come and that’s also data-enabled, so we can transparently talk
about impact and ESG and sustainable impact outcomes alongside financial performance.
Ron Cordes: A lot more product options are available on both
the public and private sides than there were ten years ago. At
that time, what was going on around socially responsible investing was largely focused on large-cap U.S. equities. Even in 2014
we found fewer options that we liked in certain categories, such
as debt and emerging market equities. That has changed now
that more managers are developing impact portfolios.
Being a quant manager in this space is becoming more and
more effective because more data are available to evaluate.
Thanks to a number of data providers, impact investing has
moved from a 1980s–90s field that depended on subjective
evaluation more than data analysis to a field that offers opportunities for interesting, quantitative data mining.
Margaret M. Towle: Intuitively, I would expect credit analysis
to be consistent with incorporating nonfinancial ESG factors
within the investment process. Yet product availability around
credit or, as Ron mentioned, emerging markets, seems to be
less prevalent. How can an investor gain exposure to impact
investing if your portfolio is dominated by the private and public equity side?
Ron Cordes: We talk to a lot of fixed income managers, but we
haven’t found as many players as we’d like. In some of the outlying asset classes, it’s harder than I would expect to develop a
universe of impact or ESG managers in 2017.
Margaret M. Towle: I’d like to hear your thoughts on portfolio
construction. Even with a commitment of 100 percent, portfolio
construction requires considering many moving pieces. How
do each of you integrate impact and ESG investing within
Rochelle Gunn: We’re not very far along the implementation
road in our portfolio. We have a unique asset allocation, so I
am mute on the fixed income question because we don’t have
any. We are truly equity investors. The portfolio is generally
want and to determine whether we can achieve it in a measur-
able and transparent way.
For more bespoke kinds of offerings, particularly for large institutions, this is a really important activity that requires in-depth
dialogue. Pairing bespoke goals with the productized segment
of the market, which makes sense for investors who are more
retail-oriented, can be difficult. I’ll include in this category
a number of families who don’t want to spend several days
discussing and creating an impact or ESG investment strategy;
they want us to say, “This is what we have.” That can be challenging because of varying views on what’s important. So we
In addition, in my work financial performance plays as central a
role as the impact of the portfolio. Curating investment vehicles
solely around issues may not yield the kind of portfolio performance everyone can bear, so we think combining issues with
consistent attention to financial performance is an important
upgrade across the marketplace.
Margaret M. Towle: I agree that financial services companies
can experience tensions in trying to provide investment vehicles that focus on return expectations versus vehicles that truly
have an impact. One aspect of the evolution of impact or ESG
investing is the analysis of big data. How do panelists view the
future of product development around ESG investing, whether
that involves big data or other approaches?
Debbie McCoy: My team at BlackRock focuses on portfolio
construction that utilizes research and data science tools.
We are a research-oriented group of investors and began
investing in our data science capabilities a decade ago.
In-house, we’re able to consume extraordinarily significant
amounts of information for analysis, and we can apply tools
such as machine learning, natural language processing, or
associating information on the basis of a set of research
ideas and conclusions.
For us, this capability is critical in the ESG space because we’re
being asked by clients, and we ourselves want to incorporate
information that sometimes companies have not made available. Our ability to do research on the issues we would ideally
like to incorporate—whether they’re in the traditional ESG
framework or beyond that in impact outcomes or sustainable
development outcomes—is crucial. We identify the information
we’d like to incorporate, find the data wherever it is, maintain
the research capability and the technical capability to consume
the data in-house, and then analyze it. This work helps us
understand what effect a specific issue would have in a public
This combination of innovation and technology is key to our
ability to deliver a portfolio that’s oriented to a financial out-
Thanks to a number of data providers,
impact investing has moved from a
1980s–90s field that depended on subjective
evaluation more than data analysis to a
field that offers opportunities for interesting,
quantitative data mining.