03.05.2018
By Shanny Basar

Investors Can Increase Women’s Access To Finance

Investors can play a significant role in increasing women’s access to finance according to the Business and Sustainable Development Commission.

In 2015, 193 countries agreed to the United Nations’s 17 Sustainable Development Goals. The Business and Sustainable Development Commission was formed to mobilise private capital to achieve these goals by the target of 2030. An initial report in January 2017, BetterBusiness, BetterWorld, provided evidence that sustainable business strategies could unlock more than $12 trillion in savings per year and create up to 380 million jobs by 2030.

A new report, Better Leadership, Better World: Women Leading for the Global Goals, highlights the need for women leaders. The report said: “According to the McKinsey Global Institute, women’s equality in the workplace could even significantly enhance the ultimate reward, adding as much as $28 trillion to global annual gross domestic product by 2025.”

The Commission reviewed existing research on women’s leadership in business and interviewed 25 women leaders who are working to advance the business agenda on sustainable development. For example, research by Credit Suisse in 2016 found that companies where women made up at least 15% of senior managers had 18% higher profitability than those where female representation was less than 10%, and companies with a woman as chief executive experienced 19% higher profitability.

Mary Ellen Iskenderian, president and chief executive of Women’s World Banking and Business and Sustainable Development Commissioner, highlighted the role investors can play in increasing women’s access to finance. She added that Women’s World Banking, a global non-profit which gives more low-income women access to the finance, has a $50m impact investment fund that requires all investees to provide gender-disaggregated data, and has helped investors see that some women had higher-performing loans.

Iskenderian said: “When you can link not only finance but women’s access to finance to the Global Goals, I think it really opens up the possibilities, particularly for corporates.”

The report highlighted that at the start of this year, BlackRock sent a letter to Russell 1000 companies with fewer than two women directors asking them to justify the lack of gender diversity on their boards and to report on their efforts to address this gender imbalance.

Larry Fink, founder, chairman and chief executive of BlackRock, said in his annual letter to chief executives: “Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result, a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth.”

Lyxor Asset Management, the exchange-traded fund arm of Societe Generale, launched the first passive fund in Europe focusing exclusively on gender equality in November last year. Clarisse Djabbari, deputy head, ETF & Indexing at Lyxor Asset Management, said in a blog that gender-diverse companies are 15% more likely to outperform. She added: “Over the last six years, the Solactive Equileap Global Gender Equality index has outperformed the MSCI World Index by 10.7%.”

UBS also launched a gender equality ETF this year to invest in the Solactive Equileap Global Gender Equality 100 Leaders index. The Swiss bank’s Wealth Management’s Chief Investment Office analysed companies in the FTSE Developed World Index, and found that companies with women making up at least 20% of the board and senior management had higher returns than their less gender-diverse peers.

Last month FTSE Russell, the London Stock Exchange Group’s index business, announced the creation of the FTSE Women on Boards Leadership Index Series. The new index series tilts stocks to overweight or underweight depending on their gender diversity at board level and social impact score.

FTSE Russell said in a statement it was responding to a growing trend among asset owners to integrate environmental, social and governance  considerations into passive investments and this trend is increasing transparency and disclosure in the capital markets with investors collaborating to improve company engagement and corporate performance.

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