From ‘temperature aligned’ investment products to outlining a plan to reach ‘net zero’, here are 4 highlights from Larry Fink’s letters to CEOs and BlackRock clients regarding ESG

Charte Photography/Shutterstock

In his letter to clients, Fink identified a key challenge that will soon face all investors — in order to make long-term asset-allocation decisions, clients will need information on the “decarbonization pathway” of their investments.

This means helping clients understand how the value of their investment portfolios may change as the world tackles global warming by reducing greenhouse gas (GHG) emissions in line with climate goals.

Asset managers have long grappled with solidifying methodologies to build climate-aware investment products and measure how portfolios align to science-based climate targets.

While Fink categorized the process as “painstaking”, he acknowledged the crucial importance of providing clients with sustainable investment offerings and the full picture on how their portfolios will fare in a net-zero world.

BlackRock’s solution to this challenge is introducing a new line of “temperature aligned” investment products and services.

“Temperature alignment is a measurement of the global temperature change consistent with a portfolio’s holdings. Methodologies for measuring temperature alignment are constantly evolving, based on new research and data specific to particular sectors and regions.” Fink wrote.

In 2021, BlackRock will launch investment products with explicit temperature alignment goals. In order to assist clients with net-zero commitments, a subset of BlackRock’s new products will be aligned to a net-zero pathway.

BlackRock will also publish a temperature-alignment metric for existing public equity and bond funds, based on data availability.

In order for clients to meet climate objectives and net-zero goals, they require both climate-focused investments and the technology to track the progress of their portfolios.

Using their recently launched tool Aladdin Climate, BlackRock is hoping to set the standard for providing clients with climate-focused portfolio reporting that “translate climate science into portfolio returns,” wrote Fink.

“Over time, this will allow investors to calculate security- and portfolio-level ‘climate-adjusted’ values, track a portfolio’s trajectory towards net zero, and better identify climate risks and opportunities,” wrote Fink.

BlackRock is not only curating a suite of temperature-aligned investment offerings, but also forming industry partnerships to improve the public availability of climate data.