(Adapted from an article that originally appeared in Stanford Social Innovation Review 2017)
We’ve come a long way since Paul Sullivan’s 2015 New York Times article, “With an Eye to Impact, Investing Through a ‘Gender Lens,’” and Laura Colby’s Bloomberg article, “Stock Tip: Try Betting on Companies Led by Women.” The practice of paying attention to where women sit within a company, how women in leadership can benefit a company and its shareholders, and how a particular company may benefit women has gained traction. Both authors did a thorough job of shedding light on this underutilized, yet growing, investing practice. Colby highlighted the concept of “doing well by doing good,” and argued that a focus on management diversity is not only a popular, “feel good” way to choose one’s companies, but also smart investing.
A bit of history: Pioneering women—from the Nuns to Joan Bavaria and others—have been bringing the question of ethics to our financial system for decades, on multiple levels. Bavaria, who passed away in 2008, was a pioneer in socially responsible investing when she founded Trillium Asset Management in 1982. At Nia Impact Capital (our women-owned company with a diverse-led team), seeking out companies with women in leadership, gender-equitable organizations, and voting down non-diverse boards has been a key to our investment thesis since inception. While diversity for its own sake is important, research continues to show that a breadth of perspective is actually essential in the corporate decision-making process and essential for good governance.
Sullivan mentioned women investors in his article, and I appreciate his words.
Here, I would like to build on them and emphasize how catalytic this role of the investor can be for creating actual change. Women are participating with investments; they also are leading this movement to transform the way we invest our money and the way we engage with Wall Street—bringing the values of diverse leadership, transparency, and inclusion to address gender equity issues and other critical issues, such as environmental sustainability, racial equity, and fair wages as well.
We need more women (and men) to speak up for their values, and ask for what they would like to see their money accomplish in this world. The power to affect change is ours to harness. Having been involved in the conceptualization of the Women’s Initiative at Root Capital, I have experienced that influence first hand, and I would like to see more people do the same. In the case of Root Capital, we loved the work that the organization was already doing: providing mid-level loans to small farming businesses in developing nations. And yet we, as investors, wanted to know what percentage of these loans were being allocated to women. The directors at Root Capital did not know the answer to our question off-hand, though within the scope of a few thoughtful conversations, they were willing to start a fund where 100% of the loans would go to women. The Women’s Initiative was born, and shortly thereafter became available to other lenders looking for a gender lens within their fixed income allocations.
This type of investor activism (or “client demand” as it is referred to by the big banks) is occurring increasingly in advisor offices around the country. Savvy investors are voicing their concerns, not only about their financial goals but about their values as well. With more investors feeling empowered to speak up, we will see change happening in product creation and portfolio construction one conversation at a time.
From the investors depicted in Sullivan’s article, it may seem as if this sort of investing is mostly reserved for a few high-net-worth investors, such as Oprah, Mackenzie Scott, and Melinda Gates. That is no longer the case. Nor is adopting a gender lens a practice that happens only “on the side.” Successful organizations like African Women Rising and many other smart leaders are using the technique of investing in women and girls as a strategy to address pressing issues across communities. At Nia Impact Capital, we work to democratize access to gender lens investing such that large institutional investors as well as individual investors in their retirement accounts can align their capital with their gender smart values.
And importantly, women are not the only ones who benefit. Oprah found that “dedicating resources to a single woman has a ripple effect on her entire community.” In 2015, according to “Women, Wealth and Impact: Investing with a Gender Lens,” (Veris Wealth Partners), the UN’s Food and Agriculture Organization estimated that if women received resources (credit, land, information, training, seeds, and fertilizer) on par with men, the additional yield could reduce the number of undernourished people by 100-150 million (12-17%). With the data stacking up, we understand that incorporating a gender lens may benefit all of us, from investors looking for positive financial returns, to the men and children who live in the same communities as the women receiving the investment capital.
At Nia Impact Capital (whose name is derived from the Swahili word for intention and purpose), we see inclusion and diversity in leadership as an important strategy to achieving equity, increased innovation, and return on investment. Impact investors are looking to use the power of business to address and solve for real problems like agriculture, clean energy, and financial inclusion. Engaging women as a lens into this process will enhance outcomes for us all. By supporting diverse teams and female leaders in their innovative solutions work, we are investing in the world we want to see.
Important Disclosure:
The views presented here are those of Nia Impact Advisors, LLC (“NIA”) and these views may be subject to change. This information illustrates NIA’s engagement and activism. All information is obtained from sources believed to be reliable, but NIA does not certify the accuracy or completeness of this information. This blog article does not constitute an offer to sell or the solicitation of any offer to buy any security. All investments carry risk. An investor is strongly advised to consult with their investment professionals prior to making investments to ensure that they understand the associated risks.
The incorporation of environmental, social and governance (“ESG”) considerations into the investment process may cause the investment adviser to make different investments than other funds that have similar investment portfolios and/or investment styles. Under certain economic conditions this could cause the investment adviser’s performance for any of its portfolios, including the Fund, to be worse than similar funds that do not incorporate such considerations into their investment strategies or processes. In applying ESG criteria to its investment decisions, the investment adviser may forgo higher yielding investments that it would invest in absent the application of ESG investing criteria.