Environmental, Social and Governance (ESG) Pillars in Gender Lens Investing (GLI)

Gender lens investing (GLI) is seen as a thematic environmental, social, and governance (ESG) investment strategy. Within GLI, global and regional gender lens equity funds grew from a wide body of research demonstrating the performance and other benefits of higher women in leadership (WIL). How well do gender lens equity funds reflect an ESG approach? By definition, the WIL investment philosophy captures the G of ESG, relationships with internal stakeholders. Our analysis shows that many GLI funds and indexes also capture an element of the S, relationships with external stakeholders, through a focus on supplier diversity, human rights exclusions, and product safety.

How are GLI equity and fixed income investment vehicles encompassing the E? Within the environmental component of ESG, gender inequality is stark. The unequal impact of climate change events on women has been well researched. Weather disasters and rising sea levels affect women more acutely, particularly in developing economies. Women are more likely to live in poverty worldwide, less likely to own land, and more likely to lose education and livelihoods through climate-crisis displacement. Discriminatory laws, lack of access to financial services, and the burdens of unpaid care only add to the gender-unequal effects of every adverse climate event.

An outgrowth of the dramatic impact of climate change is the increased presence of women as agents of climate solutions. In developing economies, numerous community-based solutions to local climate impact are being led by women. Empowering women and girls has been ranked second among dozens of solutions to global warming. In developed markets, studies show that women are relatively more focused on climate change, and many eco-friendly products are marketed to women.

GLI Equity Analysis and ESG1

If gender lens equity funds encompass Governance gender criteria by design, and many include gender-centric S criteria, how well are they doing on the E? Within GLI equity, at least four of the 29 equity funds are fossil free, an indicator of alignment with the climate component of ESG. These are the PAX Ellevate Global Women’s Leadership Fund, the Desjardins SocieTerra Diversity Fund, the Adasina Social Justice All-Cap Global ETF, and the RobecoSAM Global Gender Equality Impact Equities Fund. Several additional GLI equity fund managers recently signed a pledge to align with the Paris Accord emissions targets. These are AXA Investment Managers, BMO Global Asset Management, Nordea Asset Management, and UBS Asset Management.

Women comprise approximately 32% of the workforce in renewable energy, higher than the 22% of energy companies overall. Clean and renewable energy jobs are expected to grow exponentially over the next several decades, presenting these industries with an opportunity to create diverse workforces and leadership from the start. This is a call to action for gender lens equity and fixed income funds to invest in those renewable energy innovators and providers who encompass inclusive gender diversity in their growing ranks. Among gender lens equity funds, renewable energy providers Meridian and SunRun are held in six funds, while Orsted A/S and Vesta Wind Systems are held in five.

GLI Equity Renewable Energy Leaders

Among the global equity GLEFs, the Mirova Women Leaders Equity Fund holds four of top renewable energy companies. Within the regional equity segment, The Fidelity Women’s Leadership Fund leads the way with five.

1Fund data as of March 31, 2021. Contact us for updated analysis.

GLI Fixed Income and ESG

Gender lens fixed income includes a range of funds, notes, certificates, and a growing suite of gender bonds issued by banks and development finance institutions (DFIs). Gender bonds address the G pillar of ESG investing through a focus on women-owned enterprises (WOEs). The GLFI emerging markets and DFI bond segments also strongly address the E pillar. Most of these bonds adhere to the Green Bond Principles, a widely-used voluntary set of use-of-proceeds and reporting guidelines covering a comprehensive set of environmental investment criteria. In addition, gender bonds predominantly target emerging markets WOEs and other women-focused criteria. As climate crises have a gender-unequal negative impact on women, particularly in developing economies, these bond issues are capturing the E criteria of addressing climate change.

By design, gender bonds also address the S pillar. Supporting WOEs includes bringing them into the global supply chain, a key GLI component of S. Evidence continually demonstrates that investing in women and girls produces long-term community-wide benefits. When women work, they invest 90% of their income back into their families, compared to 35% for men. More women in the workforce also boosts economic growth. Before the pandemic the IMF estimated that, for the poorest countries, achieving gender parity in the workforce would raise GDP by an average of 35%.

Furthermore, in addition to SDG 5, a number of the DFI SDG bonds also focus on SDG 3, the promotion of public health, including reproductive, maternal, and child health. Several of these bonds include SDG 1, poverty eradication, and SDG 2, ending hunger and promoting sustainable agriculture. Indeed, hunger, agricultural output, and gender equality are closely related. Women comprise at least 43% of agriculture workers in developing countries.  According to 2021 UN data, if women farmers had equal access to productive resources, crop yields could increase by 20-30%, lifting more than 100 million people out of hunger.

How can ESG investments incorporate a gender lens? See our proposal for incorporating a gender lens into each pillar of traditional ESG investment definitions and criteria.