By Jon Hale, head of sustainability research at Morningstar
Sustainable investing is no longer a niche activity. New generations of investors around the world are looking for ways to learn whether the investments they own reflect the best sustainability practices, because it aligns with their values or perhaps they simply believe it can lead to better investment outcomes.
Until now, though, there hasn’t been a way for investors to assess how well the companies held by a fund are doing managing the Environmental, Social, and Governance (ESG) risks and opportunities they face in their businesses, nor a way for investors to compare funds on that basis.
To date, ESG research has largely taken place at the company level and been made available to asset managers and large institutional investors to help them incorporate ESG issues into their investment process.
Investors wanting to evaluate funds on these same sustainability factors, however, have had no easy way to do so. They could seek out funds with an intentional sustainability mandate, but ultimately had to rely on claims made by asset managers regarding their approach to sustainability. That’s why Morningstar has recently introduced a Sustainability Rating for funds and other ESG metrics, which will provide investors with a set of tools to view and analyse investment portfolios through an ESG lens.
How should investors use them? The new Morningstar Sustainability Rating and ESG metrics are based on actual portfolio holdings and apply to all funds; they are not limited to funds with explicit sustainability objectives. While some investors may prefer such funds, those fundamentally committed to sustainability objectives comprise only about 2 per cent of the investing universe. Most investors who are interested in sustainable investing thus own conventional funds.
Using our new ratings, investors may discover that the funds they own are not doing well enough on a sustainability basis and will actively seek out funds that are more fundamentally committed to sustainable investing. Others may find that the existing funds in their portfolios score in a range that is acceptable to them, particularly given the fund’s overall quality and performance record. Still others may use the information to dig deeper into whether, and how, a manager is considering ESG issues in the investment process.
While we recognise that different managers may consider ESG factors and incorporate them in different ways, our sustainability rating measures how well the companies in a portfolio are managing their ESG risks and opportunities relative to their peers within the same industry. We do not base the ratings on exclusionary screening of specific companies, products or industries. We base them on company-level ESG analytics from research provider Sustainalytics.
Our sustainable investing metrics will provide investors with a fresh perspective they can use to evaluate how well the companies in a fund are doing on a sustainability basis, and to compare funds across categories, relative to benchmarks, and, eventually, over time based on ESG factors. The sustainability ratings can serve as an initial screen for investors interested in sustainability and ESG, and as a useful starting point for investors wanting to know more about a manager’s investment process and how it relates to sustainable investing. We think it is a key link for turning the widespread interest in sustainable investing that we see today around the world into actual investments.
Provides Innovative Approaches to Implement Climate Change and Fossil Fuel Aware Investing
Investors who are interested in proactively seeking opportunities to enhance environmental impact without sacrificing potential financial return now have access to a new framework to transform the dialogue around climate change and the fossil fuel debate into an actionable plan for investing.
Morgan Stanley Wealth Management’s Investing with Impact Platform has recently introduced the Climate Change and Fossil Fuel Aware Investing Tool Kit.
The Tool Kit is designed as a roadmap for Morgan Stanley Financial Advisors to use with individual and institutional clients to develop a tailored investment approach to incorporate climate change and fossil fuel awareness into their portfolios based on their unique objectives.
The Tool Kit includes a primer that explores the topic of climate change, with a focus on fossil fuels, and provides a framework for investors to understand the risks and opportunities involved in climate change and fossil fuel aware investing. It also provides various approaches to climate change and fossil fuel aware investing, and guidance on how to implement these approaches from a portfolio perspective in a changing marketplace.
“We are pleased to provide our clients with this latest Tool Kit, further enhancing our ability to serve our clients who seek to address global challenges and pursue competitive financial returns,” said Hilary Irby, Head of Morgan Stanley’s Investing with Impact Initiative. “With the support of a Morgan Stanley Financial Advisor, investors can take actionable steps toward understanding the impact of climate change on their investments and then shift their portfolios toward building a more resource-efficient economy.”
The Tool Kit recognizes that there is no one-sized-fits-all approach to climate change and fossil fuel aware investing. However, adopting a systematic approach can help investors accomplish their unique goals by integrating climate change into their investment considerations and reducing carbon exposure in their portfolios through the strategic reallocation of assets.
“We believe there are a variety of approaches investors can take to transform the dialogue around fossil fuels and climate change into an actionable plan for investing,” said Lily Scott Trager, Director of Investing with Impact for Morgan Stanley Wealth Management. “The framework presented in the Tool Kit helps to clarify the different approaches to climate change and fossil fuel aware investing, and serves as a catalyst for action by providing a lens for portfolio construction that maintains a consistent, balanced focus on both impact and financial goals.”
The Fossil Fuel Aware Investing Framework offers a variety of approaches that can be used individually or together:
Fossil Fuel Aware – Investors may choose to reduce or eliminate exposure to companies producing coal, oil and gas, nuclear energy or owning significant fossil fuel reserves.
Environmental Leaders – Investors can maintain select exposure to the energy sector by investing in companies that reflect industry leading environmental practices compared with their peers.
Thematic Opportunities – This proactive approach focuses on opportunities across asset classes to invest in themes related to climate change and fossil fuel awareness. Examples include energy efficiency, renewable energy, energy storage and distribution, and alternative transportation such as electric vehicles.
Shareholder Engagement – Shareholder engagement can serve as a tool in making a portfolio potentially less vulnerable to climate change and fossil fuel related risk. As shareholders, investors can drive positive environmental change by voting proxies and as an investor in third-party strategies that use the power of their collective assets to influence corporate behavior.
Morgan Stanley Wealth Management’s Investing with Impact Platform, launched in 2012, enables clients to align investment decisions and personal values without sacrificing potential financial performance. The broader Investing with Impact Platform now offers more than 130 investment products capable of delivering positive environmental and social impact.
