Even the fanciest ship cannot leave harbor until the anchor is pulled up. Sustainable investing may be such a ship. The field is much touted, straining at its ropes, but still not quite out to sea. It remains held back by classic investment habits that give priority to short-term financial return. Women, it turns out, may be critical to cutting those ropes to spur a major shift in the way capital is invested by banks, stock brokers, pension funds and other assets managers worldwide.
More women financial advisors than men report being interested in sustainable investing. According to a key 2012 study, Gateways to Impact spearheaded by the Rockefeller Foundation, Deutsche Bank Asset Management and other investment enterprises, 59 percent of women advisors surveyed expressed strong interest in advising their clients on sustainable investment strategies, compared to 34 percent of their male peers. If this trend continues, women will be key to moving sustainable investment from the margins to the mainstream.
Whether you call it sustainable investing, green investing, responsible investing, impact investing, or mission-related investing, all touch on the same core theme: investing money for the longer term, putting a tangible value on traditionally intangible benefits, and putting cost on long-term risks. For example, investors may choose to put money in stocks or mutual funds that convey not only financial returns, but social benefits, such as more employment in a community with high unemployment, or funding for fledgling renewable energy companies.
According to the Forum for Sustainable and Responsible Investment (SIF), “more than one out of every nine dollars under professional management in the United States today… is involved in sustainable and responsible investing.” Their 2012 report found that $3.74 trillion in total assets under management use one or more sustainable investing strategies, growing more than 22 percent from 2010.
So far, barriers to more sustainable investing have been the belief that shareholders would have to settle for lower financial return, or were in insufficient demand by investors, or that the benefits were too intangible to reliably measure. If companies operate in an economy that undervalues natural resources, they have little incentive to improve performance, especially if this performance is not reflected in a higher stock price and return on investment relative to their competitors.
Sustainable investing, of course, also wants financial return and there is increasing evidence that investors in sustainable business practices need not settle for less profit. A sustainable investment advisor looks beyond classic financial return and seeks to account for risks that could erode value over time.
For example, an investor may question the financial management of a company that plans to locate new operations in flood-prone areas, given the expected rise in sea levels due to climate change. Or, they might select stocks and funds from companies that are building businesses that will grow in constrained environments, such as producers of technologies that reduce energy or water use on crops.
Likewise, a sustainable investor may divest or avoid altogether stocks in companies dependent on processes that emit greenhouse gases, expecting that there will eventually be regulations that limit those emissions. Universities and other institutions are being pressured to divest from fossil fuel companies in campaigns organized by groups like 350.org and Divest-Invest Philanthropy.
The field of sustainable investing has some highly respected women leaders like Abby Joseph Cohen, director of the Global Markets Institute at Goldman Sachs. Goldman’s Sustain division has pioneered metrics that properly value a company’s social and economic performance and Cohen often says that investors are increasingly taking a company’s social and environmental record into account when choosing where to invest.
We need more people like Cohen. McKinsey and Company’s annual Women Matter report has detailed important findings about women and business leadership. They discovered that companies with more women in their executive committees have better financial performance and that this correlates with nine leadership behaviors, five of which women apply more frequently than men. Both Women Matter and Gateways to Impact point to the importance of having women in leadership positions, both for financial performance and for bettering the world.
Unfortunately, according to a 2012 study by Catalyst, women make up only 23% of all senior officers in the finance and insurance industry. Progress in sustainable investing may depend on these existing leaders mentoring their younger female colleagues.
Such an effort could be transformational. Not only would women be more influential in overall economic activity, they could tilt the flow of capital in favor of social and environmental benefits and perhaps dramatically raise the percentage of dollars that seek those benefits. That would cut the ropes and pull up the anchor. Perhaps with women at the helm, the sustainable investing ship would truly set sail.
Rachel’s Network Advisor Paula DiPerna is a strategic environmental and philanthropic policy advisor, and writer.