In the U.S., the cost of both rental housing and homeownership have reached multi-decade highs, which in our view, has stemmed from an underbuilding of affordable housing units rather than the unhealthy source of too much demand (see chart). Housing is about more than just where we live – homeownership has been an important driver of wealth creation across generations, but not everyone has had equal access to that opportunity, and with the pressures of today top of mind, the legacy of that inequity may continue to grow and worsen. Homeownership is linked to greater quality of life and health outcomes, such as improved mental health and greater participation in social activities. In addition, accumulated home equity offers financial stability later in life, and can operate as a protective barrier to temporary financial shocks.
Less homebuilding means less affordability
Source: Morgan Stanley as of June 30th, 2022
In this piece, we highlight why the BlackRock Impact Mortgage Fund (PNIGX), which targets a subset of the U.S. Agency MBS market, offers an exciting opportunity. As with allocations to U.S Agency MBS, Impact MBS offer similar safety to U.S. Treasuries with the potential for additional yield pick-up, but it can also play a role in helping to address social and environmental issues in housing finance. We believe the diversification benefit alongside the added feature of sustainability will offer investor’s a new lens to view this sector.
Our approach to Impact Mortgage investing…
We set out to create a framework that in addition to achieving positive externalities meets BlackRock’s criteria for Impact investing.
BlackRock has identified an opportunity set to frame sustainable investing within the space across both environment and social aspects. While most of the Impact and “ESG” investment strategies available in the market today focus primarily on environment components, the framework we have developed is centered around achieving positive societal impact, which in our view can provide material value to investors.
To achieve the above, the Impact MBS framework focuses on loans which 1) facilitate equal access to credit or, 2) target historically underserved populations, or 3) support the growth of sustainable housing units. To learn more about what Agency mortgages qualify and why, as well as discover the metrics we use, and our objectives in the space. Access our white paper here.
The BlackRock difference…
BlackRock has the differentiated history, tools, and approach to be one of the first managers to successfully launch a dedicated Impact Mortgage strategy.
Mortgages are in our DNA - BlackRock was founded as a mortgage manager in 1988 and the team has been an industry leader in the space. Since inception, mortgage investing has been at the core of BlackRock's identity and have influenced everything from our technology to partnerships in the industry.
Delivering meaningful sustainable outcomes – In our view, some sustainability factors will play a critical role in investment returns for the next several decades. BlackRock has been and will continue to be at the forefront of the sustainable movement. As part of this initiative, we’ve developed a proprietary Impact MBS framework to identify mortgages that deliver positive and measurable environmental and social impact, while delivering and expected financial return that meets or exceeds that of similar MBS in the Bloomberg Agency MBS benchmark.
Deeply resourced team – The Agency MBS platform is comprised of 12 sector specialists including researchers and process engineers that facilitate complete coverage across all sectors of the agency MBS market. The depth of dedicated personnel allows for concentrated focus on identifying and sourcing Impact MBS collateral, which is often housed in more niche pockets of the market.
Introducing a proprietary sustainability framework to the highly complex and specialized MBS asset class requires a deep expertise and level of experience that only a handful of managers can boast. BlackRock separates itself as one of the few managers with the people, the process, the platform, and the partnerships to deliver a compelling Impact Mortgage offering.
