The leadership of women in ESG investment has been transformative, and yet unheeded. As activism for equal pay has been institutionalised into corporate policy, women in finance have firmly established ESG in the mainstream and standards of ‘good business’ have been redefined.
Employers and regulators now increasingly focus on reaping the benefits of an inclusive, happy and healthy workforce through attention to social (S) and governance (G) factors, such as the gender pay gap, maternity and paternity pay, mental health, equal opportunities and minority networks.
Environmental (E) incorporation and broader impact investment is taking this further, with women at the helm encouraging consideration of public costs and benefits into private corporate decision making, to achieve better results for everyone and establish a new inclusive culture of finance.
A telling study by S&P Global finds that firms with female CFOs generated 8% higher return on stocks, likely due to the adoption of this long-term, holistic approach to risk: When Women Lead, Firms Win. For investors, women in business, and society, ESG has been a win-win-win.
Women have assumed key leadership roles in sustainable investment. Emphasis on the gender pay gap has exposed inequalities in management – as of year-end 2018, there were 19 male CEOs for every one female CEO. Women in ESG roles often, though not always, have been propelled up with the exponential importance of ESG expertise.
Over the last 5 years, 44% of the top ESG jobs a top recruiter helped to fill were accepted by women, despite making up only 17% of senior managers and investment advisers, according to the FCA. Leadership begets more leadership, as women capitalise on their experience to shape the landscape of sustainable investment.
“Women’s empowerment and equality obviously transcends the payrolls of public companies”, relayed Catherine Berman, CEO and co-founder of impact investment platform CNote. Indeed, while ESG might be shifting the balance on boards and the C-suite, more needs to be done across the rest of the economy.
Women, particularly women of colour, are the demographic hardest hit by poverty. Investment into initiatives seeking to alleviate poverty has improved many women’s access to education, jobs and capital. Recognising this, ventures such as CNote are specifically designed to create opportunities for vulnerable women. Their Wisdom Fund strategically allocates capital to women entrepreneurs in low-income communities, especially women of colour. Knock-on effects include greater financial independence, protection from poverty and a route to escape for victims of domestic abuse. Transcending firm-level ESG considerations, CNote’s female co-founders saw an opportunity to affect change on a macro level, whilst generating return.
Women have helped establish a new culture in finance that welcomes the responsible investor. Those with a greater understanding of risk and society, who want to shape a more sustainable business and economy, are likely to feel welcome in it. This culture itself opens opportunities.
Yifat Susskind in her TED talk In Uncertain Times Think Like a Mother describes how motherhood is ‘understanding of the needs of the world’, choosing to act in the present with an idea of what you want for the future. To caveat, not all mothers think like a mother and you don’t have to be female, but this encapsulates exactly the lens adopted by sustainable investment.
It is perhaps this alignment of values that makes 84% of women interested in sustainable investment, compared to just 67% of men, according to a study by Morgan Stanley. Indeed, my own mother said to me, “private finance sees the client as a commodity to be taken advantage of,” opting instead to work in financial accounts for the NHS where social purpose eclipses profit.
Amid the COVID-19 pandemic, the glorification of the nurse has already gone some way to champion the role of the stoic caregiver, rather than the life-taker usually romanticised in times of war. With women on the front-line, constituting around 60-70% of key workers, we only now are beginning to fully respect the value and societal contribution of their hard work.
So many of these women are from minority groups, facing a lack of representation in public and private sector leadership roles. Initiatives like CNote identify the potential of such hard-working women, and the opportunities for society when they are provided with economic opportunity. It is about time that we are all encouraged to ‘Think Like a Nurse’.
As Berman said: “Knowing you can step up and do tremendous good for your neighbours and community through investment is a powerful tool that many have never engaged before.”
There is no greater need for this culture than in a crisis. The skilled leadership from Jacinda Ardern is an example to all of us of how to effectively manage risks to the benefit of all. The public and private sector must collaborate to identify the shared risks from inequality and climate change.
There has never been a more simultaneously hopeful and important time for sustainable investment, as Berman noted, “it is an opportunity for impact investment, if we do our jobs right.” Though we build upon the brilliant determination and tenacity of women who led the way, we still have further to go.
We cannot reap the wealth of benefits available until we achieve a diverse and representative set of people in finance. And as we rebuild our societies with a renewed sense of community and appreciation of key workers, perhaps we will co-opt this emerging culture in our approach to investing, entrenching the existing trend towards sustainable investment in pursuit of a more considered and responsible market that is tailored to the needs of society as whole.
Katy Husband is a Research Analyst in the Economic Research team and a Sustainability Officer at Record Currency Management, chairing the Record ESG Committee. She graduated with a degree in History and Economics in 2019, holding the position of Events Officer for the newly-established UN Women Oxford society during her final year.
This article was written on behalf of the CFA UK ESG Working Group.