Morgan Stanley Wealth Management, a global leader, provides access to a wide range of products and services to individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, cash management and lending products and services, annuities and insurance, retirement and trust services.
Morgan Stanley (NYSE: MS) is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. With offices in more than 43 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For more information about Morgan Stanley, please visit www.morganstanley.com
This material has been prepared for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (hereafter “Morgan Stanley” or “the Firm”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor or Private Wealth Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Morgan Stanley Smith Barney LLC offers investment program services through a variety of investment programs, which are opened pursuant to written client agreements. Each program offers investment managers, funds and features that are not available in other programs; conversely, some investment managers, funds or investment strategies may be available in more than one program. Morgan Stanley’s investment advisory programs may require a minimum asset level and, depending on your specific investment objectives and financial position, may not be suitable for every investor.
Investing in the markets entails the risk of market volatility. Sustainable investing is subject to certain risks such as investment style risk. Because sustainable criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.
Inaugural Universe Includes Apple, Cisco, Intel, Johnson & Johnson, Microsoft, Nike, Walmart, and other Tech, Finance, and Consumer Product Leaders
Clean Edge recently released the inaugural universe of Corporate Clean Energy Leaders, recognizing corporations that are leading the way in establishing renewable electricity and low-carbon commitments, deploying renewable energy, and investing in clean-tech deployment. As more companies transition from fossil fuels to clean energy, the Corporate Clean Energy Leaders universe provides a key barometer of innovation, best practices, and leadership.
Thirty-four companies make the inaugural list. They are (in ranked order):
“These companies are committing to low-carbon, clean energy-powered operations to improve not just the environment, but their bottom lines,” says Clean Edge managing director Ron Pernick.
“Corporate Clean Energy Leaders spotlights firms that are taking a proactive role in moving toward a clean-energy future, with a focus on solar, wind, and other renewable energy sources and more efficient, low- or zero-carbon operations.”
Clean Edge tracks six different indicators to create the rankings.
Specific criteria used in developing the Corporate Clean Energy Leaders universe include:
• Investment organizations that have mobilized at least $25 billion in clean-energy/clean-tech/environmental deployment
• Companies that have a stated goal of getting 100% of their total electricity from renewables (for U.S. and/or global operations)
• Companies that get 25% or more of their current electricity from renewables (for U.S. and/or global operations)
• Climate leadership based on active membership in leading global carbon-reduction efforts and executive-level sustainability staffing
While many organizations apply negative screens to track corporate sustainability, fossil-free, and ESG (environmental, social, and corporate governance) activities, Clean Edge applies a methodology focused on actions and commitments, applying mainly positive screens. Companies must meet at least two of the tracked criteria, and meet minimum score thresholds, to be eligible for inclusion in the rankings. Companies must be U.S.-listed on the NYSE, NASDAQ, or AMEX exchange and have a market cap of at least $1 billion. The list excludes corporations whose primary business is the extraction and/or processing of coal or oil. Clean Edge plans to update the universe twice annually, in January and July.
Clean Edge’s Corporate Clean Energy Leaders debuts at a time when more companies and governments around the world are working to achieve higher renewable energy and lower carbon emission goals. To learn about licensing opportunities on the Corporate Clean Energy Leaders universe, please contact email@example.com or call 503-493-8681.
About Clean Edge, Inc.
Clean Edge, Inc., founded in 2000, is the world’s first research and advisory firm devoted to the clean-tech sector. The firm delivers an unparalleled suite of clean-energy benchmarking services including stock indexes, utility and consumer surveys, and state and metro leadership tracking, providing companies, investors, NGOs, and governments with timely research, trending analysis, and actionable insights. Managing director Ron Pernick and senior editor Clint Wilder are coauthors of the widely acclaimed business books The Clean Tech Revolution (HarperCollins, 2007) and Clean Tech Nation (HarperCollins, 2012). To keep abreast of the latest clean-tech trends, or for more information on the company, visit www.cleanedge.com or follow us on Twitter @CleanEdgeInc
The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular financial product or an overall investment strategy. Clean Edge, Inc., does not make any recommendation to buy or sell any financial product or any representation about the financial condition of any company or fund.
Sustainable Investment Firms Actively Engaged with Apple to Advocate for Pay Equity Disclosure
Pax World Management LLC, investment adviser to Pax World Funds (http://paxworld.com) and a pioneer in the field of sustainable investing, and Arjuna Capital (http://arjuna-capital.com), a sustainable investment advisor, in early March 2016 applauded Apple on its commitment to pay parity. Pax World and Arjuna Capital had earlier filed shareholder proposals, and have been in active dialogue with Apple on pay equity for the past several months. At Apple’s Annual Meeting in February, CEO Tim Cook announced the results of the company’s gender pay assessment and stated that the company is committed to closing the pay gap.
In September 2015, Pax World and Arjuna Capital filed shareholder proposals requesting that Apple disclose the percentage pay gap between male and female employees and the steps it was taking to address it. Pax World and Arjuna Capital subsequently withdrew the proposals in November 2015 after Apple committed to a constructive dialogue with the firms to explore specific actions the company could take to address pay equity.
“It became clear in our initial conversations with Apple that the company was fully committed to understanding and managing pay equity across its workforce,” said Heather Smith, Lead Sustainability Research Analyst, Pax World. “We commend Apple for its willingness to engage in a constructive dialogue and ultimately disclose the results of its pay analysis. We look forward to continuing our conversation with Apple, and expect that the company will continue to actively work to close the pay gap.”
