Gender Equity
in Capital Flows
Wednesday, March 29, 2023
Carolyn Burns
Gender-lens Investing Specialist, Criterion Institute
Allison Gibson
Chief Design Officer
Spring Activator
Kasha Huk
Chief of Staff
New Power Labs
Bonnie Foley-Wong
CEO
Pique Ventures
Allison Gibson from Spring Activator, Bonnie Foley-Wong from Pique Ventures/Mercer, and Carolyn Burns from Criterion Institute join Kasha Huk from New Power Labs in a New Power Talks discussion on what comprehensive equity, diversity, and inclusion means in the context of capital flows and the incredible work being done to invest in gender-equity towards a stronger, more equitable Canadian economy.
When will we achieve gender parity in portfolio management?
We asked attendees to weigh in on how long it will take to achieve equal gender representation for fund managers. Sixty-one percent thought we’d get there in 59 years, while 36% guessed correctly: in reality, Citywire’s Alpha Female 2020 report shows that it will take 200 years for us to achieve equal gender representation in fund management.
In discussion with our expert panellists, each working within the gender-lens investing movement from the grassroots to institutional to thought leadership levels, six big ideas came up:
1. While there has been improvement at the institutional level, there’s room for more.
At Mercer’s Sustainable Investment team, Bonnie advises institutional investors in making more sustainable and impactful investments. She notes that consideration for diversity does come through in investment approaches, citing Mercer’s recent report that there is recognition of the financial value and strong business case to investing in funds with diverse leadership — diverse teams make better decisions, generate better ideas, and form a foundation for good governance.
In 2019, Mercer’s survey found that 12% of key decision makers amongst asset managers are women, and by 2023 it had grown to 13.7%. There are positive signals that diversity concepts are making their way into manager research and due diligence, although there is room for improvement.
2. Momentum is building at the grassroots level.
There are more and more women investors supporting women entrepreneurs. Allison shares about her experience running the Impact Investor Challenge at Spring Activator in partnership with the TELUS Pollinator Fund, which featured high potential women-led startups and a team of all women investors. Together, they went through a journey, learning about navigating the early stage fundraising process. It’s a unique program designed for women by women — a great example of how gender lens investing is working well in practice.
Bonnie speaks of her work at Pique Ventures, a fund where 80% of the capital came from women and exclusively invested in 8 women-led ventures. Since founding, Pique Ventures has had two successful exits and was able to return capital and demonstrate the financial basis of gender-led investing. Pique Venture’s investors went on to invest in other startups or start investment vehicles of their own.
3. There is a need for more holistic risk-assessment frameworks that are inclusive to underfunded founders.
In her work, Allison has seen founders from diverse backgrounds jumping through loopholes just to get a conversation. Founders who come from diverse backgrounds are innovative, and their diversity should not be punished if it diverges from entrenched models. It is important for investors to look into their risk assessment framework to ensure that diversity is seen as an opportunity, not a risk.
Bonnie shares that institutional investors manage a large amount of capital, thus they also hold a fiduciary obligation to manage risk and generate return. Venture capital is often too risky of an asset class for institutional investors to focus on. At the same time, the number of women-led private equity firms is quite low. It is 2023 and we just heard of the first female-led private equity firm in Canada. Bonnie shares about her time serving on the board of WeBC (Women’s Entrepreneur Center) who run a fund designed specifically to bridge the access gap for women entrepreneurs, but it is not a big enough pool of capital. To Bonnie, the failure of SVB shines a light on the need and opportunity for that gap to be served, in a way that risk is well-managed.
At the ecosystem level, Carolyn highlights ARISE (Advancing Research and Investment Standards for Equity), a three year project to accelerate the adoption of gender analysis within investments to improve gender equality. This project brings together recognized asset holders and encourages them to step into their power to become early stage investors in women-led organizations. Such reputational support brings credibility to the gender-lens investment movement by showing proof of concept and willingness to take risks, encouraging others to then follow with additional volumes of capital.
4. We are moving beyond performative commitments, and change is both top-down…
Bonnie is seeing that in Canada, there is an increasing recognition among asset owners that diversity factors can have a material impact on financial risk and return. Assets managers are gathering data and developing processes to understand and evaluate the risk of their portfolio, instead of ignoring it. At the asset owner level, there is awareness that certain key diversity metrics are worth monitoring in a portfolio — for example, board diversity and workforce diversity.
