BlackRock’s Hildebrand Predicts ‘Vast Reallocation’ Into ESG
(Bloomberg) -- Global capital markets are about to witness a seismic shift of capital into products that promise to support environmental, social and governance goals, according to Philipp Hildebrand, the vice chairman of BlackRock Inc.
“The long-term story is clear,” Hildebrand said in an interview on Friday with Bloomberg Television’s Francine Lacqua. “We’re going to continue to see a vast reallocation of capital toward sustainable products.”
The prediction comes as the ESG market -- already estimated at more than $35 trillion -- faces growing scrutiny from regulators and investors following claims of greenwashing at major asset managers. Hildebrand acknowledged that there continues to be a lack of clarity around what actually constitutes an ESG asset; he says BlackRock’s response is to be “transparent” in its product descriptions, so clients know what they’re buying.
“We’re still in a world where we don’t have perfect standards, that’s going to take some time,” Hildebrand said.
BlackRock, the world’s largest asset manager with $9.5 trillion in client money, plans to expand its range of ESG products, Hildebrand said. The firm is already the biggest provider of ESG exchange-traded funds as investors increasingly look for cheaper, passive strategies within sustainability.
With more ESG money flowing into strategies that aren’t actively managed, some in the industry argue that there’s a greater risk of greenwashing. That’s amid a growing debate around what constitutes real ESG fund management, in the absence of a clear, universal definition.
“Our job as an asset manager is to increase the scope of our product offering, ensure that it’s transparent and continue to innovate together with the index providers to make sure we can offer more choices,” Hildebrand said.
As the market for ESG continues to grow, regulators have started to police sustainability claims more aggressively. In Europe alone, asset managers were forced to strip the ESG label of $2 trillion in the two years through 2020, in anticipation of stricter regulations. Since March, the industry also has had to adapt to the European Union’s Sustainable Finance Disclosure Regulation, which was designed to crack down on greenwashing.
In the U.S., the Securities and Exchange Commission has made clear it will no longer tolerate inflated ESG claims. Investors were forced to acknowledge the new regulatory landscape in late August, when the world learned that both the SEC and Germany’s regulator, BaFin, were investigating the asset management arm of Deutsche Bank AG. According to its former sustainability head, the ESG commitments were exaggerated. The unit, DWS Group, has refuted the allegations.
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