The NZ$12.3 trillion BlackRock will roll out a series of new ‘temperature-aligned’ funds and low-carbon index alternatives this year as part of an ambitious climate change corporate agenda.
In a letter to clients posted last week, BlackRock says the “climate-oriented investment options” slated for release this year will include “products with explicit temperature alignment goals, to allow clients to achieve their net zero objectives”.
Furthermore, the world’s biggest investment manager says “we will launch broad-market, low-carbon transition strategies that can be easily substituted for market cap weighted index exposures”.
“We will also introduce an explicit ‘climate objective’ for new sustainable funds; for example, carbon reduction targets or a tilt towards issuers better prepared for the energy transition,” the letter says.
BlackRock plans to help retail investors build more flexible portfolios, too, via recently purchased subsidiary, Aperio. The global investment behemoth paid over US$1 billion in cash last November for Apeiro, which helps ultra high net worth investors (and institutions) build and manage index-based “personalized public equity portfolios that reflect each client’s unique tax, risk, and values preferences”.
“This acquisition will enable us to help investors access the customization that traditionally was only available to the largest institutional clients,” the BlackRock letter says. “Over time, it is our aspiration to bring this customization technology to even more investors.”
Along with the new products, BlackRock says it will ramp up climate and environmental, social and governance (ESG) data standardisation and transparency through the Aladdin risk management platform this year.
The manager will also pursue an enhanced ‘investment stewardship’ role, wielding its significant financial heft to push for ESG improvements in underlying companies including a commitment to achieving ‘net zero’ emissions by 2050.
BlackRock has previously faced criticism for a hands-off approach to corporate engagement through its large passive stock holdings but the manager vows in the letter to increase “the role of votes on shareholder proposals in our stewardship efforts around sustainability”. The firm will take a more aggressive ESG stance through its active funds, too, the letter says.
Post the letter, some large US public pension funds urged BlackRock to follow its own advice on corporate transparency by revealing details of the manager’s political spending and lobbying activities.
In a companion note sent to CEOs of large companies, BlackRock chief, Larry Fink, says the “tectonic shift” in capital markets towards sustainability has developed further during the COVID-19 era.
“As more and more investors choose to tilt their investments towards sustainability-focused companies, the tectonic shift we are seeing will accelerate further,” Fink says. “And because this will have such a dramatic impact on how capital is allocated, every management team and board will need to consider how this will impact their company’s stock.”
Fink urges corporate leaders to engage with ESG issues, including the net zero target, and wider ‘stakeholders’ or risk losing investor confidence.
“The world is still in crisis and will be for some time,” he says. “We face a great challenge ahead. The companies that embrace this challenge – that seek to build long-term value for their stakeholders – will help deliver long-term returns to shareholders and build a brighter and more prosperous future for the world.”
BlackRock has several institutional mandates in NZ, including with the NZ Superannuation Fund and a new role managing the assets of the AMP NZ wealth business (including its KiwiSaver scheme). The manager’s iShares exchange-traded fund range is also popular among retail investors in NZ.