Climate crises disproportionately affect women and girls in all demographic groups, but especially in developing economies. Subject to persistently higher poverty (and extreme poverty) than men, women and girls are also more likely to suffer the impact of climate disasters. In fact, 80% of those displaced by climate change are women, according to UN statistics.
Due to ongoing gender gaps around the world, climate events affect women’s job security and education, as well as their access to health care, clean water and food resources, among other needs However, research shows that with their local knowledge, women have a lot to contribute to climate change adaptation, although gender gaps in legal resources and economic participation hinder their involvement.
As environmental, social and governance (ESG) investing continues its rapid growth, it is critical to apply a gender lens to public funds focused on climate solutions. Because? Because higher levels of women in leadership (WIL) benefit company performance, operations and risk management. In fact, ACWI index companies with gender diversity are better at reducing carbon emissions, according to a 2021 MSCI report, while 2020 research found that gender diversity on boards ‘administration of American companies was correlated with greater consumption of renewable energy, which in turn, increased financial performance.
Gender Lens Equity Fund: Steady Growth
Gender-lens investing directs resources to women-focused initiatives, women-owned businesses, and companies that demonstrate a commitment to gender equality and a broad base internally and through their external relationships, products, and services.
Thirty-two gender-lensed equity funds are available to individual investors. There are 14 global and 18 regional funds in Parallelle Finance’s coverage universe with mandates to invest in higher WIL and related gender metrics. These funds hold between 30 and over 400 stocks. As of March 31, 2022, its assets under management (AUM) stood at $4.1 billion, having grown 51% in 2021.
Top 12 Largest Gender Lens Equity Funds, in US Millions, as of March 31, 2022
Are climate funds investing with a gender lens?
Renewable energy is a cornerstone of global efforts to address climate change. Renewable energy funds invest in producers of solar, wind and other clean energy, as well as providers of related technology and services. The 17 US-listed and three European- or UK-listed funds in our dataset have AUMs ranging from $5.6 billion, for the iShares Global Clean Energy exchange-traded fund (ETF), to less of $5 million, as of March 31, 2022. The average trajectory of the funds is six years.
The 12 largest renewable energy funds in the dataset, in US millions, as of March 31, 2022
These funds are not capturing the benefits of diverse leadership and broader corporate equality.
Only 11% of US portfolio managers are women. This figure has not improved significantly in 20 years. According to available data, only 13% of renewable energy fund portfolio managers are women, and 14 out of 20 funds have no women on their portfolio management teams. In contrast, our research found that more than 50% of gender-sensitive equity fund portfolio managers are women.
There are 110 top 10 holdings among the 20 renewable energy funds. The chart below lists the 21 companies that overlap with the major gender lens equity indices and datasets. Only seven appear in any of Solactive Equileap’s Gender Lens Equity Indexes, which are built from Equileap’s analysis of workforce equality and leadership metrics, pay equity and transparency, and benefits and employment policies in public companies. Among the top clean energy holdings of the 400 companies in the Bloomberg Gender Equality Index, only 16 appear on both lists and only 5 on the Forbes-Statista list of women-friendly companies.
Top Holdings Overlays: Renewable Funds and Gender Lens Indices, Datasets and Equity Funds
Of the top renewable energy holdings, only three (Enbridge, Meridian Energy and Schneider Electric) appear among the 164 unique 10 gender lens equity fund holdings. These three are also in at least one of the index and dataset lists.
The results are clear: unless renewable energy companies improve their WIL and other equality metrics, the sector will miss out on performance and related operating benefits.
The way forward: incorporating equality criteria
Climate change will set back gender equality by 20 years, BCG predicts. Because? Because climate change disproportionately affects women and because women are underrepresented in the global economy. In fact, women are being left out of emerging industries in response to climate change, with global net zero investments forecast to be between $100 and $150 trillion by 2050, according to BCG , this is bad news for both women and zero.
The data doesn’t lie: WIL is material for all sectors and industries. Climate-focused equity and fixed-income funds must apply generalized equality and equality criteria. This should include:
- Invest in innovators, producers and providers of women-led products and services.
- Seek greater gender equality in leadership, workforce, pay and workplace policies across all demographics across all funds and encouraging fund participation in developing supplier diversity programs.
- Invest in innovations to reduce climate-related travel.
- Apply shareholder defense tools to advance corporate gender equality.
For more analysis from Marypat Smucker, CFA, visit Parallel Finances.
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All posts are the opinion of the author. Therefore, they should not be construed as investment advice, nor do the views expressed necessarily reflect the views of the CFA Institute or the author’s employer.
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