The Esade Center for Social Impact (ECSI) has published its Gender Strategies in Investing study to better understand how European investors can move from awareness to action in gender lens investing (GLI) by striking a more equitable balance in their own teams as well as by applying a gender lens to their portfolio investments.

The study, which was launched at a webinar hosted by two of its co-authors, Leonora Buckland, senior researcher at ECSI and Lisa Hehenberger, associate professor at Esade Business School, sought to understand why investment firms adopted gender strategies, what barriers may exist when starting the gender journey, and how GLI can be further mainstreamed in private markets.

The research is based on interviews with seven private investment firms, namely Albion VC, EQT Group, Global Social Impact, AlphaMundi Group, NESsT, We Are Jane, and one firm which remained anonymous. Speakers from Albion VC, EQT Group, Global Social Impact took part in the webinar in a panel discussion on the key findings and their firms’ own experiences in adopting GLI strategies.

People and culture focus

Speaking at the webinar, Buckland explained the study’s aim was “to get under the skin of the organisations” they interviewed.

“We did not want to focus too much on the tools and frameworks, but more on the hidden, psychological issues related to people and culture within firms and how these [GLI] strategies get adopted,” she said. “We also wanted to look at the relationship between ESG and gender lens investing within firms, and ESG’s contribution to the field and where impact investing sits within this.”

To accelerate the uptake of GLI, the research revealed four key insights – first, that where GLI crosses over with ESG is a sweet spot, suggesting that the GLI movement could work more closely with ESG as it evolves and deepens on the “S” and “G” in terms of gender analysis.

The second insight is that male partners were key allies and even instigators of the approach, primarily driven by their understanding of the enhanced performance of diverse teams, as well as external pressure from LPs and the broader market. Thirdly, that the gender question was an entry point to a much broader discussion about diversity, equity and inclusion (DEI), and lastly, that once on the gender journey, investment firms deepened their approach over time moving towards a cultural change.

The authors concluded that although the insights provided by the research offered avenues for improving gender equality across firms and investment portfolios, they did not address the core problems of time, the slow pace of change, and the need for more gender-transformative approaches.

While acknowledging the importance of action by individual firms, the final remarks included a call for more systemic solutions across the finance industry to address the issue, whilst highlighting the need  for a more standardised set of metrics and measurement tools to demonstrate the positive impact of gender strategies on the lives of women and girls.

Four interconnected GLI strategies

The study highlighted four interconnected gender strategies that investment firms use, including: advancing gender diversity in the investment firm (strategy 1), which was highlighted as a key entry point to GLI especially for mainstream investors; investing in women-led businesses (strategy 2); improving workplace gender equity in portfolio companies (strategy 3); and investing in companies providing products and services focused on women and girls (strategy 4).

“We tried to look at the different interconnections between strategies and how they play out at the firm level,” explained Buckland. “The biggest on-ramp for mainstream investors was advancing gender diversity within firms. This was at all levels, junior, senior, in the investment committee and at partnership level.”

Their findings revealed that that when an investment firm’s team was more gender-balanced,  there was also greater investment in gender-diverse teams, which could reinforce new frames of reference for what an entrepreneurial team looked like and catalyse increased focus on workplace equity for women within the firm and in the portfolio.

“We found that a greater gender balance within a firm has a catalytic effect on the other strategies. There’s this kind of homophily effect in which women investors are more likely to invest in women entrepreneurs,” added Buckland.

Focus on impact investors

The study also found that the impact investment field was ahead of the curve in terms of both gender balance in decision-making and investment in gender-balanced teams in portfolios, but that there was still significant work to be done.

”There’s been a discussion about how far gender lens investing is an impact investing approach or much broader,” said Buckland, who explained the further you moved along the spectrum of capital from traditional and responsible capital to sustainable and finally to impact capital, the deeper the gender considerations got.

Interestingly, the study found that the fourth gender strategy – investing in companies providing products and services focused on women and girls – was not part of the reinforcing loop of gender strategies but sat apart as a strategy exclusively used by impact investors or within impact funds.

Impact investors were found to treat gender as material not just from a financial value perspective (single materiality) but also from the perspective of impact of the investment on the lives of women and girls (double materiality).

They were also found to embed gender more deeply into their investment processes, by using gender impact scoring within their due diligence and by providing significant technical assistance to their portfolio companies relating to women not only as employees but also as customers and workers in supply chains.

“Impact investors go deeper in terms of gender analysis for due diligence. When they work with their portfolio companies, they also look at their suppliers, customers, communities, stakeholders and actually measure gender outcomes related to the impact work,” said Buckland.

Motivations for engaging in GLI

The study also looked at firms’ motivations to engage in gender strategies which the authors see as key to understanding the most effective levers for change.

These included an internalised belief in the benefits of diversity in investment decision-making, external investor pressure from limited partners (LPs) to improve their own gender diversity as well as that of their portfolio companies, reputational pressure to do the same from a range of other external stakeholders, and an understanding or belief in the intrinsic value of a more inclusive economy.

“I know that there is sometimes some scepticism about whether returns can sit alongside these very intentional gender strategies, but we found that the firms we interviewed absolutely believe they can and see the diversity of decision-making as a real draw,” said Buckland.

The study also unveiled key enablers for driving GLI within an investment firm, the most significant of which was identified to be deep leadership within the firm that was sensitive to unconscious bias.

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