Climate change a 'key consideration': BlackRock

Climate change a 'key consideration': BlackRock

Including climate considerations within the investment process is a necessity but does not mean compromising portfolio returns, according to the BlackRock Investment Institute.


The institute's research indicated that climate-aware benchmarks could outperform competitor benchmarks, given the rapid changes in technology and regulation centred on climate change.

“Benchmarks that take climate into account have the potential to perform in line with or better than regular counterparts," the institute said.

“The MSCI Low Carbon Target Index, for example, has modestly outperformed the MSCI ACWI since 2010, MSCI data show."

The same is likely true for climate-proofed portfolios, the BlackRock Investment Institute added, and investors should make climate-proofing a “key consideration”.

The institute found that modifying existing benchmarks and “overweighting green companies and underweighting climate offenders” while keeping the returns profile close to that of the initial benchmark was one way to incorporate climate considerations and protect the portfolio.

Acknowledging that tracking error increased as the modified benchmark became more ‘climate friendly’, the institute nevertheless added that even small changes could have a huge impact.

“It is possible, for example, to cut a portfolio’s carbon footprint by around 70 per cent while keeping the tracking error within 0.3 per cent, our simulation showed,” the institute said.

Read more:

Dividend obsession is a 'myth', says CFS

Financials retain 'neutral' status: Moody's

Global capital shortfall approaching $4tn

Veteran fund manager joins Asset Strategy Forum line-up

More QE on the horizon for Europe: Pimco

 

Climate change a 'key consideration': BlackRock
investordaily image
ID logo
promoted stories

Appointments

investordaily image

AMP names incoming chief risk officer

Jessica Yun

investordaily image

Antares Equities hires new director

Staff Reporter

Brad Fox

Former AFA CEO appointed to boutique board

Staff Reporter

Analysis

investordaily image

Warning lights flashing on Aussie equities

Roy Maslen

investordaily image

What’s in store for the economy in 2018?

Frank Uhlenbruch

ST Wong

Busting common passive investing myths

ST Wong