“Investing in Gender Equality Is Key For Sustainable Development.”

Karina Storinggaard: Gender Lens Investing means a themed investment. Take a lens and look at any investment decision that you make with gender at the back of your mind. You will see that there’s a lot of potential for new business and new markets to uncover. But you will also see that we are still pretty biased, and that we are not as far as we wanted to be.
 

Karina Storinggaard: There are three key areas or three main lenses that you can deploy: The first one is to invest in female founders. At the moment only 2 to 6 per cent of venture capital goes to female founders. Further, women around the world do not get the access to capital that they are actually looking for. There’s a huge credit gap, primarily in the developing world, although research shows that if we invest in these women, they will spend the money on their families and on building their business. So if you want to have an economic and social impact, giving women access to capital is a smart way of doing it. 

The second gender lens that you can deploy is on products that foster equality. For example, there are 200 million less women than men having a mobile phone. That’s a market, if you look at it from a company perspective. But it is also a way of giving females around the world independence and the opportunity to start a business. Or look for products tailored to the female investor. There is a huge gap between men and women and how much they invest. This has a social and economic influence on our lives, on our pensions and so forth.

The third key area that you can look at with a gender lens is diverse leadership. Gender balanced companies perform better. Research from twenty years ago has already shown this and every year there’s new evidence being published. So it’s rational to invest in companies with diverse leadership, and meanwhile we also have financial products to facilitate it.
 

Marion Leslie: When it comes to gender equality the personal involvement at the top has changed significantly, with Chairs and CEOs signing up to drive the change through organizations. A number of nations have also put in place regulatory and voluntary codes.  The financial crisis showed that diverse boards not only drive financial performance but also improve corporate governance and risk management. 2020 saw the first female CEO appointed to Wall Street and from 150 all-male boards in the FTSE 350 in the UK a decade ago we are now down to two. However, the biggest breath of fresh air for me is that it is no longer about “fixing the women”, as  was the case when I started in the industry. It is now about fixing the system, created for a very different era and centred around only part of the population.
 

Dr. Tillmann Lang: Yes, definitely. At Yova, the evergreen topic our customers invest for is climate change: Far more than 95 per cent of our investors care about climate change and make that a key part of their portfolio. But gender equality as an investment topic is strongly picking up. I think that goes along with how much people know about the topic. As Karina has already said in the beginning: gender equality is one of the most important criteria to a more sustainable development.
 

Karina Storinggaard: Well, one reason is that for many years we have been missing data on an individual company level to let us know which companies actually have a gender balanced team or which have initiatives in place that foster equality. It’s only over the last few years that this has improved. The other reason is that gender equality seems to be a very emotional and difficult topic to tap into. And it doesn’t fit the way we have looked at investment previously, which has been very short-term. A gender lens investment is long term. You won’t see the performance next quarter.

Dr. Tillmann Lang: Contrary to the popular belief investors are not all that rational. The data suggests gender lens investing and the investment case is clearly there, but that still doesn’t mean that people invest in it. There are many examples for irrational investor behavior. Best practices of investing recommend to diversify, take a long term perspective and not to try to time the market. Even many knowledgeable investors don’t follow the basic rules and just create cost and underperformance. So reading a study about how gender lens portfolios outperform is important. But it’s not enough to get the masses going. You can probably fill an evening discussing the behavioral theories that give a reason for that.

Marion Leslie: That said, asset managers and institutional investors can have the biggest impact. They have recognized the business case which supports the impact of diverse leadership on business results and corporate governance and are increasingly supportive of the social imperative. They have investment policies and will vote against, or even actively disinvest from, organizations that do not meet their criteria for diversity. Some hold dedicated meetings with the C-Suite probing the truth behind the diversity data reported. When the world’s biggest asset manager takes this approach, it can have a big impact.
 

Marion Leslie: How diverse is a firm’s leadership, what is its carbon footprint, how ethical is its supply chain? At the moment there is no standardized, reliable data enabling cross industry comparisons.  We need all data on a firm’s sustainability practices to be as accessible and as machine-readable as their financial reports. It should be out there like the stock prices that you see on the ticker wall when entering the SIX building in Zurich. And yes, we have sustainability indices - such as the SXI Switzerland Sustainability 25 produced by SIX – as well as social media sentiment and web-scraping of company reporting, but no objective, independent, consistent, standardized data. The UN Sustainable Development Goals, the EU Action Plan and sustainable finance regulation is all driving us towards conscious data-driven decision making, with impact and accountability. But behind all that is data and right now it is a mess. There is no real truth, no standardization and no audit. That will change.
 

Dr. Tillmann Lang: You can measure, whether a company’s impact on the world has changed. And you can assess whether your investment and the influence you’ve taken as a shareholder has worked towards that change. So you can ensure that your impact goes in the direction you intend. What you can’t fully assess is the exact influence of your investment on the overall change. There are just too many forces influencing things. Yes, change is for sure driven by investor action, most importantly by investors engaging with top management and by shareholders’ voting. But change is also driven by market forces, for example by customers looking for products that are more in line with their values. And, not least, change is driven by regulation. All these mechanism jointly can create change. Investing is an important part in the overall mix. But you can’t isolate the percentage of change created by investing, consumers, markets or regulation.

Dr. Tillmann Lang: What you can do is to give people an indication of their investments’ impact and sustainability performance. You can show, for example, how climate-heavy their portfolio is compared to a conventional benchmark, and if the companies in the portfolio are progressing faster when it comes to reducing their carbon footprint. You can also show a range of other indicative measures, but they remain an indication, not an accurate measurement. In the end it’s a mix of things in your lifestyle that add to your personal impact and investments are only one important ingredient.