A combination of qualitative information on the diversity of the underlying organizations, and quantitative analysis of diversity metrics during the due diligence and monitoring process can ensure that gender equity is not performative.
…and bottom-up.
As an entrepreneur coming from a non-traditional finance background, Allison draws on her personal experience of being included in investment processes where she is able to provide insights into the unique needs and challenges that diverse founders face. By understanding these needs and challenges, funders could work to amplify their impact. Inviting beneficiaries to share their lived experiences is a simple yet meaningful way for funders to move beyond performative commitments.
Carolyn provides an example of incorporating a bottom-up approach to design a fit-for-purpose investment vehicle: Pacific RISE. Pacific RISE developed an innovative finance vehicle to lower the cost of materials to produce reusable menstrual pads, making them more accessible to local enterprises. This helps stabilize the enterprises’ cash flows, allowing their production to scale and grow.
5. Comprehensive data can shift conversations, opinions, and decisions.
A book released in 2019 called Invisible Women provided data and case studies on how the world we inhabit has been built by and for men as a default — from the medicines we take, to the cars we drive, to the facilities we use. Based upon similar stories and research, Pique Ventures’ investment thesis focuses on women-founded ventures to explore what could be created when decisions were driven by women-led leadership, serving predominantly communities of women. At Mercer, Bonnie’s team has made it a priority to gather diversity data among asset managers, recognizing that this would drive better outcomes for investors.
Carolyn emphasizes the importance of translating data into something understandable and actionable. Data can be specific to a deal and can be viewed in different ways. Therefore, it is important to have members on an investment committee that have diverse expertise and backgrounds, and to draw on a variety of relevant data points, to more fully understand the risks and opportunities of the deal.
Allison adds another perspective: the data is only as strong as the sample. It is important to collect gender data in respect to other diversity lenses such as race, sexual identity, citizenship status, etc. Gender-lens investing is also about women of colour or immigrant women — for whom data is not available or insufficient. New Power Labs is working to collect data across various diversity lenses that would bridge this gap and help advance gender equity by shifting mindsets and practices.
6. We can engage male allies in the gender-lens investing movement.
Bonnie shares that by asking questions and creating inviting environments to male allies to bring their perspectives, we can open the door for women and the gender-diverse community to share our own experiences. Allison shares that by creating a work environment that is inclusive and safe, we invite participation from men and create opportunities for sharing and learning. Echoing this, Carolyn highlights gender champions — leaders committed to advance gender equity at the workplace by creating space for conversations and ideas, and putting that into practice in workplace policies, then monitoring their impact.
What is gender-lens investing?
— Carolyn Burns
Gender lens investing incorporates a gender analysis into the financial analysis to get to better decisions. This definition names a vision, as well as a process standard. It focuses on an approach to investing that includes a broad set of potential outcomes from intersecting two separate fields: social finance and gender. It is about using finance as a tool to address gender imbalances, which largely though not exclusively negatively affect women and girls.
Three opportunity frames:
Access to capital (i.e. investing in women founders, women-led businesses, women decision-makers, applying fit-for-purse technical assistance to make these companies investment ready, etc.)
Workplace equity (i.e. policies and practices surrounding leadership; mentorship, sponsorship, professional development, advancement practices; safe working environments etc.)
Products/goods and services that have been designed per a gendered analysis of how they will be used by end-consumers and other stakeholders (i.e. women’s health care products, women’s banking services)
All of this can be applied across businesses of all sizes, sectors and geographies.
Read more about gender lens investing:
Innovative gender lens investing funds to follow:
The Buen Vivir Fund, an initiative of Thousand Currents and partner organizations, transformed traditional models of decision-making within finance. All investment-related decisions require a majority vote from the Members Assembly, which is comprised of ten grassroots leaders, eight financial investors, and one representative from Thousand Currents. Each member has equal voting rights, and all are required to follow the same application process in order to be involved — meaning investors, not just investees, had to pass due diligence.
Coralus (formerly SheEO), an investment community experimenting with new ways to provide equitable funding to women and nonbinary entrepreneurs, describes its investment approach as an exercise in sharing power with its community. They operate with a transparent application process and a regenerative capital model, whereby 0% loans are made to ventures and, upon repayment, cycled back to support another round of companies. As members of the network grow and become more invested in one another’s success, opportunities to share resources and to continue collaborating on the next phases of a business’s growth increase exponentially.
