Do you share BlackRock CEO Larry Fink’s “vision?” BlackRock wants investors committed to a “shared vision to transfer to a low-carbon economy.” The company’s ESG guru for its iShares subsidiary, Sarah Kjellberg explained how she’s implementing this vision to ETF Trends. They reported on the interview:
Looking at how investors have integrated climate awareness into their portfolios, Kjellberg explains how BlackRock has integrated climate risks into their capital market assumptions.
Kjellberg adds, “while we’re seeing institutions in the world take pretty significant action to address climate risk, we’re just now starting, we’re just now starting to see advisors really integrate those climate considerations.”
It’s looked at in a few ways, as Kjellberg notes. The first is broadly considered through ESG within core allocations. With advisors now thinking about moving away from traditional market cap-weighted exposures and ESG ETFs that continue to provide broad market exposures, there’s a better chance of achieving a more sustainable outcome. It means gaining a reduction of carbon intensity anywhere between 35-60%.
Another way is tactical allocation to themes. This is what investors are generally thinking about in sustainability when it comes to ETFs. Themes such as clean energy, electric vehicles, and other areas that can be embraced by larger wealth teams allow for consideration for a future portfolio that is a combination of thematic/trending ETFs alongside ESG.
Looking at some of the carbon ETFs recently launched by BlackRock, the BlackRock U.S. Carbon Transition Readiness ETF (LCTU) and theBlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) are low carbon transition ETFs. These serve as an example of BlackRock’s commitment to a shared vision to transfer to a low-carbon economy and making the strategy available to all investors. These funds attempt to capture the risks and opportunities associated with this long-term transition in one strategy.
As Kjellberg explains: “What we’re seeking to do is measure a company’s exposure and their management to climate transition. So, the portfolios will tilt towards those companies that are going to be better positioned.”
Action Line: Are you investing because you want to boost Larry Fink’s EGO and hasten the low-carbon transition? Or are you investing because you want to earn dividends and income to build a portfolio that you can spend on yourself and your family in retirement? If you don’t mind funding Larry Fink’s vision, that’s fine, you invest, he wins. But if you want to prepare your family’s finances for the long term, I would love to talk with you.
