Here’s what the great American fund manager Larry Fink wrote in a client letter with the title Sustainable investment: It’s a long game!
The epidemic has accelerated certain structural trends in markets, such as sustainability, but it has also underestimated risks related to sustainability such as resilience of distribution and supply chains.
“Transformation increases strength.”
But in the long term, green stocks are constantly benefiting from new policy decisions, particularly in developed countries, which means that the shift to sustainability increases strength and speed in the long term, although the ongoing dynamic restart of economies around the world favors cyclical stocks. .
In 2021, the traditional energy sector will triumph, but that does not change Blackrock’s mainly positive view that green stocks are yielding long-term returns. This is why Blackrock has chosen not to focus on short-term returns.
‘Assets are getting more expensive’
Larry Fink believes climate change is one of the main reasons green stocks drive long-term growth.
He writes, “After a long transition to a low-carbon economy, the underlying high-sustainability assets will become increasingly expensive, while other assets will be cheaper, as we see them.”
Blackrock’s updated assumptions about the return on strategic portfolios now included the impacts of climate change, especially the green transition to a world seeking to gradually reduce carbon dioxide emissions.
Leveraging technology and healthcare
Particularly interesting sectors in this development that, according to Blackrock, are benefiting from technology and healthcare. The losers become “carbon-intensive” sectors such as energy. This leads Blackrock to the conviction that developed markets are strategically better than emerging markets.
The logic conclusion is that the transition to sustainability is still at an early stage, and that other growth factors continue to benefit from a strong economic reboot after the pandemic.
But we believe that the shift in investor preferences for sustainable assets is resilient, and is accelerating with political and regulatory changes. That’s why we have strategically conditioned preferences for companies and sectors that can benefit from moving to a more sustainable future, ”writes Larry Fink.