BlackRock Combining Traditional Investing with ESG Insights to Improve Long-Term Outcomes
10/02/2020 | by Sarah Borchersen-Keto

Sherry Rexroad, managing director, global real asset securities at BlackRock, participated in a video interview filmed in conjunction with Nareit’s REITworks: 2020 Virtual Conference.

BlackRock operates from a simple definition of sustainable investing, Rexroad said, as it combines traditional investing with environmental, social, and governance-related (ESG) insights to improve long-term outcomes for clients.

“The companies that are most successful are those that create a strategy that addresses the needs of their stakeholders, clearly articulate that strategy, and are consistent across their communication channels,” Rexroad said.

As to how BlackRock identifies and encourages the changes it wants to see as long-term institutional investors, Rexroad said the firm understands its ability and responsibility to encourage progressive change. BlackRock publishes guidelines and engages with management teams and boards to encourage responsible ESG policies and reporting, she said.

Meanwhile, as an active REIT investor, Rexroad said her team is trying to evaluate both the financial and risk impact of ESG policies. “That risk return link influences a company’s cost of equity and hence our estimate of value,” she said.

Rexroad noted that from a social perspective, new questions that are likely to emerge for companies include: what have you learned from the current social unrest and how are you measuring the success of your efforts to improve?

An important consequence of substantial preferences for sustainability, Rexroad said, is that they ultimately affect the type of companies that comprise the investable equity universe. “Over time, this will drive the company’s cost of capital so companies with low perceived levels of sustainability may switch to more sustainable practices to improve valuation,” she noted.