INVESTING IN CHANGE

Top strategist at BlackRock says asset managers should be wielding their considerable clout to influence companies to do good for society.

In a fast-changing world where demographic shifts and technology-led disruption have left millions fearful about their futures, governments alone can no longer be counted on to ride to the rescue. Businesses can and should be doing more to help create a sustainable future.

Consumers in recent years have been turning up the heat on companies to serve a greater social purpose. The power of social media and other tools has raised awareness about issues such as environmental responsibility, workers’ rights and ethical supply chains.

Investors and asset managers also can exert great pressure by choosing to invest only in those businesses that serve the interests of all stakeholders including employees, customers and communities.

In the investment world, size does matter when it comes to influencing corporate behaviour. That makes Isabelle Mateos y Lago, chief multi-asset strategist at BlackRock — the world’s largest fund manager with nearly US$6 trillion under management — an influential person indeed.

“It is not enough to generate higher earnings,” the Paris-born financier tells Asia Focus recently. “You need to think about the role you are playing in society and if you cannot articulate how you are contributing positively to society, not just society in an abstract way, but to the collectivity that you are based in, such as your workers and the environment then I don’t think that you are going to be a company that is going to perform over the long term.”

Laurence Fink, who helped found BlackRock in 1988 in New York, expressed those thoughts recently in his annual letter to the CEOs of the companies that the firm has invested in.

“Once I read this, it made me happy that I work at BlackRock and I thought, ‘I’m in the right place’,” says Ms Mateos y Lago.

It’s a strong and a meaningful statement, coming as it does from a seasoned economist with 17 years in the official sector under her career belt before she moved into the world of finance.

“This is wonderful because not only are we doing our best to generate strong returns so that people can retire with a decent income, but on top of that, because we have become so big, it allows us to really have a role in talking to the biggest companies in the world,” she says.

“To be fair, some of them are already on that wavelength and they are already doing it, but many of them are not and putting that kind of pressure on them — to tell them, ‘Look, it’s your responsibility to think about the impact you are having on your workers, their families and the environment’ — I think it’s possible.”

Her passion to change the world led her to work for many years with an international institution, but a conviction that more can be done for the world through other means led her to change her career path.

As part of the BlackRock Investment Institute (BII), she is responsible for helping to shape macroeconomic analysis, providing market intelligence and representing the company’s views to clients and in the media globally. She is also on the board of Bruegel, a leading European policy think tank.

PUBLIC SERVICE TRADITION

Ms Mateos y Lago was born, raised and studied in Paris before she moved to the UK to obtain her master’s degree in economics from the University of Cambridge. Returning to Paris, she joined the French finance ministry. Civil service jobs in France are highly coveted, entry is difficult and in this particular case, even as recently as 20 years ago, the field she chose was very male-dominated.

“In France, if you want to work for the government you have to take an exam and they will tell you there are going to be around 40 slots with 4,000 candidates and they would say ‘good luck’ but once you’re in, you’re in. You are sure to have a job,” Ms Mateos y Lago recalls.

She decided to take the test because she grew up in a family where many members were very keen on the public sector and were strong believers in the role of government. In any case, she says, she did not find much appeal in the prospect of working for a company where a salary would be the only reward.

“I thought, I want to change the world and the way to do this is to work for the government. In France, the role of the government is omnipresent — that is why government spending is something like 57% of GDP which is ridiculous,” she remarks with a bemused smile.

After an apprenticeship of two years, she went to work for the Ministry of Finance, not because she had a passion for finance — her real preference was international affairs — but because the unit she ended up working for offered the best opportunity for her to see the world. That opportunity was to represent France at the International Monetary Fund headquarters in Washington DC.

“After three years in Paris I got posted to be the French representative at the IMF and I did that for two years at the IMF board,” she says.

“Normally I would have had to go back to France but as I thought, ‘Actually I really like it here. I’m going to join the staff at the IMF’. So I did that and I told my parents, ‘Don’t worry, it’s only going to be a couple of years’, and then I stayed another 13 years,” she says with laughter.

