BlackRock Incorporating ESG Risk into Valuation System

Sherry Rexroad, chief investment officer at BlackRock Global Real Estate Securities, joined for a video interview at NAREIT’s 2017 Leader in the Light Working Forum at the Hilton Austin in Austin, Texas.

BlackRock is making more of an effort to engage with companies on environmental, social and governance (ESG) issues, according to Rexroad.

“Things are furthest along with the governance piece,” she noted. However, BlackRock is also seeking to incorporate environmental and social aspects into the valuation process.

“We’re trying to incorporate the risk into our valuation system, as well as what the potential impact to cash flows can be. A lot of people in the investment community are moving in that direction, and that’s why you’re seeing such a demand for better environmental data,” she observed.

Rexroad also commented on the issues created by having multiple sources of ESG data.

“I really can’t find the right data source,” she said. Rexroad pointed out that much of the available ESG data is set within the parameters of a particular vendor’s template, “and it creates a huge burden for the REITs to provide the data correctly.”

BlackRock is looking at ways to improve its incorporation of data from the Global Real Estate Sustainability Benchmark (GRESB), which is “probably most accurate in the eyes of the REITs,” Rexroad said. However, BlackRock also receives ESG data from a number of other providers, and in some cases, the data is not reviewed by the companies, according to Rexroad.

Rexroad said she sees a “huge opportunity” for investors and companies to try to create a more unified template for data collection.