“Apple is a leader and we would expect no less from the tech giant,” said Natasha Lamb, Director of Research & Shareholder Engagement at Arjuna Capital. “Gender pay equity is critical to creating a diverse and innovative workforce and tech companies can no longer sit this discussion out – they have to speak up for fair pay. It’s not simply a question of fairness; it is a question of breaking down the structural bias that keeps women in the back seat and business from reaching its full potential.”
The tech industry has come under intense scrutiny in recent years for its lack of gender diversity in its workforce, spanning all professional levels – from entry level positions to C-suite and boardroom executives. Research indicates that pay equity can be a key part of a successful diversity strategy and is an important factor when companies are working to attract, retain and motivate talented employees. Given the increasing national conversation and attention around gender diversity, Pax World and Arjuna Capital believe that managing pay equity and committing to pay parity is a meaningful next step toward achieving greater diversity.
“It is our hope that other companies, particularly those in the tech sector, will follow Apple’s lead and adopt similar reporting policies,” said Smith.
Pax World is engaged in numerous shareholder advocacy initiatives aimed at closing the gender pay gap, including co-filing shareholder proposals at eBay and Amazon requesting the disclosure of the results of pay equity assessments. Pax World also recently wrote to 31 technology companies held across its mutual funds, asking for information about how the companies are addressing pay equity and that they publicly disclose the results of a company pay analysis. In February, Pax Ellevate Management, a joint venture of Pax World and Ellevate Asset Management, sent a petition for rulemaking to the SEC urging the agency to require public companies to disclose gender pay ratios on an annual basis.
Arjuna Capital, in partnership with Baldwin Brothers Inc., has filed eight resolutions at technology companies asking them to commit to closing the gender pay gap. Facebook, Microsoft, Amazon, Google, Expedia, Adobe and eBay face 2016 proxy season votes and other direct shareholder pressure to follow the lead now taken by Apple to commit to gender pay equity.
About Pax World Management LLC
Pax World Management LLC, investment adviser to Pax World Funds, is a pioneer in the field of sustainable investing. Pax World integrates environmental, social and governance (ESG) research into its investment process to better manage risk and deliver competitive long-term investment performance. For over 45 years, Pax World has made it possible for investors to align their investments with their values and have a positive social and environmental impact. Today, its platform of sustainable investing solutions includes a family of mutual funds, as well as separately managed accounts.
About Arjuna Capital
Arjuna Capital is a sustainable investment advisor offering diverse, sustainable, profitable and high-impact investments to build and preserve our clients’ wealth and influence sustainable change through enlightened engagement in the capital markets.
You should consider a fund’s investment objectives, risks, and charges and expenses carefully before investing. For this and other information, call 800.767.1729 or visit www.paxworld.com for a fund prospectus and read it carefully before investing.
ALPS Distributors, Inc., is not affiliated with Arjuna Capital or Pax World Management LLC. / Pax World Funds are distributed by ALPS Distributors, Inc. Member FINRA. / PAX005952 (3/17)
Led by millennials, sustainable, responsible and impact investing is growing. Report recommends families appoint an SRI “champion.”
A growing number of family offices in the United States are exploring ways to invest for impact, according to a report released in February 2016 by the US SIF Foundation (www.ussif.org) entitled “Family Offices and Investing for Impact: How to Manage Wealth, Expand Legacies and Make a Difference in the World.” Download the Guide here- www.ussif.org/files/Publications/Family_Offices.pdf
While public data on family offices is limited, the report, drawing on interviews with family offices and other industry professionals, cites the anecdotal evidence that family offices are making more frequent inquiries to family office membership associations, financial advisors and consultants about sustainable, responsible and impact investing (SRI).
Approximately 3,000 family offices exist in the United States, and their collective assets under management are estimated at $1.7 trillion. Based on US SIF interviews, however, there is no definitive data on how many of these family offices practice SRI. In 2014, family offices representing $22 billion in assets under management, a relatively small sample, provided information for the US SIF Foundation’s biennial survey of SRI trends in the United States. They indicated that $1.5 billion of their assets under management took into account environmental, social and corporate governance factors.
According to interviews, family offices that invest for impact are motivated by the families’ values, including the growing influence of members in the millennial generation. In addition, family offices are becoming aware of a growing body of evidence that investments that take into account environmental, social and governance indicators achieve comparable or even better financial returns than conventional investments. Furthermore, the growing availability and variety of SRI investment options and the positive influence of family offices that have been pioneers in SRI investing is encouraging additional families to explore investing for impact.
Brief profiles of nine single family offices and multi-family offices, highlighting investment strategies, sectors of interest as well as their motivations for investing for impact, are also featured in the report. The report found that sectors of interest are diverse, with environmental issues figuring prominently. Other sectors mentioned by interviewees include human rights, supply chain issues, local and community investing, sustainably grown food, and technology innovators that advance social and environmental progress.
The report offers recommendations and resources for family offices to get started in sustainable, responsible and impact investing across different asset classes. It suggests that family offices:
• Identify and appoint a “champion” within the family who is interested in exploring investing for impact and can encourage family members to discuss their goals, values and specific social, environmental or corporate governance concerns;
• Review studies on the financial performance of sustainable investments to see how they compare with conventional investments;
• Engage financial professionals with expertise in sustainable, responsible and impact investing; and
• Take advantage of educational resources on sustainable and impact investing, such as online and live courses, reports, conferences and networks.
“This report captures the ‘buzz’ about investing for impact among family offices, which is definitely on an upswing, thanks in part to the interest of millennial generation members,” said Lisa Woll, CEO of US SIF and the US SIF Foundation. “Our guide highlights a number of family offices that have made the commitment to utilize their investment assets for positive social and environmental impact. We hope that the recommendations and resources provided in this report will motivate many more family offices to follow their example.”
