Wespath and BlackRock Collaborate to Launch New Low-Carbon Economy "Transition Ready" Investment Strategy
Lisa Drew, Wespath Benefits and Investments
Ed Sweeney, BlackRock
October 11, 2018
Glenview, Illinois – Wespath Benefits and Investments (Wespath) and BlackRock, Inc. have launched a new approach to low-carbon investing. The “Transition Ready” strategy seeks to deliver long-term competitive financial returns relative to standard performance benchmarks and directs capital to companies best positioned to facilitate the global transition to a low-carbon economy. The strategy was co-designed by Wespath and BlackRock, and incorporates proprietary data and insights to evaluate a company’s transition readiness.
Wespath, which invests over $23 billion on behalf of United Methodist pension participants and institutions, has committed $750 million across US domestic and International equity market accounts, replacing a portion of its market cap-weighted index exposures. “As a fiduciary, we believe companies positioned to benefit from the transition to a low-carbon economy are attractive long-term investments,” said David Zellner, Wespath’s Chief Investment Officer. “Capturing a return premium associated with these risks and opportunities required a new and innovative approach.”
The launch marks another offering of BlackRock’s expanding sustainable investing practice. “We start with the premise that the future will look different than the past across a number of sustainability-related issues,” said Brian Deese, Global Head of BlackRock Sustainable Investing. “The transition to the low-carbon economy is one of these issues that presents a potential for significant disruption across the energy, transportation, building and consumption sectors. What we have designed together is a new approach to low-carbon investing that seeks to deliver enhanced financial performance and improved environmental characteristics in our clients’ portfolios, through a risk-managed approach.”
The strategy was built on the investment conviction that public policies, emerging technologies, and physical impacts associated with concerns about climate change are creating winners and losers across companies, industries and countries, impacting long-term investment performance. Wespath and BlackRock developed a new investment framework and “Transition Readiness” methodology to evaluate a company’s core business involvement and natural resource management practices associated with the low-carbon transition. The framework seeks to reflect a company’s future preparedness for the transition and considers a variety of measures, including a company’s exposure to energy production, carbon efficient technology, energy management, water consumption and waste production.
Kirsty Jenkinson, Managing Director of Sustainable Investment Strategies at Wespath, added, “The forward-looking nature of this strategy complements our long-standing approach to sustainable investing and offers a unique extension to the current market of low-carbon investment offerings. This strategy combines our investment outlook regarding the low-carbon economy with new quantitative methods to assess a company’s financial and environmental performance, and management of both risks and opportunities.”
BlackRock will manage the new Transition Ready investment strategy in separate accounts for Wespath, and will offer the strategy to other BlackRock institutional clients. Wespath’s participants and institutional clients will benefit from this strategy by investing in funds managed by Wespath. BlackRock and Wespath plan to focus next on developing enhanced Transition Ready analytics and additional strategies.
Wespath Benefits and Investments (Wespath) is a not-for-profit agency that has been serving The United Methodist Church for over a century. In accordance with its fiduciary duties, Wespath administers benefit plans and invests over $23 billion in assets for over 100,000 participants and over 100 United Methodist-affiliated institutions (as of June 30, 2018). Wespath maintains the largest reporting faith-based pension fund in the world, which is among the top 100 pension funds in the United States. Wespath’s investment process proactively incorporates the consideration of environmental, social and governance (ESG) factors into investments across asset classes and in the selection of external asset managers. Wespath's activities promoting sustainability include proxy voting, corporate and public policy engagement, and positive impact investing.
BlackRock helps investors build better financial futures. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. As of June 30, 2018, the firm managed approximately $6.3 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com | Twitter: @blackrock | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock.