NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, December 1, 2015

Last April, two months after being named the first global head for impact investing at BlackRock, Deborah Winshel flew to San Francisco to meet with Ryan LaFond, a hedge fund manager at the firm. LaFond and a team of researchers had spent two years studying whether algorithms used to predict fluctuations in the stock market could also spot a company whose business is doing good. Identifying responsible corporate citizens was part of the reason Winshel left her job as president of the poverty-fighting Robin Hood Foundation; she believes Wall Street has a role to play in fixing some of the world’s most urgent problems.

It’s been about a decade since impact investing has emerged as a strategy, but Wall Street investors have been skeptical, in part because it’s been hard to measure its benefits. LaFond’s team used quantitative data to select a few hundred publicly traded companies whose businesses, ranging from renewable energy to less-toxic pesticides, do good and to measure how much good they actually do. LaFond had more persuasive information to share with Winshel: When the companies’ stocks were combined into an index, it outperformed the Russell 3000 benchmark.

“That was exactly the thing that made me think BlackRock could be a big player in this market,” Winshel says. In mid-October, six months after her visit to San Francisco, BlackRock rolled out the Impact U.S. Equity Fund, one of several equity funds based on LaFond’s work. They’ve since brought in more than $500 million from U.S. and European investors. “We’re the hedge fund guys, and she’s the do-gooder, and we’re coming together to build something,” LaFond says.

In less than a year, Winshel has become one of the world’s most influential impact investors, helping set strategy for $7.5 billion of funds for BlackRock. In addition to LaFond’s stock fund, the company has $6 billion invested in renewable energy and an additional $1 billion in companies working to address the effects of climate change. In a May survey of 146 investors, the Global Impact Investing Network (GIIN), an industry trade group whose members include financial institutions large and small, said $10.6 billion was put toward impact investments last year, with an additional $12.2 billion projected for 2015.