About the US SIF Foundation
The US SIF Foundation is a 501c3 organization that undertakes educational, research and programmatic activities to advance the mission of US SIF. The Foundation houses the Center for Sustainable Investment Education, which serves the growing need of investment professionals in the United States to gain expertise in the field of sustainable, responsible, and impact investment. The Center provides education, research and thought leadership on sustainable investment to investors, investment advisors, consultants and analysts. Online and live versions are offered of the Fundamentals of Sustainable and Responsible Investment (www.ussif.org/courses), a resource for investment advisors, financial planners and other financial professionals.
About the US SIF
US SIF: The Forum for Sustainable and Responsible Investment advances sustainable, responsible and impact investing across all asset classes and a wide range of environmental, social and governance issues. US SIF members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, community investing organizations, nonprofit associations, and pension funds, foundations and other asset owners. Learn more at www.ussif.org
A Road Map to the Future of Gender Lens Investing – Executive Summary
by Joy Anderson and Katherine Miles / Prepared by Criterion Institute
Gender matters. In fact, it matters all the time. Gender matters when we are investing in women-led businesses or in companies that produce goods marketed to women. It matters when we are investing in regional transportation infrastructure, or the debt of a nation, or in the future of the semiconductor industry. Gender is not only about counting women and girls and how they are represented as workers and leaders or served as consumers and stakeholders in enterprises, industries or economies. Gender is a social construction that shapes how both men and women relate to one another and the institutions around them. Given the importance of how gender operates within society, culture, and the economy, the ability to analyze it should inform how we assign value and structure investments within systems of finance. This is not standard practice in finance, therefore, the field of gender lens investing is necessary.
At its core, gender lens investing incorporates a gender analysis into financial analysis in order to get to better outcomes. Through the creation of financial products and vehicles that reflect an understanding of the gendered nature of our world, innovators within the field of gender lens investing have created a new set of investment opportunities. These opportunities resonate with individual and institutional investors who are looking to demonstrate their commitment to creating a better world for women and girls in how they deploy their capital. This is in turn generating momentum and catalyzing creative design and demonstration as well as generating new patterns of investment activity. Over the past five years, investors have deployed billions of dollars, have been committed and new investment products and vehicles are being announced with increasing frequency.
Yet, for gender lens investing to fulfill its promise of improving gender equity, it cannot only move capital to investments that have gender as part of their analysis. It also needs to demonstrate how finance can be part of a strategy of social change. We need to demonstrate that finance and investments can be tools to advance positive change around a wide range of issues, such as sex trafficking, biases in the media, the wage gap and equitable health access.
This report tells the history of the field of gender lens investing over the last five years and outlines a roadmap to the future, defining the critical areas of focus for resources and attention.
We tell that story from the perspective of Convergence, the conference hosted by Criterion Institute, which brought together leaders in the field four times between 2011 and 2014. The research for this report builds from the transcripts and documents of that conference as well as additional secondary research. This report organizes the information in order to survey the current state of the field, make sense of tensions and trends in the field and recommends directions and action by a wide variety of participants in the field: philanthropists, investors, nonprofit leaders, policymakers, entrepreneurs, activists and academics.
As a field, gender lens investing can be understood in three ways: as a set of ideas organized into common language and frameworks; as a set of activities, the supply of, demand for and measurement of investment opportunities; and as a loosely organized set of people and institutions. The report organizes the insights and conclusions within this framework, a summary of which is included.
By Maria Bolis, senior advisor for Private Sector Department, Oxfam America
What if you were never asked, “What do you want to be when you grow up?” When I was younger, I wasn’t aware that people had different expectations of girls and boys. My parents wanted me to get good grades and have a career. They never asked, “When will you get married? How many children will you have?” Instead they asked, “What are you thinking about” And “What interests you?”
I followed my interests – sometimes circuitously – to graduate school for international development, the World Bank, the Overseas Private Investment Corporation, consulting, business school and eventually the New York Fed – free of the constraints of societal or familial pressures that so many women around the world face.
When I came to Oxfam, I began to see things differently. The doors that so easily opened for me – largely because of the “zip code” of my birth – were either shut or perhaps not even visible to others. Education, mentors, books, contacts, encouragement – these were all assets that I’d taken for granted. It killed me that the world was so full of people with incredible talent and drive who were routinely set back, minimized or unacknowledged largely because of their gender or the color of their skin.
At Oxfam, we set about developing an initiative known as “Women in Small Enterprise” or “WISE.” The objective of WISE is to support the revaluing of women’s economic contributions. We seek to demonstrate how women – especially indigenous women – are already contributing meaningfully to their economies as producers, suppliers and employers, but their contributions are going uncelebrated. We call this “making the invisible visible.” For those women, who are running their own small businesses, generating employment and supporting their families, we want to elevate their accomplishments. At the same time, the WISE initiative tries to make the road a bit easier for those women – through access to business training, coaching, peer networking, and financial links.
I worked in finance and felt confident that the impact investors could be part of the solution. There is a rising tide of interest in gender lens investing that invites investors to create economies that re-value women and their contributions. Furthermore, we knew that tackling a problem as big as women’s economic marginalization requires a “systemic approach” involving multi-sectorial partnerships that bring together the unique skills sets and resources of the financial sector, non-profits and academia. Oxfam would play its traditional convening role and use its platform as a global advocacy powerhouse to trumpet the voices of the entrepreneurs to change the paradigm of what a “successful entrepreneur” looks like.
We went on to raise Oxfam America’s (www.oxfamamerica.org) first ever impact investing fund in support of a pilot that we launched in 2014 in Guatemala. Fund capital is used to provide a partial guaranty to local financial institutions to incentivize increased lending to women-run businesses. This financial access component is paired with coaching and peer-to-peer learning opportunities (supported by separate grant funding) for the women participating in the program provided by our local partner organization, IDEA. The training weaves together business skills with themes of empowerment and agency. The very first training session helps women define their “life plan.” It asks – “What do you want to do?” to women who may never have been afforded the luxury of answering this question.
