Two of the largest asset managers may be lining up to support environment, social and governance principles. Blackrock CEO’s annual message: “Climate change has become a defining factor in companies’ long-term prospects ... I believe we are on the edge of a fundamental reshaping of finance ... In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”
Blackrock manages $7 trillion.
Fidelity International indicated environment, social and governance principles (ESG) may be hitting a tipping point: “The change can be seen through most sectors and all regions, including areas where ESG interest had previously appeared to stall or be in decline.”
Fidelity manages $2.5 trillion.
McKinsey Institute’s ESG-focused survey of corporate managers and investors found participants were willing to pay a 10% premium to acquire companies adhering to ESG principles.
British Petroleum just announced a target to reach carbon neutrality by 2050 and to increase investments in sustainable energy sources.
Royal Dutch, Total and Repsol SA already have announced similar carbon and sustainability goals.
Last week, Bank of America Merrill Lynch scheduled a conference call focused on ESG and real estate. The moderator for the call is an “ESG strategist” and one participate an “ESG analyst” – new jobs on Wall Street.
Significance of these developments?
For businesses, investing in sustainability could generate higher company valuations. For individuals, ESG-oriented investment funds could produce superior returns. Follow the money.
Like democracies, capitalism may need a crisis to face change.
Tom DeHudyDurango
