Fund Solutions

Investors Need to be “Gender Smart” When Allocating Capital 

Investing in gender equality will be gateway to tackling other areas of diversity.

Investors should focus on understanding the value of diversity within investment opportunities and when allocating capital, said Hedda Pahlson-Moller, CEO of sustainability and impact investing solution provider TIIME. Pahlson-Moller sat on a panel with other female industry leaders as part of the Sustainable Investor Summit (SIS) Online on November 26. 

Panellists pointed out that women represent around half of the total population and are not a minority outside the workplace. If investors cannot engage with the issue of workplace gender inequality, tackling the likes of ethnic diversity, sexual orientation or socio-economic diversity will become much harder, said Pahlson-Moller. 

“Investors need to stretch their imaginations quite far when it comes to gender smart investing. [As an impact investor], my personal investment journey across asset classes is defined by wanting to avoid harm and the ambition to contribute to solutions for gender equality,” she added. 

To have meaningful impact at company level, the priorities and values of investors must be “defined by their strategy” and implemented proactively, she said. If an investor’s interest lies in gender equity, then they should not be relying solely on asset managers to pick out opportunities for them. Rather, said Pahlson-Moller, investors should have an “explicit gender lens” as opposed to an implicit one. 

Returns through gender diversity 

Julia Bewerunge, Associate Vice President at ISS ESG, noted research conducted from 2016 to 2020 which revealed a direct correlation between a diverse employee representation, from a gender, ethnicity, and LGBTQ+ perspective, and higher levels of performance.  

“If you have high levels of diversity in a company, you also produce high quality and high returns which will increase or decrease in a matter of months if a company then logs less or more diversity over time,” Bewerunge explained.  

By ensuring the workplace is diverse, companies and investors alike actually benefit financially as their workplace has more diversity of thought and achieves consistently high-quality results, she added. 

“It’s not just about investing in women entrepreneurs or women sitting on boards, but rather across the value chain, staffing processes and marketing products solutions,” Pahlson-Moller noted. 

Diversity within gender 

As an investor, it is vital to focus on areas of diversity you care about, Bewerunge said. “You don’t have to choose a diversity direction that does not fit for you. You can look at available data at current KPIs and decide what best aligns with your personal goals as an investor.”

This includes thinking about other areas of diversity within gender equity, too, such as ethnicity, LGBTQ+ representation and women dealing with disability discrimination in the workplace environment.

In a recent ‘Valuing Race and Diversity’ panel at the UK Sustainable Investment and Finance Association (UKSIF) London Conference, panellists flagged the risks of “tick-boxing” diversity issues as an investor, rather than more actively focusing on specific areas for improvement 

“We must avoid diversity-washing from preventing real action,” said Gavin Lewis, Managing Director and Head of UK LGPS at BlackRock, who chaired the discussion.  

Equal access

Ethnic representation in the asset management industry, for example, is far from optimal. According to a 2019 report published by The Investment Association (IA), black UK fund managers made up just 1% of the total number.

Lewis noted the recent release of a City of London report, supported by IA members, which looked into the lack of diversity in socio-economic backgrounds in financial services and investment industries.  

According to the report, white employees within surveyed organisations are almost twice as likely to have attended an independent school than black employees. Nearly half (43%) of senior roles are currently occupied by white males who attended an independent or selective state school, suggesting a lack of socio-economic and ethnic diversity. 

“A lot more needs to be done to grant equal access into these sectors, regardless of background,” Lewis said.

At ESG Investor, we aim to be the practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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