Take Elvira Yolanda Ralda Vasquez, owner of Marranería Centenario. When Elvira’s father retired he entrusted the business to his sons. The sons proved haphazard leaders, periodically leaving the business to work in the US. During these times, management passed to Elvira. The business prospered under Elvira’s leadership but when the sons returned from the US, the business would suffer when they again assumed management responsibility. In October 2015, Elvira’s father attended the WISE graduation ceremony. Elvira won the business competition that is held at the WISE graduation and her father, so impressed by her hard work and excellent reputation among her peers, formally transferred business ownership to Elvira. WISE gave Elvira a platform to “make the invisible visible” – she was the person best suited to run Marranería Centenario all along.
What can socially responsible investors do to hasten this change? Applying a gender lens to your portfolio is a great way to start. Veris Wealth Partners piece “Women, Wealth & Impact” is a veritable how to guide to do just that. If your impact focus is clean energy or animal welfare, a “gender lens” may feel unattainable but it’s not. Have you ever considered the number of women executives in the firms in which you invest? Have you asked investees about their maternity or paternity policies? When you select the imagery you use to highlight your successes, do you think about how your communications products can be used as a platform to say women are credible leaders? You, wherever you sit and whoever you are, have access to some resource that can make a difference in how women are seen and how they see themselves. It is critical to “make the invisible visible.” As Marian Wright Edelman has written, “It’s hard to be what you cannot see.”
What if you were never asked what you want to do? What if no one ever encouraged you to pursue your interests? Worse still, what if you were told that your dreams were impossible because your gender dictates inescapable responsibilities such as caring for children, parents and the home. And what if you went against the odds and pursued your professional path, and as a result neighbors gossiped, your husband was frustrated and you risked both your reputation and your safety on public transport. Would you do it? I know I wouldn’t. It is for those women brave enough to assume roles outside of what is expected for whom WISE was created.
Article by Mara Bolis, senior advisor, Private Sector Department, Oxfam America (www.oxfamamerica.org). Mara has over 15 years of experience working in the fields of international development, emerging markets finance and business. Mara is the global lead on the Women in Small Enterprise initiative, which includes Oxfam America’s first impact investing fund that focuses on women entrepreneurs in Latin America. Prior to Oxfam, Mara consulted with the Middle East Investment Initiative to develop a new form of small business insurance to help Palestinian exporters hindered by travel restrictions. Prior to that she worked at the Federal Reserve Bank of New York as an emerging markets financial sector analyst. She has worked with various international finance and development organizations, including US Export-Import Bank, the Overseas Private Investment Corporation and the World Bank. She has an MBA from Johns Hopkins University and a Masters in Foreign Service from Georgetown University. Mara also speaks fluent Latvian and basic Russian.
By Lynne Ford, Executive Vice President of Calvert Investments
Three important trends are already changing the asset management industry, and are poised to become even more important in the coming years. First, based on their spending and earning power, women now represent a growth market bigger than those of China and India combined. This reality was identified by Kate Sayre and Michael Silverstein of the Boston Consulting Group in their article “The Female Economy.”
The second trend is the ever-increasing percentage of millennials in the workforce—forty-six percent by the year 2020. What does that mean when you project ahead another decade or two after that? It means that this generation is going to hold important keys to the future. Yet most of us continue to manage our business models around boomers.
The third major trend is the increasing focus on sustainability. With events such as the Paris Climate Agreement and the Pope’s 2015 speech on the importance of protecting the environment, concerns about sustainability have become part of the mainstream conversation. Like the tidal changes of the Internet and social media, demands for global change and sustainability will only increase, and women and millennials will likely drive this pressure.
Millennials have grown up recycling and hearing about solar panels and water conservation and carbon emissions. Theirs is a global world, and based on a focus group of millennial investors that Calvert conducted in 2015, their attitudes about investing are in tune with their values:
• They are nearly twice as likely to be familiar with “sustainable investing” — or what we’re now beginning to refer to as “responsible investing” — than other generations (57 percent vs. 29 percent)
• They are three times more likely to have discussed responsible investing with family and friends (39 percent vs. 12 percent)
• They are more than twice as likely to invest responsibly (70 percent vs. 31 percent)
Women are also leading the way to a focus on sustainability. Last year, Calvert Investments (www.calvert.com) conducted a study of 1,036 women aged 25 to 70 with household income over $75,000 that explored purchasing behavior, charitable giving, and responsible investing.
• Nearly all ranked “helping others” (95 percent) and “environmental responsibility” (90 percent) as important.
• At least some of the time, roughly 60 percent of the women based purchase decisions on how a company’s corporate behavior aligns with their personal values.
• Although many affluent women change purchasing behavior to support their values and donate significant sums to nonprofits, only four percent say they understand how to invest their dollars in a way that supports their values, and 70 percent have not heard of sustainable or responsible investing. However, 18 percent would invest in mutual funds that support their values and more than half (54 percent) want to invest in companies that have a high degree of corporate responsibility and ethical business practices.
• Half of affluent women with employer sponsored retirement plans are very or somewhat interested in being given a responsible investment choice.
As responsible investing becomes more widely known, there could be significant opportunity for financial advisors to get ahead of the curve by helping women align their values with their need for financial growth and stability.
Women and Millennials Have the Potential to Drive Responsible Investing
Women want to use their investment dollars to support their values in the same way they use their purchases to achieve that objective. As more women gain awareness of responsible investment strategies, the statistics above suggest they will direct their dollars toward responsible investment solutions. Our survey found significant differences between the Millennial and Baby Boom generations on responsible investing topics. While Millennial women are the most likely to say social and environmental causes and issues are very important and drive much of what they do (90 percent versus 81 percent for Generation X and 80 percent for Baby Boomers), Baby Boomer women are more likely to change purchasing behavior (28 percent) and show the strongest interest in sustainable and responsible investing (63 percent).
