Aligning Gender Lens Investing and ESG: A Call to Action

Key Points:

1. Gender lens investing (GLI) is an ESG strategy inspired by women in leadership and gender equality criteria.
2. Global and regional GLI equity funds closed out 2020 with $2.67 billion in assets under management.
3. GLI equity funds performed in line with the broader market, with information technology and financial services as top sectors.
4. Progress on gender equality has been slow, particularly for women of color, but efforts are being made to address this.
5. GLI equity funds align with the ESG approach by focusing on corporate governance and social aspects, but there is room for improvement in the environmental aspect.
6. Some GLI equity funds are fossil fuel free, and there is potential for investment in women in climate leadership.
7. The ESG reporting standards should incorporate a gender lens and measure corporations on internal gender equality, diversity in external relationships, and addressing gender-unequal climate change impacts.

Gender lens investing (GLI) is an environmental, social, and governance (ESG) strategy that focuses on women in leadership and gender equality criteria. GLI equity funds, available to individual investors, had $2.67 billion in assets under management at the end of 2020. These funds performed in line with the broader market, with information technology and financial services as the top sectors. However, progress on gender equality has been slow, especially for women of color.

Efforts are being made to address the slow pace of change. In the UK, the government-backed target of having one-third female board membership for all FTSE 350 companies has been met. In the US, the NASDAQ stock exchange filed a proposal requiring board diversity for new listed companies.

While GLI equity funds address the governance and social aspects of ESG, there is room for improvement in the environmental aspect. Women are disproportionately affected by environmental crises, such as climate change. GLI equity funds can align with the ESG approach by investing in clean energy companies and promoting inclusive gender equity in the renewable energy sector.

ESG reporting standards should incorporate a gender lens and measure corporations on internal gender equality, diversity in external relationships, and addressing gender-unequal climate change impacts. By weighting investments towards leaders on these metrics, ESG funds can have a greater impact.