Emerging Challenges in Gender Lens Investing
For the past several years Domini Impact Investments has been incubating a small portfolio that, in addition to other standards, applies a gender lens of the simplest nature. In order to qualify for purchase, the company must employ one female on the executive management team or have one female on the board of directors. The portfolio is unconstrained, multi-cap, global and opportunistic. Within this Wild West of a universe, this one standard has produced portfolio management challenges, personal challenges and frustration well beyond anything I had anticipated.
We begin with the fact that here in the United States it is fairly common to see women in leadership positions, – not exactly routine, but it happens. This is not the case in much of the rest of the world. Further, the maleness or femaleness of people can be a bit difficult to grasp in disclosure documents that refer to each board member as “Dr.,” and have no photographs and have names that do not denote gender to my Americanized eyes. We are fortunate at Domini to have native speakers of Chinese, Japanese, and a handful of other languages. Nonetheless, simple, computer-driven screens, such as a conventional analyst would use to calculate revenues, are not an option and the disclosure is not simple. Particularly in Southeast Asia, the raw data can be a challenge.
Challenges, however, create opportunity. We have had a multi-year correspondence with the largest Japanese publicly-traded companies over gender diversity. Happily, these conversations have led to occasional feedback that our comments have led to results. Once again, the fact that a standard for purchase exists proves itself helpful as a social change vehicle. Naturally this is why we apply standards so to see it in action makes the effort valuable.
Here in the United States we also have diversity issues. Diversity can be accidental. We have had to sell a portfolio holding when the one woman on the board transitioned off or the one woman in top management left. This tells us that a policy that prioritizes inclusion is missing. Should we use the stock again when the accidental inclusion of a female occurs? As our standards do not include progress, we do not really give credit for simply having a policy regarding women and other protected classes. Such documents are informative when compared one to another, and therefore add color to our knowledge base, but they don’t really help in our efforts to pick companies. We have here also written several companies several times to explain our standards and ask what their gender diversity standards are. Responsiveness from U.S. based companies is perhaps a bit weaker than from Japanese ones, certainly not markedly better.
Then there is the prickly aspect of demanding that we all self-define ethnicity or gender at all. At a personal level, I am concerned that gender definition is increasingly felt to be an offensive concept. The growth in acceptance of and even demand for the usage of ‘they’ to refer to any other person is a testimony to the fact that reference to gender is nonsense to an ever-growing audience. I worry that, in the words of a close relation, my incubating product is for the Hillary Clinton crowd (by which they mean yesterday’s newspaper). While I am personally rather stunned to learn that not everyone applauds my interest in seeing women get ahead, I am professionally distinctly disinterested in dis-affecting future generations of involved and activist voices by using vocabulary offensive to them.
Finally, we come to sheer numbers. A recent article in Fortune Magazine highlighted the issue. With venture capital funds spending 98 percent of their dollars on male founded businesses, the new, exciting, answer-oriented companies that have been formed are almost uniformly all male. As you attempt to seek out great ideas for a solar future, solutions to educating a billion high school and college age students, breakthroughs for the diseases that fall so heavily on the desperately poor, you are seeking new, young companies. The last thing that the venture capital filled seats include is women. Female leadership is far easier to find in mature, dare I say old, industries and companies. While such companies may make fine investments, they are generally less interesting to the ethical investor.
I am a fan of highlighting advances made by women, just as I am a fan of highlighting advances made by a host of other pockets of the general population. I am also a fan of women in management, having founded more than one entity myself. Domini Impact Investments boast females in the positions of Chair, CEO, CFO, and General Counsel. Nonetheless, it is clear that managing a portfolio with even the simplest gender standards is an uncomfortable position to find myself in. I hope that by my rising to the challenge, future generations will discover my path is easy to find and follow, but it will be, in my opinion, those future generations that make real progress towards bringing true diversity of any and all sorts into the higher levels of corporate management and oversight. We are not there yet.
Article by Amy L. Domini, CFA She is widely recognized as the leading voice for socially responsible investing. Her passion for the field has led her to create three businesses and to write several books. She has been awarded acknowledgements of these efforts, including: Time magazine named her to the Time 100 list of the world’s most influential people in 2005. That year she also received a citation from President Bill Clinton for her work with the United Nations Foundation. In 2008, Ms. Domini was named to Directorship Magazine’s Directorship 100, the magazine’s listing of the most influential people on corporate governance. In 2014, she was awarded the Founders Award by New Yorkers Against Gun Violence for her advertising campaign (which ran in The Nation), urging investors to divest guns from their portfolios.
She is the founder of Domini Impact Investments (www.domini.com), a mutual fund company with $1.6 billion in assets under management. Ms. Domini is also founder of The Sustainability Group, which manages private client assets in Boston, MA. She has served on a number of boards, including the National Association of Community Development Loan Funds (now Opportunity Finance Network), an organization whose members work to create funds for grassroots economic development loans; and the Interfaith Center on Corporate Responsibility, the major coordinator of involved shareholders who file proxy resolutions. She is a member of the Boston Security Analysts Society.
Ms. Domini holds a B.A. in international and comparative studies from Boston University, and holds the Chartered Financial Analyst designation. In 2006, she was awarded an honorary Doctor of Business Administration degree from Northeastern University College of Law. Yale University’s Berkeley Divinity School presented Ms. Domini with an honorary doctorate in 2007.
Ms. Domini is the author of Socially Responsible Investing: Making a Difference and Making Money (Dearborn Trade, 2001) and The Challenges of Wealth (Dow Jones Irwin, 1988), and a coauthor of Investing for Good (Harper Collins, 1993), The Social Investment Almanac (Henry Holt, 1992), and Ethical Investing (Addison-Wesley, 1984). She contributes regularly to Optimist magazine and GreenMoney Journal. She lives in Cambridge, MA with her husband, Mike Thornton.
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