Calvert has been focused on responsible investing for more than 30 years. This includes proactively selecting responsible investments as well as using our clout as a significant institutional investor to drive change. In 2004, the Calvert Women’s Principles were established in partnership with the United Nations and were the first code of corporate conduct focused exclusively on empowering, advancing, and investing in women worldwide. The seven principles — available on the Calvert website — provide a roadmap of how a company should aspire to impact women, a tangible measuring stick for assessing progress, and a gauge on how a company affects women in the community through its products and its impact on women down the global supply chain.
Today, the Calvert Women’s Principles are being adopted and activated through partners such as the UN Global Compact — where more than 800 companies have signed on to work toward adopting the principles — and through municipalities that are looking to create standards for businesses in their regions. The City of San Francisco is a great example.
We also just updated our bi-annual look at how companies in the S&P 100 are doing on a range of diversity indicators—including several key women’s issues. I would encourage you to look for that report, which we call “Examining the Cracks in the Glass Ceiling,” on our website as well .
Responsible Investing Can Also Drive Financial Returns
Beyond allowing investors to align their investments with their values, multiple studies have shown that paying attention to non-financial environmental, social and governance metrics can make a positive, material impact on portfolios. For example, working with Harvard professor George Serafeim, Calvert recently published “The Evolving Role of the Corporation in Society”. This report outlines why and how companies are investing in efforts to manage their impacts on society and the environment and how this activity can translate into benefits for investors.
An increasing number of investors — led by Women and millennials — already prefer to invest in companies that are effectively managing their impact on society and the environment. Now, financial professionals have the research and the choices to help their clients and prospects build their nest eggs with investments that also reflect their values.
Article by Lynne Ford, executive vice president, Calvert Distributors, Inc. leads the firm’s sales efforts across all institutional and retail channels, as well as Calvert’s product, marketing, and public relations efforts. An industry veteran since 1984, Ms. Ford brings both significant experience and new ideas to the task of growing sales and assets while re-energizing Calvert’s leadership position within the responsible investment segment of the industry. Before joining Calvert in 2012, Ms. Ford served as executive vice president and chief executive officer of Individual Retirement at ING Life Insurance and Annuity Company, where she was responsible for the ING Broker Dealers, retirement rollover platform, and fixed income annuities. Ms. Ford spent the majority of her professional career at Wachovia, which merged with Wells Fargo in late 2008, serving in a number of executive capacities within its investment management and distribution organizations. She built the Retail Retirement Group as executive vice president and managing director, after being promoted from senior vice president and Retirement Sales Strategy executive where she was instrumental in creating the overall retirement strategy at a corporate level. She also held a number of executive positions within Evergreen Investments, from 1993-2003.
An active and engaged member of her community, Ms. Ford is a member of the 2015 Leadership Greater Washington program. She is a director of the Insured Retirement Institute and was previously on the Executive Committee, serving as chair of the board 2011 – 2012. She also serves on the National Board of Junior Achievement USA and is a member of the Audit committee. Ms. Ford holds a Bachelor’s degree from Davidson College and a Master’s degree from the University of North Carolina, Charlotte.
By Amy Domini, founder of Domini Social Investments and partner in The Sustainability Group
As I was working on this article, the old Buffalo Springfield lyrics kept buzzing through my mind. “There’s something happening here; what it is ain’t exactly clear.” The more I looked at actual research about women as investors, both as investment managers and as persons making decisions about how and where to entrust their savings, a conundrum became apparent. Women are good investors, better than men, but women are not trusted to run portfolios.
I start with some of the better-known studies. June 2015 Morningstar published a research report surveying mutual fund managers by gender. Their findings seem pretty stark. Less than 10 percent of all U.S. fund managers were found to be women. If you count the dollars rather than the people, the results are even more dramatic. Women run about two percent of the industry’s assets. This offers fairly conclusive evidence that women are not participating at high levels in the investment fund management industry.
One clue into why that may be is a study of behavioral scientists that attempted to see whether there was a prejudice against investing into mutual funds run by women. April 2011 Alexandra Niesen-Ruenzi and Stefan Ruenzi of the University of Mannheim, published the results of their study, Sex Matters: Gender and Prejudice in the Mutual Fund Industry. Their conclusion was that customer discrimination as to gender does exist. They argue that the discrimination is what led to those funds which are run by women experiencing fewer fund flows to them, even though they found no difference in performance. Male-managed funds saw, on average, 15.6 percent higher flows.
They argue that the reason the money in mutual funds run by women (an average fund size of $573 million in this study) is less than the money in mutual funds run by men (an average fund size of $711 million) is that the funds run by women fail to attract assets. The above study attributes this to prejudice and presumptions that women will deliver a lower rate of performance. The scholars found no performance differential and no other reason for investor behavior. They even found that an S&P 500 index fund run by a woman would experience lesser fund flows than one run by a man.
Now we look at the investors themselves. The Investment Company Institute is the trade organization for mutual fund management companies. ICI publishes research into every aspect of the fund. In their recent, Equity Ownership in America, they surveyed mutual fund owners and those that purchased stocks directly. The characteristics tell us that household investment decisions are generally jointly made. Fifty-four percent of the decisions as to what to invest in are made between a male and a female acting together. Twenty-five percent of the time it is a male acting alone and 20 percent of the time it is a female.
I cannot know the dynamics of the jointly made decisions, but if you narrow the field to just those you know the gender of, 20/25 or 44.4 percent of deciders are female and 55.6 percent are male. From the above Mannheim study, we know that neither males nor females prefer female managers, but since male and female asset managers perform equally well, Mannheim does not tell us whether the household with the female decider does as well as the household with the male decider.
