Tag: Impact Investing

Although we are two decades into the 21^st Century, there is still not much discernible difference between the demographics of the financial services sector compared to forty years ago. One could argue that the main difference between now and then, is why women are taking a far more active role in the financial services space, both as advisors and investors. The rise of sustainable, responsible and impact investing strategies, has led many firms and their investors to seriously question the importance and prominence of gender diversity in leadership positions. Although the financial services sector is still very much a male-dominated industry, considerations regarding environmental, social and governance (ESG) issues have provided an avenue to bring more women to the table.

The Sustainable Finance “Wedding Cake”

Much of the focus regarding ESG factors is fixated on the “E” component, which makes perfect sense. Human rights and equality, which constitute the bulk of the issues with the “S” component, are often overlooked because they are sometimes difficult to measure and justify. However, a strong society where all participants are treated fairly and equally is essential before a country can truly realize a strong and sustainable economy. Dutch professors Dirk Schoenmaker and Willem Schramde of the Rotterdam School of Management and authors of Principles of Sustainable Finance,¹ frequently describe the fundamentals of sustainable finance as a wedding cake: the bottom layer represents the environment, the middle layer represents society, and the top layer represents the economy.

The top layer cannot exist without the bottom layers to support it; so an economy cannot exist without a properly functioning society, and society cannot exist without a thriving environment. However, many still overlook the fact that a strong, thriving economy cannot exist in a scenario when half of society is being marginalized. Therein lies the issue that needs to be addressed for women in 2021 and beyond: how much more optimal would our economy be if all members of society could benefit equally?

Advancing Women Makes Economic Sense

While it should not be too shocking that a society where all participants can actively contribute to the economy will grow and thrive, there are still quite a few skeptics as to what kind of importance gender diversity would provide for corporate profitability.

Many research studies have been conducted in recent years making the business case that providing a level playing field and expanding employment and leadership opportunities for women not only improves societies but also drives a more sustainable economy. US SIF, The Forum for Sustainable and Responsible Investment,² cited a number of these studies in their 2020 report, Investing to Advance Women, and among these studies were:

• McKinsey’s 2018 whitepaper, Delivering Through Diversity, which confirmed their original findings from a 2015 study noting a statistically significant correlation between the diversity of leadership teams and financial performance. In fact, the top 25 percent of companies with the most gender diverse executive teams were 21 percent more likely to be more profitable and 27 percent more likely to contribute greater value to the firm.
• In 2015, MSCI ESG Research found that companies listed in their MSCI World Index with strong female leadership – denoted as three or more women on their board of directors or representation above the national average in the country of origin – achieved higher returns on equity and stronger stock valuations.
• A 2014 study from The Peterson Institute for International Economics found that a company that went from having no women in corporate leadership to a 30 percent proportion, saw an increase in corporate net margins of one-percentage point, or in other words, a 15 percent increase in corporate profitability.

As much as we would like to think that definitive proof of the importance of equality would be reflected across our society, we are far from this reality. US SIF also notes in this report that in 2018 only about 26.9 percent of CEO positions are held by women despite the fact that women held about 46.8 percent of the civilian workforce. Also in 2017, at all levels of education, full-time employed women earned only about 80.5 cents for every dollar their male counterparts earned, which is only slightly better than the 77 cents in 2012. In other words, there is still a lot of ground to cover in order to achieving meaningful gender equality.

While 2020 should have been a year to continue this advancement, COVID-19 has resulted in a major setback which ultimately hit working women harder than working men. Women are far more likely to work in industries hardest hit by the pandemic, work in occupations that do not easily allow for telecommuting, and unlike times of national strife, like World War II, access to childcare has dwindled, leading many women to choose between staying home with their children and helping with schooling, or continuing their work.³ This hole that COVID-19 has caused for women has resulted in a setback, but recognizing the shortcomings can lead to meaningful change in 2021 and beyond.

