Investors and asset managers are chasing a new shade of green
strategy+business|Summer 2020
The environment and other aspects of sustainability are becoming top concerns for investment CEOs and their clients.
Olwyn Alexander

The year 2019 was one of cataclysmic fire and rain. Wildfires swept across California, the Amazon, and Australia, and storms and floods deluged parts of six continents — a string of natural disasters that scientists say were caused by the changing climate. And in 2020, the COVID-19 pandemic has coursed through the world.

Historically, events like these — along with other concerns that are included in what Wall Street calls environmental, social, and governance (ESG) issues — haven’t been a major business concern for most asset and wealth management (AWM) firms. As recently as 2016, only 10 percent of AWM CEOs counted themselves as “extremely concerned” that climate change could threaten their business’s growth, according to PwC’s CEO Survey. But that’s changing. In the 23rd Annual Global CEO Survey, which was released in January 2020, that share rose to 25 percent, and 62 percent of AWM CEOs expressed some level of concern about the climate. They were similarly worried about income inequality and social instability. Now, in response to the coronavirus pandemic, a PwC survey of chief financial officers shows that as of April 6, 73 percent of respondents believed the outbreak could have a significant impact on their business operations.

In January 2020, the world’s largest asset manager, BlackRock, announced in a letter to clients that it would place sustainability, particularly with respect to global warming, at the center of how it “manages risk, constructs portfolios, designs products, and engages with companies.” The company’s goal, ultimately, is to supplant its portfolio of passively managed funds with sustainable alternatives; to reduce ESG risks in its actively managed assets, including by divesting from coal production; and to push portfolio companies to completely disclose how they are managing these risks.

Of course, many smaller investment firms specialize in sustainable investment, and most of the trillion-dollar investment managers also offer some ESGdriven products. Last June, France’s Crédit Agricole announced its intention to fully withdraw from financing coal power and shift investment capital to clean energy sources, including through its US$1.6 trillion asset management subsidiary Amundi. But should BlackRock fully implement this ESG strategy across the $7 trillion in assets it manages, it would set a new standard for the industry.

What’s driving this strengthened commitment to ESG? To be sure, climate activism is surging. Swedish student–activist Greta Thunberg and her confederates around the world have captured much of the attention, but various other campaigns have also put pressure on asset managers.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM STRATEGY+BUSINESSView All

Transforming information into insight

Focus on six organizational elements to build a world-class data and insights capability.

8 mins read
strategy+business
Winter 2020

THE URGENT NEED FOR SOPHISTICATED LEADERSHIP

The pandemic has highlighted a series of paradoxes inherent to the work of leaders. What comes next will depend on how well leaders face up to them.

10+ mins read
strategy+business
Winter 2020

The road to successful change is lined with trade-offs

Rather than trying to convince people your change initiative is the right one, invite them to talk openly about what it might take to implement it: the good, the bad, and the frustrating.

10+ mins read
strategy+business
Winter 2020

Sustaining productivity virtually

Maintaining productivity levels among remote employees is an enduring challenge. Here are five ways to help businesses and employees thrive while people work at home.

7 mins read
strategy+business
Winter 2020

FORWARD TO normal

Entertainment and media companies are building business models that are resilient to the enduring changes in consumer behavior ushered in by COVID-19.

10+ mins read
strategy+business
Winter 2020

How leaders can promote racial justice in the workplace

Embrace four principles to turn today’s diversity, equity, and inclusion initiatives into sustained progress.

9 mins read
strategy+business
Winter 2020

CREATING THE OFFICE OF THE FUTURE

In a remodeled world, it is vital for companies to reinvent ways of working.

10+ mins read
strategy+business
Winter 2020

Consumer companies must take leaps, not steps

As shoppers show how quickly they can adapt to external shocks, retailers will need to radically reconfigure their business models.

7 mins read
strategy+business
Winter 2020

Businesses can fast-track innovation to help during a crisis

“Unrealistic” timelines can actually work. Here’s how.

5 mins read
strategy+business
Winter 2020

Agility and experience management work better together

Many companies achieve early wins with separate transformational efforts, then stall. But if combined and enhanced using “return on experience,” or ROX, measures, these two programs can unlock each other’s potential.

7 mins read
strategy+business
Winter 2020
RELATED STORIES

Shareholders Push for Change

Resolutions filed with companies this year cover a range of environmental, social and governance issues.

4 mins read
Kiplinger's Personal Finance
April 2022

Engine No. 1's Grancio: ‘People Will Appreciate an Economic Argument'

ENGINE NO. 1 sent shock waves across corporate America in May when the fledgling investment firm won a boardroom battle with Exxon Mobil Corp., securing three seats on the oil and gas giant’s board after purchasing only about $40 million of its stock.

6 mins read
Bloomberg Markets
October - November 2021

Examine How Market Upheaval Is Affecting Company Results

The coronavirus pandemic sent huge waves of volatility through markets in 2020. How did that affect the financial results of companies that interest you?

3 mins read
Bloomberg Markets
February - March 2021

The Secret Of BlackRock's Success? Cautious Calculation

Ten years later, its shrewd moves are a master class in capitalizing on others’ risk

5 mins read
Bloomberg Businessweek
September 03, 2018

TATA POWER TO CREATE COMPREHENSIVE RENEWABLE ENERGY PLATFORM RAISING RS 4,000 CR

The Tata Power Company and BlackRock Real Assets-led con-sortium, including Mubadala Investment Company, have entered into a binding agreement to invest in Tata Power’s renewable energy subsidiary, Tata Power Renewable Energy.

1 min read
Construction Week
May 2022

CORPORATES GET REAL ON CLIMATE CHANGE TARGETS

CLIMATE change used to be the stuff of placards and protests outside company headquarters. Now, the action has moved into the boardrooms, as shareholders and investors demand definitive targets to reduce emissions.

4 mins read
The Morning Standard
April 17, 2022

BlackRock-led consortium to invest Rs 4K cr in Tata Power Renewables

OVER THE NEXT FIVE YEARS, THE COMPANY AIMS TO ACHIEVE A PORTFOLIO OF OVER 20 GW OF RENEWABLES ASSETS

1 min read
The Free Press Journal
April 15, 2022

Mad women go out in the rain

The rain-soaked, deserted Cheddar Gorge proves exhilarating

3 mins read
Country Life UK
March 09, 2022

Black Rock tries to calm oil sector over greener investment

BlackRock 'does not pursue broad divestment from sectors and expects to be a long-term investor in carbon-intensive sectors

2 mins read
The Guardian
March 09, 2022

“QUE TODOS HABLEN EL MISMO IDIOMA EN SUSTENTABILIDAD”

PARA BLACKROCK, ES FUNDAMENTAL QUE LAS EMPRESAS MEXICANAS ADOPTEN CRITERIOS “ESG” EN SUS ESTRATEGIAS DE NEGOCIOS, PUES, HOY, LA INVERSIÓN SE MUEVE A UN RITMO SUSTENTABLE.

4 mins read
Forbes México
Noviembre 2021