Major Asset Managers Now Hiring ESG Leaders
Although this happened a little over a month ago, it is a trend that I expect to see more in the financial industry. Reuters noted that Brian Deese, the former advisor on climate change and negotiator for the Paris Climate Change Agreement under President Obama, was recently hired by BlackRock as the head of its Sustainable Investing Group. No longer staying in the dark on these issues, many Wall Street firms are recognizing that an increasing number of investors want to do their part in making the future better through their investments.
Wall Street continues to champion ESG (environmental, social and corporate-governance) standards in order to keep the flow of new investors coming in, namely, Millennials, universities and religious organizations looking to align their stocks with their values.
Just as many large investment firms are now doing, BlackRock said that investors should factor climate-change into their decision-making process when it comes to stocks, otherwise they'll have to accept notable inferior returns. Makes sense, right? Why would you want to have advisors keep recommending companies like Equifax and Wells Fargo that inevitably collapse thanks to poor ethics, and oil companies collapse because they didn't make a plan to diversify into other resources.
However, growth in the ESG space, at least for BlackRock, has been somewhat muted in recent years. Most likely because (like many asset managers) they don't quite know or understand what they're doing. BlackRock’s sustainable unit currently manages $195 billion, down from more than $225 billion in February 2015, when BlackRock first announced plans to coordinate its efforts in the space. According to BlackRock's spokesperson, "Growth in products that pursue social goals and investments in companies with strong ESG track records have partially offset a decline in assets in investments that screen out certain stocks or bonds."
Bringing Deese on board is a crucial first step for the firm to get back on track in the growing space. He will enlist specialists in climate and use of natural resources and add a chief investment officer specifically for sustainable investing to work with BlackRock’s portfolio managers.
This is something to look out for in the industry, and also it's worth noting that one should be getting into the ESG space soon, rather than later.