Capital Human and Impact Investing Australia release first-of-its-kind report

Released 28 March 2022

A new report released today targeting Australian investors says a failure to implement a gender lens approach could heighten business or investment risk; impacting a company’s operational and share price performance or investor portfolio returns.

The report A Roadmap for Australian Investors How to invest to achieve gender equity, racial equity, diversity and inclusion’ is a comprehensive resource to help investors adopt gender lens investing (GLI) to improve operational and investment performance, uncover investment opportunities and reduce risks while contributing positively to gender and racial equity, and diversity and inclusion outcomes.

This first-of-its-kind report published by Capital Human and Impact Investing Australia includes roadmaps for investors, including asset owners, fund managers, wealth managers, family offices and foundations, offering practical steps to start or strengthen a gender lens approach.

Building on successful practice around the world, the roadmaps outline how Australian investors can most effectively integrate gender into their investment frameworks and decision-making processes using a whole-of-organisation approach through a new 3i Framework:

  1. Internal operations: How to consider gender within an organisation’s governance, policies, people and processes
  2. Investment processes: How to consider gender within investment processes (specific to investor type, for investing in Australia or from Australia into South and South East Asia and the Pacific)
  3. Influence on system: How an investor can use their influence to achieve gender equality beyond their own core work.

The unique investor roadmaps are:

  • categorised by investor types and stage in their GLI journey
  • considering of different asset classes
  • intersectional, integrating gender and racial equity as well as other forms of social equity to ensure different and intersecting forms of discrimination and disadvantage are addressed
  • modular, with approaches and strategies able to be implemented individually, sequentially or in combination.

The business case for gender lens investing

The report outlines the clear business case for gender and racial equitable investing from a risk, return and business development perspective.

Companies with gender diverse executive teams perform better on profitability and value creation

  • Companies in the top quartile of gender diversity in executive teams are 21% more likely to outperform the market on profitability and 27% more likely to have greater value creation.
  • Companies in the bottom quartile are 29% more likely to underperform the market on profitability.[1]

GLI can drive better performance outcomes for clients

  • Private equity and venture capital funds in emerging markets with gender-balanced senior investment teams generated up to 20% higher returns compared with other funds, while portfolio companies with gender-balanced leadership teams outperformed in terms of valuation increases by as much as 25% compared to non-diverse teams.[2]

Intersectionality and racial equity are also important performance factors

  • When it comes to considering ethnic and cultural diversity, top quartile companies were 33% more likely to outperform on profitability while those in the other three quartiles were 29% more likely to underperform.
  • Companies with diverse boards of directors were 43% more likely to outperform.[3]

GLI in Australia and globally

The report’s release comes at a vital time, with Australia’s global ranking on the World Economic Forum’s Global Gender Gap Index having fallen. Overall, Australia ranks 50th out of 153 countries in closing the gender gap, and 70th for the sub-category of economic participation and opportunity.[4]

Globally, investors are recognising the value in GLI and the trend to adopt a gender lens approach at an organisational level as well as in investment processes is growing – particularly in North America and increasingly in Asia.

Here in Australia, the term gender lens investing is less well known. While some companies like HESTA and Melior Investment Management are recognising the positive benefits of GLI, the report’s research revealed many are still unaware of what GLI means or how to start their GLI journey.

“Through our research surveys and interviews concerns were often raised that integrating an approach that considers gender and racial equity limits investment opportunities and increases investment risk. In fact, for GLI done properly the opposite is true,” said report co-author, Sally McCutchan from Impact Investing Australia.  

“Our report demonstrates there are many paths to improving gender, diversity and importantly inclusion outcomes across internal organisational structures and policies, investment processes and through influencing systems. We wanted to provide investors with easily implementable roadmaps and a framework to get them started or to strengthen their GLI approach from whatever point they’re at.”

Manita Ray, co-author from Capital Human said: “Systemic change is needed if Australia is to pursue a more active role in closing the gap toward gender equality in Australia and our region. Direction of capital and investment are powerful levers for change and gender lens investing is a strategy that can enable this.”

“What the report shows is that intentionally directing capital and purposefully considering gender and diversity throughout the investment process can lead to better financial returns, now and into the future. It supports investors to discover additional paths towards a gender equitable world through the power of inclusive, sustainable investment.”

The report authors agree there is a significant opportunity for more Australian investors to participate in gender lens investing, and the time for that is now.

A Roadmap for Australian Investors How to invest to achieve gender equity, racial equity, diversity and inclusion’ will be launched at the 2022 Impact Investment Summit Asia Pacific in Sydney on March 30.

You can read the report here.

[1] Hunt V, Prince S, Dixon-Fyle S, and Yee L, Delivering Through Diversity, McKinsey & Company, 2018.

[2] Private Equity and Value Creation – A Fund Manager’s Guide to Gender-Smart Investing, CDC Group and International Finance Corporation, 2020.

[3] Hunt V, Prince S, Dixon-Fyle S, and Yee L, Delivering Through Diversity, McKinsey & Company, 2018.

[4] The Global Gender Gap Report 2021, The World Economic Forum, 2021.

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