ESG Unlocked: Europe out in front - Page 14

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How to navigate the lowcarbon transition with ETFs

As much as $ 100trn in investment could be required to rebuild a net-zero global economy
Author : iShares by BlackRock

Investors should always consider new information as part of their investment process – be it on the likely path of interest rates , company earnings or stock valuations . That list now needs to include the transition towards a decarbonised economy . We believe this transition will have a significant impact on investment portfolios as we witness a massive reallocation of capital and reshaping of global economies .

The speed and shape of the transition are deeply uncertain , and it will take decades to play out . An estimated $ 50trn to $ 100trn in capital investment is required to rebuild a net-zero global economy ( one that emits no more greenhouse gas than it removes from the atmosphere ) by 2050 . 1
Many investors are reallocating investments in their portfolios to navigate this tectonic shift and to position for the economy ’ s transition to net zero .
However , many investors struggle to construct a sustainable portfolio that ’ s right for them . As an asset manager , BlackRock ’ s fiduciary role includes helping our clients navigate this economic transformation .
Finding your path
In 2021 , we conducted investor research across 175 UK and European investors and 260 portfolios to understand investors ’ approach to the sustainable transition . 2
Three big challenges occupied investors ’ minds : portfolio construction , product selection and data and analytics .
Challenge 1 : Portfolio construction : Some 27 % of European investors cite measuring their portfolio ’ s sustainability features as their biggest challenge when adopting sustainability . 3 Investors need a partner to help translate their sustainability goals and commitments into tangible portfolio allocation ideas . BlackRock can act as a partner by helping investors with the following goals : ➡ Evaluate : a portfolio ’ s holistic sustainability profile with a comprehensive suite of sustainable analytics that constantly evolve to address the challenges investors are facing . ➡ Evolve : a portfolio ’ s sustainability metrics with more advanced analyses such as running risk optimization . Evolve your portfolio with sustainable product substitutions across alpha-seeking , factor and index investments . ➡ Build : a new sustainable proposition , based on investor ’ s sustainability objectives and net zero commitments . Challenge 2 : Product selection : To help meet investor demand , a significant number of sustainable funds have launched in Europe in the past year with
14 ESG Unlocked : Sustainable Revolution In Full Swing October 2022