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Five Ways Asset Managers Can Drive Better Financial and Impact Performance by Investing with a Gender Lens

I’m thrilled to co-author this column with Ellen Martin, Chief Impact Officer of Circulate Capital.

In the “real world” application of impact investing, environmental and social outcomes are inextricably linked. It is only by understanding this fact that innovative investment asset managers can deploy capital to generate multiple positive outcomes at the same time. One such area is the intersection of innovations that address climate change and gender equality.

For anyone following this column, you will know that since our inception, we have focused on the circular economy of plastic, and specifically its impact on climate change. But our commitment to creating positive outcomes for women through our work is very much tied to that. Our firm recently committed to the 2X Challenge, which Ellen Martin led, with the goal of at least 30% female representation in leadership positions in our portfolio companies.

We would like to outline our commitment to the 2X Challenge and our work with our portfolio companies to achieve this goal in the hopes that we can inspire others to take similar action in any area in which you work.

The starting point? Recognize that investing in women makes financial sense.

It’s not just about doing the right thing or doing the right thing. We know inclusive investing is smart investing. When it comes to climate change, women are innovators, leaders, entrepreneurs, workers, suppliers and customers in climate-related fields, yet they remain underrepresented in key decision-making positions and as stakeholders. users of capital.

Yet there is a growing body of evidence identifying the benefits of gender equality for economic development and the fight against climate change. According to a McKinsey study, closing the gender labor gap could add $28 trillion, or 26%, to annual global GDP by 2025. In addition, a BIS study found that a 1 percentage point increase in the proportion of female executives resulted in a 0.5% decrease in CO2 emissions in 2,000 listed companies in 24 industrialized economies over a 10-year period.

Not only does having more women in decision-making positions translate to better climate outcomes, but there is also a clear business case for making the waste management and recycling industry more inclusive. Many of the solutions our portfolio companies have implemented to address gender gaps are also good human resource management practices that support stronger recruitment and retention overall. For example, one of our portfolio companies is committed to increasing the representation of women across the workforce by institutionalizing a structured and impartial performance management system. We’ve shared tools and templates to help them achieve this commitment. It’s also about smart portfolio management that helps these companies build a stronger foundation for growth, which translates into positive financial results.

How to embark on a gender-smart investment journey

There are many ways for your business to start investing and acting with a gender perspective.

  1. Be honest about where you are in your own journey – In our case, we invest in companies that are ready to scale quickly. Many of them are about to expand their C-suite team, and we invite them to be part of our gender engagement. They are open to mainstreaming gender policies that empower women, but they just don’t know how to go about it. We’ve shared how our own organization compares, so they can be sure we’re on this journey with them.
  2. Look at him policies and practices that portfolio companies already have in place – A lot of this is about people’s practices. Watch how they recruit key employees. Do they use inclusive language in the job description? Are they evaluating a diverse candidate pool? Have they taken steps to remove bias from the recruitment process? What policies do they have in place, such as maternity care and leave, harassment, discrimination and grievance mechanisms? You can also survey the women in the organization to learn more about their experience in their own words.
  3. Don’t assume the women aren’t there – Don’t settle for the excuse of not being able to find enough women to promote. If you push hard you will find that often women are there, you just have to look harder. For example, some of the businesses we work with are family businesses where the mother or wife has played a central role in the business but has never been empowered to make decisions. We also work in emerging markets and in the waste sector, where many of the waste pickers (a key part of plastic waste recovery) are women. So looking at our investments from a gender perspective has important ramifications for the ecosystem in which we work.
  4. For companies in emerging markets looking to meet global standards, gender representation matters – Part of our definition of creating impact is creating world-class business operations. For most of our portfolio companies, this means helping them qualify as suppliers to global companies, some of which are our investors. All of these multinationals have supplier diversity initiatives around their source of supply, so putting gender front and center helps achieve these goals.
  5. In some cases, external funding may be available to accelerate your gender-smart efforts – In our case, we received funding from the United States Agency for International Development (USAI
    USAI
    D) and we’ve partnered with experts from SAGANA and Catalyst at Large to help us roll out our gender-smart engagements internally and across our portfolio. Part of our partnership was to publish a “how to” guide for investors and asset managers. The guide was supported by USAID and co-authored by SAGANA, Circulate Capital, and Catalyst at Large. This guide provides investors with tools and best practices for integrating a gender perspective into the investment process, from sourcing to active portfolio management. You can read it here.

As we search for the engines that will rebuild our global economy in the months and years following the pandemic, we must tackle the systemic issues that put the female half of the world’s population on an uneven playing field. The 2X Challenge helps direct more capital to organizations that are leading the charge in empowering women in developing countries, which include those most at risk from the effects of climate change. We take pride in our work and hope to inspire others to integrate a gender perspective into their investments. It’s good for business and it’s what we all need to do.

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