Last week in New York, I had the opportunity to sit down with three incredible women in investment and financial services at the All In Together Women in Financial Services Forum, where we discussed the intersection of social good and impact investing, particularly within the context of gender equality and diversity & inclusion. Although impact investing is still widely considered “niche” within the investing world, it’s definitely on the rise. Recent stats show that $250B in global capital is going into impact investing, and that number is growing year over year.
Kiersten Barnet, deputy chief of staff and manager of the Bloomberg Gender Equality Index, said that the importance of impact investing is expanding quickly, and that it has the potential to shake the current investment model significantly. “Impact investing won’t be considered niche in the near future,” said Barnet. “Environmental, Social and Governance data is being incorporated more and more in investors’ risk analysis and how they judge a company’s performance.”
She added that one of the biggest drivers of the growing interest in impact investing and ESG data is the fact that women are gaining access to significant capital and want to invest that capital into financial opportunities that align with their values.
“It’s the first time in history that women in the U.S. control more assets, or are allocating more assets, than men,” said Barnet. “So I think the biggest shift will be in client demand and what clients are looking for, and individuals and leaders will adjust their strategies and products to adapt to that. Companies that don’t get that shift right won’t be around anymore.”
Stephanie Luedke of Citi Investment Management, who works on the front lines of asset allocation, agreed that she’s increasingly seen this shift manifest itself in her day-to-day conversations with clients.
“We are absolutely seeing that the demographics of our client base are shifting,” said Luedke. “90% of women surveyed have indicated that they want to invest at least a portion of their wealth in a manner that aligns with their values, and women are more inclined than our average investor to do this.”
Luedke reinforced that women are not only wealth inheritors, but they are also wealth creators.
“Women are the primary breadwinners in 44% of households in America – but they are still remarkably underserved in the financial services industry,” said Luedke. “Something like 51% of women with over a million dollars in assets don’t have a financial advisor,” said Luedke. “So all of these things stack up towards making sure that organizations like ours are able to work well with women as a client base and also deliver the investment strategies that they’re interested in, and it’s well-documented that they’re interested in impact investing.”
In terms of policy changes to drive greater gender equality and representation in the financial services and investment industry, the panel agreed that a combination of approaches are necessary.
“I think change can be driven a lot faster from the private sector,” said Ita Ekpoudom, partner at Gingerbread Capital. “Women aren’t seeing themselves in many traditional companies, and so you see women going out and starting businesses. Millennials in particular are starting businesses earlier and are building diversity into them.”
Ekpoudom added that diversity has to be an intentional choice on the part of company leadership. “A lot of people believe that once their company is stable, gender diversity will just fall into place – it won’t. You have to intentionally invest in it.”
Luedke said that the influence that investors have on major companies and corporations will also be a significant factor in driving that change.
“Money speaks volumes,” she said. “And so if investors and the investment community as a whole values things like gender equality, that ultimately will drive significant, significant change. If public companies know that you are evaluating them not just on how many people they have in the C-suite but what are the policies and procedures around diversity, what is the culture of their organization – if companies figure this out, they’re going to want the investor dollars. And people throughout the organization are going to start to address some of these matters in a really more meaningful way.”
“I think that in most cases, not all, [influence] has proven to be more powerful than policy a lot of the time,” said Barnet. “Look at the largest three asset managers in the U.S. Last year was the first year that they all used their proxy to vote against management on boards where they didn’t have any gender diversity. That’s huge. That sends a really huge message.”