Financial Planning

Though a new Labor Department proposal could hinder the use of ESG factors in retirement plans, the world’s largest money manager isn’t stepping back from sustainable investing.

In fact, BlackRock is upping its commitment.

By the end of this year, 100% of its portfolios will integrate ESG metrics, up from 70% at the end of April, CEO Larry Fink said. The asset manager will also produce data and analytics that underscore the investment value of taking into account climate change, according to Fink, who pointed to threats posed by natural disasters.

BlackRock to double down on ESG despite new DoL proposal -oilandgas360

“As we sit here today, we have raging fires. We have a hurricane. We have five tropical storms in the Atlantic. We have had record heat throughout the world,” he said. “We are seeing more and more examples of how climate change is becoming investment risk.”

Under the department’s proposal, fiduciaries who use ESG funds in retirement plans will have a compliance burden to confirm they only considered pecuniary factors when selecting funds for retirement plans.

A vast majority of commenters opposed the proposal.

The department’s proposed regulation comes amid surging interest in ESG among investors. ESG funds reported net inflows of $71.1 billion in April and June, according to UBS Global Wealth Management.

“Our job is to educate. Our job is to persuade,” Fink said.

Although BlackRock is upping its commitment to sustainable investing, it says it will not exclude non-sustainable products or indices. Fink acknowledged that move has drawn criticism from environmentalists. Still, clients are taking to ESG investments, he said, noting that Blackrock had seen record inflows into sustainable products in the first six months of the year.

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