Rights are not Pie

Actively seeking equality should not be a revolutionary idea, and yet there is this misconstrued assumption that somehow human rights are like a pie: the more people who come to the table to have dessert, the smaller each person’s piece becomes. The simple truth is human rights are not pie. Human rights are like air. Rights, like air, exist in abundance and nothing is lost if you help more people get to a place where they can easily breathe.

Far more women advisors are seeking to help women investors in the sustainable investing space, which is quite apparent in my interactions with students in the Chartered SRI Counselor (CSRIC) designation program. Sustainable investing, which includes screening investments for positive environmental factors and focusing on human rights is no longer a way to simply feel good; it makes logical sense from a business perspective.

Don Phillips, managing director at Morningstar, summed up the use of ESG quite nicely when he said “ESG is a great and powerful movement, not because it rights some wrong inherent in business, but because it removes obstacles that keep people from investing.” ⁴ If you want to bring more investors to the table, you simply make the table longer. By encouraging women to invest in a manner that advances important causes, this in turn will lead to a far more equitable society and subsequently a far more efficient economy.

Article by Jennifer Coombs, associate professor at the College for Financial Planning and the founder of the financial blog, GradMoney. She is the creator, lead author, and lead instructor for the Chartered SRI Counselor™ (CSRIC™) designation program, and serves as a subject matter expert on a number of the College’s investment courses.

Prior to joining the College, Jennifer worked for several different Wall Street firms in such varied roles as technical and fundamental analysis, equity research, trading, and portfolio management. The knowledge gained in these roles has led to her passion for educating the public. To this end, Jennifer has given TED talks on the topic of sustainable and responsible investing: “Investing for a Better World: Using Wall Street to Implement Social Change” (November 2015 at TEDx Jersey City), and “Stopping the Rebuttal: Millennial Investors and the Future of Sustainability” (April 2018 at TEDx Clarkson University). She has also given presentations and interviews on “Dollars & Change” Wharton Business School Radio on Sirius XM, Bank of America/Merrill Lynch Wealth Management, Garrett Planning Network, Society of Financial Services Professionals (FSP), The CFA Society of New York, US SIF Annual Conference, SRI Annual Conference, and Advisor Group. Jennifer is also sought out for her expertise on environmental, social, and governance (ESG) analysis for sustainable investing, and has been quoted in The New York Times, The Associated Press, MarketWatch, Investment News, Wealth Management, Financial Advisor IQ, RIABiz and Proactive Advisor Magazine.  

Jennifer earned her Master of Science in Finance (MSF) from the College for Financial Planning, and graduated with distinction (cum laude) from Clarkson University, where she earned a Bachelor of Science with majors in financial information analysis and political science, and minors in economics and law. In addition to her degrees, Jennifer holds the Chartered SRI Counselor™ (CSRIC®), the Chartered Retirement Planning Counselor™ (CRPC®) designation, the Financial Paraplanner Qualified Professional™ (FPQP™) designation, and is a Certified Financial Education Instructor (CFEI) through the National Financial Educators Council. Jennifer is also a proud member of US SIF and the Financial Plan

Contact information
Email: jennifer.coombs@cffp.edu
LinkedIn: https://www.linkedin.com/in/jennifernicolecoombs/
Twitter: @JNCoombs

Above Image from: What is ESG Investing? Saturna Capital video

When I walk into a room and see a crowd full of white men over the age of 40, I know I’m in the right place. Lack of diversity in the asset management industry is a fact that is palpable.

Earlier this fall, when Jane Fraser was announced as the next CEO of Citigroup, there was much celebration for the first woman to head a Wall Street bank. One Fortune headline promised a tell-all about how Fraser “broke banking’s highest glass ceiling.” An article in the Financial Times stated that there was an “amorphous sense of tribal pride, a collective ‘we did it.’”¹ But given Citi’s recent regulatory troubles — resulting in a $400 million fine for “unsafe and unsound banking practices”² — Fraser’s promotion may appear, to the cynical, like just another example of an extremely capable woman being appointed to a glass cliff. It’s been well documented that women and minorities are more likely to be promoted to “top leadership roles when an organization is in crisis,”³ but regardless of the mess that needs cleaning at Citibank, having more female leaders, visible role models, is crucial for developing the next generation of female leaders in finance

