind. Demand is getting greater and greater.”
For more information on socially responsible investments, visit our socially responsible ETFs category.
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