A pathway to action for gender lens investing: In conversation with Laurie Spengler

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This post was authored by the Impact Investing Institute.

The coronavirus pandemic has shed light on long entrenched inequities around gender, race, and socio-economic opportunities across the globe, but it has also ignited momentum for action by the investment community.

‘Crisis as catalyst’ was the overarching theme of the 2021 GenderSmart Global Investing Summit, which brought together 500 delegates and 150 speakers from 53 countries. Participants explored concrete actions investors, businesses, policy makers and others can take to champion investing with a gender lens, encouraging a greater flow of capital across the full spectrum of opportunity.

We spoke to Laurie Spengler, one of the Institute’s Lead Experts and board members who is a member of the GenderSmart Investing Summit’s Advisory Council. Laurie moderated the Summit’s plenary session on ‘Stepping up for Systems Change’ and led a workshop on ‘Making the Case and Telling the Story’ of gender lens investing. Laurie is a long-time practitioner and champion of gender lens investing.

Why is gender lens investing so relevant now?

The coronavirus pandemic, alongside the impact of climate change, racial injustice and inequity, is having a disproportionate impact on women globally. Every investor who thinks of gender as a ‘nice to have’ side note to their investment and sustainability strategies, needs to think again. According to the McKinsey Global Institute the world economy could gain up to USD 28 trillion in annual global GDP by 2025, 26 percent more than a business-as-usual scenario, by eliminating the global gap between men and women in the areas of labour force participation, hours worked, and the sector mix of employment.

But the summit made it clear that there are more arguments for adopting a gender lens beyond the business case. At a moment of enhanced recognition of deep structural divides within society, we should not be afraid to embrace moral and legal arguments for gender lens investing alongside the business case. Evidence shows the positive impact to society when women are factored into investment decision-making. The time is now to dial-up activity and put more money to work – with women, for women, about women.

Fortunately, numerous tools and solutions to tap gender lens investing opportunities are available. Practitioners and researchers have been working on them for years. But they are best activated in tandem with a shift in attitude where women are seen as actors rather than beneficiaries. The familiar case of women in the Global South seeking microfinance loans for their livelihoods does not adequately describe the full picture of investment opportunities with a gender lens. The summit made clear that women are primary actors throughout the investment chain – as wealth owners, asset managers, practitioners, entrepreneurs, consumers and more.

What needs to be done to integrate gender into more investment strategies?

There is growing consensus that we need an ‘and’ not an ‘or’ approach to gender lens investing. Throughout the summit, discussions focused on how we need to think about climate AND gender, about racial equity AND gender, about supply chains AND gender. This integrated approach applies across all thematic and geographical portfolios and asset classes, expands an investor’s opportunity landscape and allows for better decision-making.

What concrete actions can investors, businesses and decision makers take to advance gender lens commitments?

Think about risk as a first step

“Companies that fail to have gender diversity carry an inherent risk,” said Hiro Mizuno in the GenderSmart Global Investing Summit‘s plenary session. Former Chief Investment Officer of Japan’s largest pension fund, Hiro made a compelling case for gender lens investing when he acknowledged that an investor’s portfolio cannot be insulated from society. A successful portfolio must reflect society’s values and respond to opportunities to create value. Gender contributes to both – it reflects a sense of fairness as a social value and it generates material value through employment, leadership, products and services, consumers and more.

Getting boards and investment officers collectively excited about integrating gender into their investment strategies is challenging. Building consensus around risk is often an easier first step. Hiro did this at the Government Pension Investment Fund (GPIF) of Japan by noting that a failure to consider gender as a factor leads to blind spots that can undermine an investment’s performance. Gender considerations around talent and workforce, leadership and diversity, consumer take-up, and supply chain performance are just a few examples of gender factors that can materially influence risk assessments of an investment.

Start small, but start somewhere

One of the conclusions the participants from across asset classes validated was that there are few excuses left to do nothing. When it comes to portfolio management, asset managers and investors can start by deploying at least a small percentage of capital with a gender lens approach. Research initiatives like the Project Sage and Parallelle Finance  can provide them with the evidence and data needed to take first actions. For individuals, the SHEeo platform provides an accessible and powerful way to start putting money to work in support of dynamic women-led entrepreneurs.

Invest in local and diverse players

Many of the most effective solutions and business models come from local entrepreneurs, capital providers and fund managers. They have the best understanding of what solutions work most effectively in their communities. As an investment community, we should be putting more emphasis on the benefits of proximity, local expertise and lived experience that inform, shape and contribute to value creation.

From a due diligence perspective, take a look at Due Diligence 2.0 which offers a set of basic principles to ensure that white and male managers no longer control 97% of assets under management. Other qualified managers deserve a real shot, particularly when they are the ones bringing to market some of the most compelling investment strategies.