BlackRock Inc. launched a new business unit focusing on a growing demand for impact investing, or strategies that have social and/or environmental objectives.
To run the new business, BlackRock Impact, the firm recruited Deborah Winshel as managing director and global head of impact investing. She had been president and chief operating officer of the Robin Hood Foundation, a New York-based philanthropic organization.
Money managers with socially responsible investing capabilities and those that address environmental, social and governance concerns are nothing new. Firms large and small have been engaging in such practices for years, BlackRock included. But this marks the first time a giant manager has established an entire business unit focused on impact investing, which shows that investor demand is growing.
Ms. Winshel noted “impact investing has been in existence for a while at BlackRock,” noting that the firm has approximately $225 billion in assets “under this umbrella.”
But she added “tremendous growth in demand” prompted BlackRock’s Chairman and CEO Laurence D. Fink to decide “it would make sense to create a global platform that could deliver these products to our clients in all geographies.”
Mr. Fink called the unit “another area where we've been building out our capabilities … to meet the growing demand from investment offerings that have a measurable, positive, social impact” during the firm’s April earnings call. He added that BlackRock Impact “will truly unify the firm's approach to impact investing.”
In addition to guiding clients on portfolio construction within impact investing guidelines, Ms. Winshel is also looking to leverage BlackRock’s quantitative capabilities to measure the social benefits of the companies in which BlackRock Impact invests. BlackRock Impact is also developing a scoring system that measures and grades the companies’ social benefits, which it will publish in conjunction with the strategies’ performance numbers.
“The hallmark of the BlackRock platform will be around measurement,” she said. “Quantitative data will allow us to create products that have very clear and specific outcomes that investors can measure. So this reliance on data is going to be a real driver of impact investing.”
Interest in environmental, social or governance is on the rise. Results of a survey of U.S. foundations by Cambridge Associates LLC found that 17% use ESG criteria in their investment decision-making, up from 9% in 2011. The figure rises to 35% for those with more than $500 million in assets.
A report from the US SIF Foundation said U.S.-domiciled assets in sustainable, responsible and impact investments totaled $6.57 trillion at the beginning of 2014, an increase of 76% over two years. The AUM accounts for nearly 18% of the total $36.8 trillion in assets in U.S.-domiciled funds.
“You’re seeing much more interest in this area,” said Jeffrey Margolis, a founding partner of the Roslyn Heights N.Y.-based money management consulting firm Margolis/Kass Advisors Inc. “The younger generation in particular has a passion for this.”
The launching of BlackRock Impact comes at a time when a number of college and university endowments are either divesting from fossil-fuel companies or are under pressure from student and faculty groups to divest from such companies.
For example, the boards for the endowments of Georgetown University, Syracuse University and Goddard College all decided to divest from fossil fuels this year.
Also this year, the student-run organization Divest Harvard is urging fellows of Harvard Corp. and managers of Harvard Management Co. to divest from major oil, gas and coal companies. More than 130 New York University faculty members called for fossil-fuel divestment in an open letter sent to NYU President John Sexton in March. And in January, more than 300 tenured professors at Stanford University are calling on the school to divest all fossil-fuel investments in its $21.4 billion endowment.
“Investors are increasingly under pressure to invest in companies that behave responsibly,” said Ms. Winshel. “We see a huge demographic shift (that) companies are feeling.”
After announcing the launch of BlackRock Impact in April, Bain Capital LLC announced plans to launch an impact investing-focused fund. And in June, Goldman Sachs Asset Management appointed Managing Director Hugh Lawson to oversee expanded global ESG efforts.