For gender-defined investor savvy, we turn to behavioral economics. In 2001 Brad M. Barber and Terrance Odean, studied the difference between male and female amateur investors. Their study, Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment, found that men take on more risk and save less money. Men trade almost one and a half times more frequently than women. They are less likely to research investments and more likely to act on a tip. Over the course of a seven-year period, the study found that a female investor acting alone outperformed a male counterpart by 2.3 percent. When women invested together in a club, they outperformed the male-only investor clubs by 4.6 percent.
In 2005 Merrill Lynch investment managers released a survey they had undertaken. Merrill found that women make fewer investment errors than men. “Women are far less likely than men to hold a losing investment too long (35 percent of women reported having done so at least once vs. 47 percent of men) or wait too long to sell a winning investment (28 percent vs. 43 percent). Men are also more likely than women to allocate too much to one investment (32 percent vs. 23 percent), buy a hot investment without doing any research (24 percent vs. 13 percent) and trade securities too often (12 percent vs. 5 percent).” They found that women are more likely than men to have a financial plan and to be satisfied with their financial situation.
So here’s a conundrum. Given that women save more and invest better, why is the male the decider of where most households invest? And why, given that male and female asset managers manage equally well, do investors prefer a male at the helm?
For me this is more than simply idle curiosity. Domini Social Investments (www.domini.com), the management company I founded, is women-managed. Four of our top six officers are female. Our messaging to the public goes out in pamphlets and advertisements that have an implicitly female look and feel. Our very logo is a feminist act.
The starfish became our logo because of a simple story we publish. Our version (there are a few) goes like this: Thousands of starfish washed ashore. A little girl began throwing them in the water so they wouldn’t die. “Don’t bother, dear,” her mother said, “it won’t make a difference.” The girl stopped for a moment and looked at the starfish in her hand. “It will make a difference to this one.”
When I heard that story it was about a boy and his father. I feminized it because I wanted to be explicit about the fact that wisdom can be found in the voices of those traditionally overlooked as sources. What more naïve voice than that of a little child? And yet she is right. Do what you can; make a difference if you can. But perhaps that was a mistake. Perhaps I should be more masculine in my messaging, at least if I want to grow my assets under management.
For those of us who advise investors of both genders, none of the above surveys or studies reveal anything we have not intuited through our practice. Women are more deliberate and considered when choosing a manager and when choosing an investment plan. We know, as the Merrill Lynch study found, that women are “eager to build a working partnership with their financial advisor.”
I have often said that to succeed on Wall Street you need two skills. First, you need to be able to attract and retain clients. Second, you need to be right about what you invest in more often than you are wrong. These are skills that women can acquire. In fact, if any of the studies are on target, the second is a skill women acquire intuitively. Yet the conundrum exists. It is time that we women, that society as a whole, and that Wall Street addressed the barriers and tore them down.
Article by Amy Domini, partner in The Sustainability Group in Boston where she manages roughly $1.1 billion in liquid assets for high net worth families. Additionally she is the founder of Domini Social Investments (www.domini.com), a New York City based mutual fund family with $1.6 billion under management. She is widely recognized as the leading voice for socially responsible investing. In 2005 she was named to the Time magazine 100 list of the world’s most influential people, and in 2009 Time listed her as one of 25 “Responsibility Pioneers”. In 2005, President Clinton honored her at the inaugural meeting of the Clinton Global Initiative.
Ms. Domini co-authored the groundbreaking book, Ethical Investing in 1984. Since then she has authored or co-authored several books. Her articles have been widely published and she is a regular contributor to The Intelligent Optimist magazine. Ms. Domini serves or has served on several boards and holds the Chartered Financial Analyst designation.
Ms. Domini holds a B.A. in international and comparative studies from Boston University. She is the recipient of two honorary degrees: a Doctor of Business Administration, from Northeastern University College of Law and a Doctor of Humane Letters by the Berkeley Divinity School at Yale.
By Kathleen McQuiggan, senior vice president of Global Women’s Strategies for Pax World Management LLC and managing director of Pax Ellevate Management LLC
Imagine walking into your first Wall Street job, fresh out of college, ready to take on the world. That was me twenty-five years ago when I boldly entered the world of finance as a sales assistant for two institutional brokers. At the time I knew nothing about investing or client service, but I knew that it was a fantastic opportunity to learn and it was an environment in which I could thrive – so I was all in.
While the markets fluctuated (often wildly) throughout my career, one thing remained constant – the staggering lack of gender diversity in the financial services industry. A typical day consisted of me and a group of men on the trading floor, or in the IPO roadshow meeting, or presenting to an investment committee. I became accustomed to being the only woman in the room.
Over time, I saw the injustice being done to women in financial services firms – and I wanted things to change. So whether it was getting more women into senior leadership, or encouraging more women to pursue careers in finance, or working with more women investors to make investment decisions, my professional mission became all about more.
In 2009, I pivoted my career and began to focus solely on investing in women. Today I can say with confidence that the work our team at Pax World (www.paxworld.com) is doing to invest in women is the most important thing I have been involved with – professionally and personally – in my career.
Why Invest in Women?
Research shows that women bring positive benefits to the bottom line, including improved operational and financial performance, increased innovation, better problem solving, stimulated group performance, and enhanced company reputation. As Pax World CEO Joe Keefe often says, “When women are at the table the discussion is richer, the decision-making process is better, management is more innovative and collaborative and the organization is stronger.” In my view, we are at a point in time where the conversation is shifting from “Why invest in women?” to “Why would you not invest in women?”
