Blended value: financial returns, SDG’s and gender in harmony

 

Rien van Gendt

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How enlightened would it be, if foundations were to use gender lens investing as one of their strategies to contribute to a more sustainable world?

Philanthropy and sustainable investing should be natural allies with a common DNA. Most foundations take a long-haul approach with respect to both philanthropic spending and investing and want to be there in perpetuity. Hence it is natural that foundations take an interest in the sustainability of the environment in which they operate. Foundations serve the public interest, and this is another reason that sustainability cannot be ignored.

Where philanthropic institutions really can create momentum with ESG strategies is in the public market of listed equities and corporate bonds. These asset classes tend to be more significant in the strategic asset allocation than the strategic exposure to private markets. An ESG approach with respect to public markets implies, that the regular criteria used in portfolio construction of return and risk are broadened to include the way companies deal with impact, with issues of sustainability like Environmental, Social and Governance and the interfaces between them.

Foundations interested to invest in ESG strategies would be better placed to employ positive screening (or ‘best in class’ approaches) than negative screening, or focusing on what they do not want to support. Positive screening can be done in a passive manner by selecting ESG filtered indexes or through active management. It allows you as a foundation or institutional investor to invest across the whole range of listed companies irrespective of their products/services or geography, as long as companies contribute in a positive way to ESG criteria.

When foundations take an active approach to positive screening, they can add other lenses to their investment process, and I want to mention two of such lenses. First of all, there is the lens of companies contributing to the ‘Sustainable Development Goals’. I am the advisor of a Dutch independent investment manager DoubleDividend dedicated to sustainable investing and their funds (equity, fixed income and real estate) and their tailor-made investment management relate selected companies to SDG’s. DoubleDividend aims to invest in companies that have a significant positive impact on climate, ecosystems and/or wellbeing. These three global challenges relate to the seventeen SDG’s and hence investing in the companies identified by DoubleDividend in a dynamic fashion, means a contribution to the SDG’s and reaping both a financial and a social return.

Gender lens investing is offered by a range of investment managers, but we have to be aware of greenwashing or more specifically gender washing. Sometimes gender lens products are based on very slim research data, like the number of women in leadership positions.

Secondly there is a lens of companies taking a serious interest in diversity and particularly gender in their business operations. Diversity/gender can be seen as a proxy to achieve sustainable development. Companies that score highly on gender and diversity policies are likely the companies that are well governed and managed. There is a high probability that a screening on diversity/gender policies leads us to the better companies to invest in: companies with higher financial returns, lower risks and greater resilience. In the EFC publication ‘Championing Diversity’ of 2009, I wrote in the concluding chapter, that in addition to the imperatives of equity: ‘For me the single most important argument in favour of diversity is, that heterogeneous groups are likely to deliver better results than homogeneous groups’. Gender lens investing is offered by a range of investment managers, but we have to be aware of greenwashing or more specifically gender washing. Sometimes gender lens products are based on very slim research data, like the number of women in leadership positions. More robust data are needed next to data on gender balance and leadership, like gender balance in workforce, equal compensation and work/life balance and commitment to women’s empowerment. That is where Equileap comes in, as an organization established in 2016 by Diana van Maasdijk and Jo Andrews. For me the essence of Equileap is that it has turned gender into an investable proposition for institutional investors including endowed foundations. The organization has broadened and deepened the database; it researches over 3500 public companies using 19 criteria to measure their progress towards gender equality. One of the results of their analysis is a ranking of listed companies and this provides the basis for selecting companies to invest in. Recently the Government Pension Investment Fund of Japan decided to put nearly $3 billion in a gender equity fund powered by Equileap’s research.

If foundations are interested in active ESG management of their portfolio, the SDG lens and the gender lens offer fascinating opportunities to have a sound investment and contribute to a better and equitable world.

A longer version of this piece was originally published on 11 January 2021 the Van Gendt Philanthropy Services website.

Rien Van Gendt is an advisor to the Calouste Gulbenkian Foundation and based in the Netherlands.

Tagged in: Foundation investments


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