Cited within the same Fortune piece that announces Jane Fraser’s shattering of the Wall Street glass ceiling is a McKinsey study comparing the rates at which men and women climb the ladder in banking and consumer finance. While 51 percent of entry level banking and consumer finance employees are women, only 26 percent of the industry’s C Suite are occupied by women.⁴ Meanwhile, women have obtained bachelor’s degrees at higher rates than men since the early 1980s⁵ though Glassdoor reports that men are taking 61.5 percent of degrees in finance.⁶ Portfolio Management is particularly barren of women, with Morningstar finding that in the US, the ratio of male to female fund managers is 9 to 1.⁷ And despite the number of female portfolio managers staying pretty much flat since 2000, it appears as though positions for male portfolio managers have grown somewhere around 55 percent over the past twenty years.

These disturbing numbers hold true in my experience. I was recently included among Citywire’s top Portfolio Managers for my fund’s category, where only two women made the top fifty and only nine women rounded out the top 100. I guess the silver lining here is supposed to be that Morningstar’s study has already ruled out that the lack of gender diversity among fund managers has nothing to do with issues of poor performance.

Looking around and seeing very few other women is something I also experienced as an undergraduate majoring in computer science. I was drawn to computers quite young: my family had a Commodore 64 and then later, a Macintosh to share among five siblings. (Side note: is there anything more iconic than the “1984” Macintosh commercial, with a strong female athlete running to free the drones and destroy Big Brother?)

Our family had a guide the size of a thick phonebook of BASIC computer games that we could try our hand at programming, and there was something that lit me up about getting the games to work: if you typed in the language correctly, the computer would respond – and you could play. But outside of my family home, as an adolescent and young teen in the 1980s, I noticed it was mostly boys who were spending their free time among computers. Boys appeared to be much more motivated to learn how to break down and set up computer networks in order to play games than the girls I knew, and in this act of play, it was the boys who became more comfortable, more experienced, and then later more dominant. By the time we were college age, that comfort – or lack of intimidation – translated into an instinctive grasp of computer science. The games the boys had played as children parlayed into serious application.

I think that play and gamification are critical for making potentially challenging subjects fun instead of overwhelming. Beyond computer science, finance was another natural call for me – largely because I saw both of my parents doing it, and I didn’t grow up with any reticence or self-consciousness around investing because I’d been playing at investing with my parents for my whole life. The important work of mentoring and promoting women early in their careers to help them rise through the ranks in this industry cannot be overstated, but I also want to focus on starting the C-Suite pipeline even earlier, when kids are still just playing. How can we purposefully grow future female finance CEOs, when it’s so unusual to have a mother as interested in investing as mine was? Much has been said about the need to include personal finance among high school curriculum, but what about classes that teach about the power of money around the time elementary students first learn to count money?

Junior Achievement and Girls Who Invest each have programs that have been successful in encouraging financial literacy among youth, but if we wish to see more women in finance, it’s up to us as role models to volunteer in schools and other youth organizations to encourage play from an early age. We can also help to teach little girls the power of money by linking it to achieving better environmental and social outcomes; after all, as values-based, sustainable, and impact investors know, money is often the key to making real change in this world.

Article by Jane Carten, President and Director, Saturna Capital and Portfolio Manager of the Saturna Sustainable Equity Fund .

Jane Carten joined Saturna Capital in June 1997. Ms. Carten graduated from Western Washington University with an MBA and undergraduate degree in Computer Science and Business. As President, Jane oversees Saturna’s daily operations and directs Saturna’s internal and external information systems, managing the technology and marketing activities.

Ms. Carten also directs Saturna’s continuing education program and the philanthropic efforts of the firm. Also she currently serves on the ICI Board of Governors and as Chair of ICI’s Small Funds Committee, on the SEC’s Asset Management Advisory Committee, and on the Board of the Whatcom Business Alliance. She is active in the Bellingham Bay Rotary, is a member of the Young Presidents’ Organization, and is a former member of the Whatcom Museum Children’s Advisory Board. She is a founder and former director of the nonprofit OpenAccess Internet Services and is a Bellingham Sister Cities member and contributor. She enjoys her family, cooking, and wildlife, as well as international travel and fine and theatre arts.