Here is How Can You Invest in Women
If you are a business executive, begin by asking yourself, “Will women want to work for my organization?” Then, work to create an environment in which women can thrive as leaders. Make gender diversity a business imperative – and implement the strategy from the top down. Ernst & Young recently published a report on actions that accelerate gender parity in the workplace. It should be required reading for all senior managers.
Close the pay gap at your company. The business community could learn a lot from Salesforce CEO Mark Benchoff, who spent $3 million last year to close the pay gap between the company’s female employees and their male counterparts. At Pax World, we release a pay equity audit annually in our own Corporate Social Responsibility (CSR) report, which reviews our company’s sustainability efforts. You can start by conducting an internal pay assessment, examining pay ratios by gender, and taking proactive steps to close whatever inequities may exist.
Lastly, tackle unconscious bias head-on so that it doesn’t create an uneven playing field. Unconscious bias is an assessment that happens automatically and is often influenced by an individual’s background and personal experiences. Laura Liswood, author of The Loudest Duck, is a great resource on this topic and provides practical tools that can help you combat unconscious bias and successfully manage gender diversity in your organization.
First, assess your current investments through a gender lens. If you own individual stocks, look at the percentage of board seats and senior management positions held by women in the companies you own. If you don’t like what you see, take action. As an investor you have more power than you realize. Did you know you can actually say “no” to all-male boards? When you receive a company’s annual proxy with its slate of directors, withhold support from any board slate that does not include women. This very simple step can make a big difference in promoting gender diversity on corporate boards.
You can also consider investment products that incorporate a gender lens into their analysis and decision-making process. Veris Wealth Partners developed a helpful report that provides an overview of gender lens investing and explains how you can use your investments as a lever for investing in women. The report covers the full variety of gender lens investment opportunities including funds that integrate gender diversity into the investment process and portfolio construction. A few examples include the Pax Ellevate Global Women’s Index Fund, which invests in the highest rated companies in the world for advancing women in leadership, Breckinridge Capital’s taxable bond strategy that uses a gender lens, and Root Capital’s Women in Agriculture Initiative that investors can support through a note.
When you invest in mutual funds you should also look at the gender makeup of the portfolio management team. Just as companies can benefit from gender diversity in management, research shows that there is also a benefit associated with the presence of women on an investment team.
Look within your own practice – have you assessed your practice with a gender lens? I work with advisors all over the country through Pax World’s Women & Wealth practice management offering, which provides advisors with tools to better engage and serve their female clients.
When I ask advisors to tell me about their top female clients, it’s not uncommon for them to ask, “What do you mean? All my clients are the same.” The reality is that female clients must consider a different set of circumstances than men when making financial decisions, including the possibility of living longer, higher healthcare costs, and needing to save more for retirement to combat the wage gap.
A recent study from the Center for Talent Innovation also highlighted that women investors want a “greater basket of goods” when investing. Women want their wealth to not only provide financial security and financial independence – they also want to use their wealth for latitude in career choices, to fulfill their aspirations, and to invest according to their values. With this in mind, consider how you are integrating women’s unique circumstances into your financial planning process with clients. As an advisor, it’s important to realize that the client of the future will likely look different than your traditional male clients. Focus on better engaging and serving your existing female clients as they become an increasingly important part of your practice.
So, are you ready to invest in women and join me on this journey? The time is now. Join the global movement, enter the conversation and invest in women. Because really, why would you not?
Article by Kathleen McQuiggan, senior vice president of Global Women’s Strategies for Pax World Management LLC and managing director of Pax Ellevate Management LLC. In these senior management roles, Kathleen is responsible for initiatives related to gender diversity and women’s leadership. Kathleen’s responsibilities include sales and marketing for Pax Ellevate Management LLC, which manages the Pax Ellevate Global Women’s Index Fund. In addition, she oversees Pax World’s broader contributions to thought leadership related to gender equality as an investment concept and women and sustainable investing. She also leads Pax World’s Women and Wealth Practice Management initiative focused on helping financial advisors to build their practices and to better engage and serve female clients. In 2015, Kathleen was named to InvestmentNews’ inaugural Women to Watch list, which honors female financial advisors and industry executives who are distinguished leaders at their firms.
Kathleen has more than 24 years of experience in the financial services industry with much of that time focused on increasing the industry’s understanding of and responsiveness to the financial planning needs of women. Prior to her current role, Kathleen was Senior Adviser to Pax World for Gender Diversity Initiatives while serving as President of Catalina Leadership, a strategic advisory organization she launched that focused on investing in women. Prior to working with Pax World, she was a Vice President at Goldman Sachs for 13 years, where she served as an Institutional Equity Franchise salesperson in Chicago and Boston.
Kathleen earned a Bachelor of Arts degree in Business Administration with a concentration in Finance from Towson University. An advocate for women’s issues in business and the community, she is the former co-president of the Ellevate Network Boston Chapter and serves on the YWCA Boston Board of Directors and the WIN Council for the Certified Financial Planner Board of Standards Inc.
Kathleen McQuiggan is a registered representative of ALPS Distributors, Inc.
RISKS: Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The Fund does not take defensive positions in declining markets. The Fund’s performance would likely be adversely affected by a decline in the Index. Investments in emerging markets and non-U.S. securities are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation, intervention and political developments. There is no guarantee that the objective will be met and diversification does not eliminate risk.
You should consider a fund’s investment objectives, risks, and charges and expenses carefully before investing. For this and other information, call 800.767.1729 or visit www.paxworld.com for a fund prospectus and read it carefully before investing.
Distributed by ALPS Distributors, Inc. ALPS is not affiliated with Veris Wealth Partners, Breckenridge Capital, Root Capital, or the Center for Talent Innovation.
Kathleen McQuiggan is a registered representative of ALPS Distributors, Inc.
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