I believe it is similar to insulating steam pipes. The goal is to trap the heat in the pipe to minimize heat loss. The insulation is cool compared to the contents of the pipe. This gets the heat where you want it. The radiator for the steam, the exhaust tips for the car. I suspect wrapping (some use powder/ceramic coating to do this) is equal to or more efficient than the shield. I have nothing to back this up though.
2011.5 E90 M3 - Space Gray/Extended Fox Red Leather/Sycamore Anthracite Trim, DCT, ZCP, everything except Moon Roof