Blackrock Impact Investing: A New Era for Sustainable Finance

Blackrock, a global investment management company, is making a significant shift towards impact investing. They've announced plans to increase their sustainable investments to $1 trillion by 2030, a move that will have a substantial impact on the finance industry.

This move is a response to growing demand from clients who want to see their investments make a positive difference. Blackrock's clients are increasingly looking for investment options that align with their values and contribute to the greater good.

Blackrock's commitment to impact investing is a major step forward for the finance industry. It's a recognition that long-term financial returns and positive social and environmental outcomes are not mutually exclusive.

By prioritizing impact investing, Blackrock is setting a new standard for the industry, one that prioritizes both financial returns and positive outcomes.

Impact investing is a way of investing that aims to generate both financial returns and positive social or environmental impact. It's a growing trend that's changing the way people think about investing.

By 2020, impact investing had grown to over $1.3 trillion in assets under management globally. This is a significant increase from the $120 billion in 2010, showing the rapid growth of the impact investing market.

Impact investors are looking for ways to make a difference in the world while still earning a return on their investment. This can include investing in companies that promote renewable energy, support affordable housing, or provide financial services to underserved communities.

BlackRock, as one of the world's largest asset managers, has been at the forefront of this trend. In 2018, BlackRock launched its Impact Vision, which aims to help clients achieve their financial goals while also generating positive impact.

Impact investing offers numerous benefits, including the opportunity to reinvest returns in socially beneficial projects or organizations, creating philanthropic leverage unattainable through traditional grantmaking.

Donors and investors are attracted to impact investing because it allows more of their philanthropic money to be leveraged for social or environmental change, and it doesn't require them to hold public ownership in companies that conflict with their grantmaking strategy.

Impact investments made by foundations and other mission-based organizations cover two distinct categories, but the supply of investment opportunities sometimes falls short of demand.

Impact investors face challenges such as significant risk, lack of expertise and market fragmentation, and difficulty of measurement. These challenges can make it difficult to find attractive investment opportunities and exit strategies.

Here are some of the key challenges of impact investing:

Impact investing offers numerous benefits that make it an attractive option for donors and investors. Impact investors can reinvest their money in socially beneficial projects or organizations, creating philanthropic leverage that traditional grantmaking can't match.

Return on Investment is a significant advantage of impact investing. By reinvesting their money, impact investors can achieve financial returns while furthering their philanthropic goals.

Foundations are required by law to disperse at least 5% of their assets each year, but the remaining 95% is often focused on seeking market returns. Impact investing allows more of that philanthropic money to be leveraged for social or environmental change.

Impact investments made by foundations and other mission-based organizations cover two distinct categories.

Here are the key benefits of impact investing:

Strong environmental, social, and governance (ESG) practices may lead to financial outperformance in social good projects. This is a key benefit of impact investing, as it can help investors achieve both financial and social goals.

Impact investing can be a complex and challenging field, especially when it comes to risk. Investments can carry significant risk, especially when operating in underdeveloped markets where infrastructure is lacking.

It's not uncommon for impact investors to struggle finding deals that fit both their investment criteria and philanthropic orientation, often resulting in a lack of deal flow. This can be frustrating, especially when the supply of investment opportunities falls short of demand.

Many financial advisors lack expertise in the social aspects of impact investing, making it difficult to build a team with the requisite expertise in both impact and financial return. This is because there's a growing need for advisors who can blend philanthropy and investment, but this expertise is still emerging.

Measuring impact can also be a challenge, as there's no industry standard for impact investment performance. This makes it difficult to coordinate a unified approach to impact measurement, and social impact and assessment approaches can vary greatly between investors.

BlackRock is the world's largest asset manager, with over $8 trillion in assets under management. They play a significant role in the impact investing space.

Their investment platform, iShares, offers a range of exchange-traded funds (ETFs) that allow investors to access impact investing strategies. These ETFs have seen significant growth in recent years, with assets under management increasing by 20% in 2020 alone.

BlackRock's commitment to sustainability is evident in their ESG (Environmental, Social, and Governance) investing approach, which considers the long-term financial implications of environmental and social issues.

BlackRock was founded in 1988 by a group of partners, including Laurence D. Fink, Susan Wagner, Robert S. Kapito, and Ralph L. Schlosstein, who set out to create a better asset management firm.

Their goal was to create a purpose-driven company that focused on clients and risk management, and was driven by data and technology. The founders were determined to succeed.

The company's breakthrough platform, Aladdin, was launched in 1988 and unified trading, risk management, and reporting onto one system, connecting the information, people, and technology needed to manage money. This innovative approach helped BlackRock expand its offerings and expertise.

Over the years, BlackRock has grown from an eight-person startup to a global company trusted to manage more assets than any other investment manager. They've remained focused on delivering long-term value for their clients and shareholders.

BlackRock has purposefully invested in developing the Aladdin platform, technology, and people for over 30 years, giving them the capabilities to create better portfolios that help people experience financial well-being and better futures.

BlackRock has been a key supporter of the European Union's Sustainable Finance Disclosure Regulation, which aims to improve transparency and accountability in the financial sector.

BlackRock's CEO, Larry Fink, has been a vocal advocate for the regulation, stating that it is essential for investors to understand the environmental and social impacts of their investments.

The company has also been a major player in the development of the EU's green bond market, with BlackRock being one of the first investors to purchase a green bond issued by the European Investment Bank.

BlackRock's Sustainable Investing team has been actively involved in the creation of the EU's taxonomy for sustainable activities, which will help investors identify environmentally sustainable investments.

BlackRock's success is largely due to its pioneering role in passive investing strategies.

The company's iShares ETFs have revolutionized the investment landscape by offering low-cost, index-tracking funds.

These funds allow investors to gain exposure to a broad range of asset classes and investment opportunities.

They mirror the performance of underlying market indexes, making it possible for individuals to invest in a variety of assets with minimal risk.

The rise of ETFs has also impacted the traditional mutual fund industry, as investors increasingly opt for the lower fees and flexibility offered by ETFs.

This approach has democratized investing, making it more accessible and affordable for individuals.

The way philanthropists structure their investments has evolved significantly over the past decade. Laurene Powell Jobs was an early adopter of using LLCs as her primary vehicle for the Emerson Collective.

Philanthropic structures have become more innovative, with models utilizing LLCs, DAFs, private foundations, and public charities. The Chan Zuckerberg Initiative has implemented a combination of these structures to optimize flexibility and maximize impact.

Innovative structures have disrupted the traditional approach to philanthropy. More and more nonprofits are generating revenue through the sale of products or services, while for-profit companies are integrating social good into their business models.

For those looking to structure their philanthropy effectively, RPA's guide Operating for Impact is a valuable resource. It provides insights and guidance on how to achieve impact through different structures.