In 2016, along with our sponsors Calvert Foundation, The Caprock Group, Eileen Fisher Foundation, Fulcrum Capital, Grand Challenges Canada, Honeybee Capital, Trillium Asset Management, and Veris Wealth Partners, we launched the Gender Lens Investing and Market Risks or “GLIMR” research project, bringing together select fund managers and advisors to collectively think through strategies that improve gender analysis within investments in public equities.
Through this project, we are working to solve a critical need in gender lens investing: to have more data about gender patterns that can drive financial analysis. To expand the data possibilities, we discovered the need to reframe how gender is positioned in investment analysis. The value of investing with a gender lens is most often framed in terms of increased returns or opportunity. What about also seeing gender patterns as presenting the risks to an overall industry or sector? To approach the analysis, we looked to how climate finance has positioned the risks of climate change. ESG portfolios look at climate change as an external risk affecting potentially all industries, all sectors, all geographies; the question, then, is how companies are responding to those risks. How can an analysis of gender patterns be seen in a similar vein?
There were three significant implications from this exploration:
Expand the consideration of gender beyond internal/company concerns to external/market concerns. For example, climate finance looks not just at the specific plant emissions but also at the impacts of rising global temperatures. In gender lens investing, we need to shift to look not only at diversity in board leadership within a company but also at the at external patterns of gender based violence in the community.
Shift the understanding of gender patterns from static to dynamic. We need to develop the ability to see the future of gender. What is the long view on an issue like gender-based violence? What might the world look like in 15 years if violence against women was reduced by half? How does that vision of the future create a different understanding of the risk gender-based violence presents today?
Understand specific gender patterns as shaping market risks (both upside and downside) that would affect performance of companies in a sector, industry or geography. This requires that that we can imagine gender patterns shifting in the future. We once viewed the weather patterns as predictable and static, however that has shifted and now analysts follow changing patterns with great interest.
After exploring the framework, we then focused on the development of a methodology that would allow us to shift the analytics and the data that is used by ESG managers today.
The steps for our methodology are:
First, find gender data sources for the external risk factors – longitudinal public world data from credible sources in analyzable formats. For example, Center for Disease Control data about women’s health patterns. While the data requires cleaning for use in financial analyses, the data is abundant.
Next, select a set of data points and brainstorm what industries, sectors or geographies would have particular exposure to these data points.
Then, test the correlations between traditionally understood market risks (such as political instability) with those data points.
Finally, identify how the results of the analysis might inform specific approaches to managing an ESG portfolio.
Currently, with our 2017-2018 partners, we are using this methodology to expand the analysis of gender in public security portfolios. By starting with publicly available external gender data points relevant to a region or a sector rather than the internal data points about the gendered practices of a company, we can avoid some of the current constraints around the availability of company-level data. This also changes the conversation to focus on correlating gender patterns with a broad set of market risks.
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