BlackRock Prefers Developed Markets Amid Climate-Change Fight


BlackRock Inc. is ramping up its preference for developed markets because of efforts to combat climate change, and touting the risk for developing nations and their more carbon-intensive economies.

Technology and health-care stocks will prove more resilient to the shift, and those industries make up a comparatively bigger slice of advanced markets, according to Jean Boivin, head of BlackRock Investment Institute, the research arm of the world’s largest asset manager. The energy and utilities sectors, meanwhile, may face structural challenges as investors become more climate aware -- weighing on high-yield debt returns as well as some developing-nation bonds, he added.

“The climate transition will be a persistent driver of these returns going forward, so it needs to be reflected in our expectations,” Boivin said during a webinar Thursday. “The greener sectors that are at the forefront will have a significant edge.”

BlackRock Chief Executive Officer Larry Fink has amped up his focus on climate change and efforts to ameliorate it. Earlier this month, the company -- whose trillions of dollars of investment money make it the world’s biggest shareholder -- told companies how it wants them to address climate risk.

BlackRock Prefers Developed Markets Amid Climate-Change Fight

The money manager is challenging the notion that tackling climate change could drag on global economic growth, betting that a transition to a net-zero economy can lead to a cumulative output gain of nearly 25% over the next 20 years when compared to a scenario in which no changes are made to prevent climate change.

“Sustainability creates both risk and opportunities,” Simona Paravani-Mellinghoff, BlackRock’s global chief investment officer of solutions within multi-asset strategies, said during the webinar. “I cannot emphasize enough how critical a step this is. We should monitor ESG exposure as we do with every other driver of portfolio performance.”

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