Above photo: Shaw Legal Services, a Self-Help Credit Union borrower based in Chicago, IL, provides free legal services to immigrants and people who don’t have access to the legal system. Before COVID-19, they were in the process of expanding, but clients soon put services on hold and the court system shut down. Attorney Anne Shaw used all the funds to pay her employees so they could provide for their families. Photo courtesy of SHCU

Can women really have it all?

Women have made much progress in the last century. They gained the right to vote, currently earn a higher percentage of college degrees than male counterparts, and represent more than half of the American workforce. Despite their strides, women have been disproportionately impacted by the pandemic’s economic effects, and their progress is in jeopardy.

Many women with varying levels of income have been successful at juggling their work and family lives — those with strong support systems were able to “have it all,” albeit with much hard work and stress. But today, the pandemic and subsequent economic downturn have placed new pressures on women, especially those who are essential workers, parents, or both. Supervising children who are engaged in remote learning and balancing other caretaking responsibilities means that many women are in two places at the same time: at work and at home.

The United States is now facing what some experts are describing as the “first female recession.” Many industries impacted by the pandemic — like retail, childcare, food service and entertainment — have a majority female workforce, causing women to be more vulnerable to layoffs. Because women are often the primary caretakers in a household, many have also been forced to reduce their work hours to care for children and sick or elderly family members.

Economic insecurity among women brings long-lasting consequences for American families and our overall economy. As families have evolved, many women are now the breadwinners in their households. Their loss or reduction of income impedes their ability to provide for their families. This, in turn, can have a negative impact on the well-being of children and can lead to increased education and economic inequality.

Working women need support now more than ever. Investors seeking high impact can tailor their funding choices to have a direct, positive effect on women and their families. Here are five ways:

1)  Invest in Community Development Credit Unions 

Community Development Credit Unions (CDCUs) have historically supported women, people of color, and low-income communities. CDCUs, therefore, are well-positioned to support women who are carrying the weight of today’s public health crisis and economic downturn.

Many CDCUs also participated in the Paycheck Protection Program and provided funding and hands-on support to help women-owned businesses stay open and pay their employees during the pandemic. For example, Self-Help Credit Union provided over $183 million in loans to business owners and have saved 19,895 jobs. Fifty-two percent of the funds lent were to businesses led by women.

One of the easiest ways you can help is to place your cash reserves in a CDCU because they provide on-the-ground support for women in local communities. For instance, Self-Help Credit Union has a Women & Children’s CD that supports women as they start their own businesses, buy homes, and support their families. By investing in products like this, you can have a direct impact and earn a competitive return on your cash.

2)  Invest in Corporations with Diverse Boards and Leadership 

When women feel supported in the workplace, their productivity and retention improve. To build a strong, productive, and resilient workforce, companies must have leaders that come with diverse experiences and a commitment to creating a workplace that values female employees. Diverse leaders build a more inclusive and resilient culture by implementing policies that support women, such as offering on-site childcare, remote work options, and equitable promotion opportunities.

Invest in companies that have diverse board members and executives. US SIF has created a Mutual Fund Performance Chart you can use as a starting place to learn which mutual funds and ETFs screen for diversity. Their report, “Investing to Advance Women: A Guide for Investors,” also helps you use your investments to advocate for diverse leadership.

3)  Use Your Voice and Hold Corporations Accountable 

Your voice matters. Review your investments and ask the corporations you’re invested in to disclose their board and employee diversity data. Inquire about the number of women in leadership positions and ask if their female employees are receiving equitable pay. Use your voice to encourage fair treatment for women.

4)  Support Women-Owned Businesses 

According to the US Chamber of Commerce, 47 percent of female business owners ranked their business’ overall health as “somewhat or very good.” In comparison, 62 percent of male business owners ranked their businesses as such. Women-owned businesses are reeling from the pandemic, and many do not expect much improvement in 2021.