In looking toward the future, Ms. Weinberg expects ETFs to expand the options for sustainable investing, due to the accessibility, liquidity and lower transaction cost of ETFs.
“From an institutional perspective, we used to feel that the European markets were much more focused on this, partly from a regulatory and partly from a cultural perspective. But now, almost every client meeting, whether it’s in Asia, it’s in Europe, the U.S., or in Latin America, sustainability as a theme comes up,” Ms. Weinberg said.
Portfolios will continue to tilt toward sustainability as stakeholder preferences evolve, she said, such as Harvard University’s endowment moving its investments away from fossil fuels.
“We call it ‘a value alignment’ or ‘intentionality,’ where constituents or stakeholders want to see demonstrated intention toward an outcome in an institution’s investment book,” Ms. Weinberg said.
Although the desire for sustainable investing is growing, the meaning of “sustainable” and the desired portfolio impact is more personalized.
“A few years ago, institutions were asking for ‘ESG.’ Now, they’re much more specific. They’ll say, ‘I have decarbonization goals,’ and they may be different. They may have specificity in how to measure the decarbonization. We have clients who are focused on sustainable development goals, and they want to tilt their portfolios that way. Some of our clients may have diversity goals related to their investment portfolio and tilt that way. So it is no longer, ‘I would like to improve my sustainability scores across ESG.’ It’s very specific,” Ms. Weinberg said.
In-depth research is critical to creating index products to meet these diverse and evolving needs, she said. It is “acquiring the rights to certain datasets, evaluating the datasets, integrating them into our systems, incorporating them into our risk metrics and deriving insights to drive a portfolio that is customized to our institutional clients. It’s not indexed in the same way we think of an index. It is customized portfolios for institutions,” she said.
BlackRock managed $3.02 trillion in ETFs and ETNs as of June 30, a 32.46% increase over the previous year.
BlackRock was the largest manager of total worldwide indexed AUM in P&I’s universe, with assets rising 33% to $6.29 trillion over the year ended June 30.