In her Fellowship with Wharton Social Impact Initiative, Cathleen Gui applied what she’s learned about impact investing to the emerging field of gender lens investing.
The speed at which impact investing has evolved in recent years has been rapid, going from a concept to an investing approach that is increasingly mainstream.
Yet, the industry is still in its early stages, waiting to be defined and driven forward, which is what has made the experience of working within it especially innovative.
At a recent talk, Wharton alumnus Bobby Turner, W’84, presented an interesting framework of thought for impact investing. Turner is the CEO of Turner Impact Capital, which has made investments for social good in areas such as education, housing, and healthcare while often partnering with celebrities such as Andre Agassi and Eva Longoria to increase their reach.
Turner characterizes impact investing as a risk screen. In using an impact mindset towards evaluating companies, he says, you are simply looking for the business practices that will benefit the stakeholders they affect.
While simple, the past year has taught me that this idea is powerful in reshaping how investing is done.
In Barron’s first annual performance ranking of 200 of the most sustainable funds, a large amount of the top performing sustainable funds were not necessarily managed with the goal of sustainability—but through their criteria in selecting enduring companies, they happened to also uncover companies that were making strides socially. These underlying factors range from environmental practices consistent with sound regulations, to efficient use of resources that translates into cost reductions. While sustainability is a broad term that covers strategies from negative screens to ESG (environmental, social, governance) funds targeting positive screens for good company practices. However, beginning to identify, quantify, and standardize the factors that constitute sustainable company practices that position businesses for long-term outperformance presents an interesting challenge to take the field to the next step.
This semester in my fellowship with WSII, I had the opportunity to apply those ideas to work in an even newer space: gender lens investing.
In this emerging and exciting space, we’ve seen funds emerge to target everything from supporting women entrepreneurs in third world countries, to mandating portfolio companies to have a female representation in the board—and even a fund which invests in women-directed movies to correct the gender disparity in Hollywood.
Interestingly, the emergence of this space has indicated that the creation of an inclusive world aligns with the practices of good business. Creating a dialogue around what counts as a gender-mandate fund and using this language to create the framework for which investors in the future can aim for this new holistic approach is crucial for the next few years. But, at the same time, it will not be as clear-cut as simply measuring the number of women in business. It is also identifying the reasons behind why companies that are more inclusive as a whole, reflected by equal representation of genders within their leadership structures, may have underlying practices that make them better than companies which do not have as open environments.
Moving forward, it will not be easy for the field to develop, and it is currently unclear what the future of an ideal impact investing field will look like. We are still a distance away from a fully accountable system that can both define and evaluate such investments, but the creation of one is both essential and imminent for the consideration of business practices that extend to all stakeholders.
Cathleen Gui is a rising Wharton junior studying finance and statistics, and is a WSII Social Impact Fellow, as well as a member of the undergraduate Social Impact Advisory Board. She is dedicated to youth development and community development in socioeconomically isolated areas, and also hopes to use combine her business education and commitment to social impact to find new ways to achieve social good.