She admits she was not sure about moving to the US at the time because of all the anti-American sentiment in France, but the time she spent there changed her mind — so much so that one of her children was also born in Washington DC.

“I really wasn’t sure. To be honest, at the beginning, I didn’t like it but I really enjoyed the IMF because working at the French Finance Ministry, there was an incredible sense of uniformity,” she recalled. “All my colleagues were all male to begin with and they all wore the same suits, the same ties, they had all been to the same schools. They were lovely people but it was a bit monotonous.

“When I arrived at the IMF, I saw people from all over the world, people from 90 countries, many dressed in their national attire, with so many completely different life histories, and I absolutely loved it. The thought of going back to the uniformity of the French treasury was simply unbearable.”

During the course of the next decade and a half, she worked in a range of positions including economic analysis, policymaking, strategy and global governance, including as G20-liaison and as a member of the executive board. She fondly recalls working in Washington with a Thai colleague, among others from different parts of the world.

PRIVATE-SECTOR PUSH

Though she enjoyed her job, after 17 years in the official sector Ms Mateos y Lago started to become more mindful of the limitations of what the public sector can do. Most of the world, she observes, “doesn’t really care” what the public sector does as long as it doesn’t get in their way. And there are some things, in many ways, that are more important than what can be captured in an IMF report.

“When I left the IMF, I still had this reluctance [about the business world],” she recalls. “I am not really interested in making the owners of any company rich as I am interested in doing good for the world. It took me a while to reconcile both aspirations, and then I came across Philipp Hildebrand at the IMF when he was president of the Swiss central bank.”

In a conversation in 2013, he told her that if a firm like BlackRock, which manages the savings of millions of people around the world, does a good job of it, it can make a huge amount of difference. It took her some time to come around to a similar view but Mr Hildebrand’s conviction impressed her, and she now believes that she can change the world into a better place by working for BlackRock. Mr Hildebrand himself is now a vice-chairman at the asset manager.

“It didn’t happen overnight but eventually, I was convinced to move as it was also an opportunity to come back to Europe,” she says of the decision to join BlackRock in London, where she is now based.

Ms Mateos y Lago says her new employer provided her with the right amount of challenge and a completely new environment, That includes a younger demographic which provides a lot of vitality and dynamism, and an atmosphere that is a lot less bureaucratic and procedural when compared with the IMF.

“A lot of these very young people have a lot of responsibility as they are actually quite senior, and that is one thing I find very refreshing,” she says.

“There is a lot of scope for taking initiative since it doesn’t matter if you are very low in the chain. If you have a good idea, and you can persuade a couple of people that it is a good idea, then you are going to be allowed to run with it. In the official sector, it is much more difficult as it just doesn’t work that way.

“Generally speaking, the private sector is very fast-paced and it is constantly changing. I have seen more important reorganisations in three years at BlackRock than 15 years at the IMF. The IMF also changes, it doesn’t really stand still, but the pace of change at BlackRock is really mind-boggling.”

Right now, while working for the biggest asset manager in world and in a capacity in which she can influence its investment path, Ms Mateos y Lago will continue to push for ESG (environmental, social and governance) investments with the belief that the trend will soon catch on in Asia following a boom in North America and Europe.

“This is a train that has left the station and people who did not jump on it are going to be in trouble,” she says. “I am absolutely convinced that it is going a be a matter of outperforming the market and it is going to be a matter of avoiding big losses, because those companies that neglect this dimension of the environment, good governance and being responsible in their community, these are the ones that are the disasters you read about in the newspapers,” she says, pointing to the Volkswagen emissions scandal as an example.

Despite the heavy responsibilities the job entails, Ms Mateos y Lago brings a youthful energy to her work. She notes that a book called Why We Sleep by neuroscientist Matthew Walker opened her eyes to the importance of rest and staying healthy. Her concern for others and enthusiasm for doing good, meanwhile, provide ample motivation to carry on.

It is not enough to generate higher earnings. You need to think about the role you are playing in society, and if you cannot articulate how you are contributing positively to society ... then I don’t think that you are going to be a company that is going to perform over the long term