In this article, Stephanie Marton, Associate Consultant at the Boston Consulting Group, presents a practical and strategical perspective to approach Gender-Lens Investment. Distinguishing the philanthropic cause of gender equality from pure market opportunities, Stephanie emphasizes that the message of gender-lens investing needs to be reframed in order to attract larger funding pools to sustain this new field of investment.
Read the following piece if you want to learn more about Stephanie’s take on gender-lens investing.
Gender-Lens Investing: From Margins To Mainstream
by Stephanie Marton, Boston Consulting Group
While Sheryl Sandberg galvanizes women to lean in to their careers, “gender-lens investing” galvanizes investors to support them. The gender-lens investment movement calls for investors to use gender as a category of analysis in company diligence, prioritizing bets on value opportunities in three types of firms: companies led by women, companies that promote gender equity, and companies that benefit women through products and services. Leaders of this movement, including the team at the Criterion Institute, craft their call to action around the thesis that gender-lens investing is both the right moral move and the smart financial play. The investment thesis emerges from both the moral imperative to support women and the evidence that investment in these types of companies realizes outsized returns.
Armed with dual theses – one economic, one moral – how should advocates for gender-lens investing make their case? We might be tempted to believe that both arguments form a more powerful message when combined. In reality, by clothing our argument in the moral language of a social movement, we risk stalling our forward progress. It may be time to leave behind the social cause in the name of attracting the most committed capital and the most capable investors.
Thus far, some champions of gender-lens investing have positioned the movement as a social cause with economic perks. When the two rationales are given equal weight, the humanitarian argument traditionally leads: “First establish that women’s rights are human rights, then explain that freeing women is just good business,” said Daily Beast editor Tina Brown, summarizing Hillary Clinton’s messaging approach at an April conference. Catalytic Women, a leading organization in gender-lens thinking, summarizes their mission statement as: “Investing with a gender lens is about fundamental systems change”. I strongly agree with the potential of the movement, and organizations that lead with the social mission must exist, but the language of social movements may distract from the business case.
Gender-lens current capital sources reflect the “social cause first” framing. Social issues are historically funded through charity and philanthropy. At best, the “right thing to do framing” will attract mainstream capital earmarked for social issues. Examples of this include the Parity Portfolio at Morgan Stanley MS -0.95%, and groups such as Golden Seeds and Women Equity partners. Important as these sources of funding are, a deeper opportunity lies with the larger and more experienced investors. Mainstreaming gender issues means tapping traditional capital; the hedge funds, bulge brackets, and institutional investors who move markets most quickly.
The struggle and eventual triumph of the clean wind movement offers lessons for the gender-lens advocates at this early stage. From its birth in the 1970′s, environmental activists called for more investment in clean and renewable energy technologies. As gender-lens investing has done, these early activists adopted the “social cause first” approach. Bill Clinton’s view on environmental topics reflects Hillary Clinton’s approach to gender empowerment, with market opportunities positioned as secondary: “I believe it is time for a new era in environmental protection…which uses the market to help.” Only when the business case became strong enough to move traditional capital did environment-friendly energy sources take off, starting with paradigm shifting bets on the sector placed by traditional capital sources, namely GE, in the 1980′s. As the sector grew, access points for investments took hold. Last year, renewable and alternative energy mutual funds outpaced overall energy funds. Renewables became a true investment class, channeling significant funds to the cause, and contributing to major progress toward energy sustainability.
With the renewable energy sector as guide, a clear call to action emerges for the gender-lens activitists: Partner carefully, and brand selectively. On this path, gender-lens movement leaders should sacrafice unhelpful alignments and narrowing its brand to ensure a reputation as the “smart” move independent of its social movement origins. The risk in the economics-first approach is that advocates will run out of ammunition in the cases where the economic rationale is weak or intangible. Philanthropic money, however, will always be there to plug these gaps. In fact, positioning gender-lens investing as a different breed from the women’s empowerment movement may prevent the causes from cannibalizing each other, allowing the social-cause activists to leverage socially conscious capital, while gender-lens investors present a clean business case to traditional capital.
Some will argue that those who believe in the gender-lens investing business case need not push the agenda any faster than the profit motive dictates. If decision makers were rational and market information complete, I would agree. Given the realities of the markets, advocates should frame the gender-lens thesis deliberately, choosing an identity that will attract larger and sustainable funding pools to magnify, as opposed to divide, the platform for this opportunity.