As the investable assets of nonprofit entities, endowments comprise an important segment of institutional investment capital. A growing focus on how these assets can successfully invest in environmental, social, and governance (ESG) strategies has shed new light on the potential for gender lens investing by endowments.
A 2019 report by the Intentional Endowments Network (IEN) summarized the key steps to gender lens investing by university and college endowments, from buy-in and participation by stakeholders to a robust investment selection process and disclosures around results and progress. The report found that diversity and inclusion is an increasingly material factor in decision-making among college and university endowment stakeholders.
In 2020, the IEN followed this study with an examination of how university and college endowments are successfully meeting objectives with ESG investing. Its findings illustrated that, under growing stakeholder demand for sustainable investments by universities and colleges, higher-education endowment fiduciaries can invest funds in mission-aligned ESG strategies while maintaining target financial returns. The IEN report found that many of the analyzed endowment funds that used ESG strategies met or outperformed their benchmarks. As this expansion into ESG continues, gender lens investing by endowments is poised for growth.
Accelerating Progress on Gender Equality
Within this growth and expansion of gender lens investing, the Women of the World Endowment (WoWE) is raising a $5 billion endowment. The group aims to bring significant institutional investment weight to the challenges of the global gender gap, which the World Economic Forum estimates will require 257 years to close at the current pace. The Endowment’s unique investment structure encompasses public and private gender lens investing with a goal of disrupting the gender landscape for faster progress toward equality. WoWE was founded in 2018 and seeks to demonstrate that gender lens investing by endowments can meet or exceed the same risk-adjusted returns as traditional endowments.
Women of the World Endowment CEO Patience Marime-Ball explains that because the challenge is so steep, it requires a much greater level of institutional investment. “Without bold, ambitious action, progress on gender equality will remain too slow,” she says. “We need the deep impact of institutional investment at scale.” WoWE also recognizes that faster progress is needed in order to meet the United Nations’ Sustainable Development Goal 5. Marime-Ball emphasizes that investors must earn market rates of return, as well as that WoWE is seeing investor interest around an approach fully centered on gender lens investment.
To learn more about gender lens investing, read Gender Lens Investing in Public Markets: It’s More Than Women at the Top.
Another cornerstone of WoWE’s investment philosophy is the intersection of gender lens with mainstream investing, particularly ESG. Marime-Ball explains, “We are investing in gender lens and solving the world’s most pressing social and environmental problems.” She underscores how important it is to capture each area of governance, social, and environmental within gender lens investing.
Marime-Ball points out that this investment philosophy has already accounted for the corporate governance piece. Yet globally, the environmental and social arenas are where women and girls tend to see the most disproportionate impact. These both deserve a place in gender lens investing, which also must include women’s leadership in these areas. “In terms of fully capturing ESG into gender lens investing, we have the impact story,” says Marime-Ball. “But we have not fully told and captured the investment story of women as actors. We need investable strategies centered on women as the actors of the S and the E in ESG.”
A Self-Sustaining Investment Process across the Capital Spectrum
Based on this bold philosophy, the Endowment’s investment process is structured to provide women-led companies with the right capital at each stage of enterprise development, from grants and mezzanine financing to venture capital, fixed income, and public equities. At the same time, the process focuses on five women empowerment zones:
- Economic empowerment
- Participation in peace and security
- Ending violence against women
Marime-Ball explains that in the process of creating a gender lens investment landscape that drives faster progress, WoWE is building solutions to specific challenges. Among the hurdles are a relative scarcity of both public and private investment products and a lack of product depth needed to attract institutional participation at a scale that can move the dial on global gender equality.
Solutions under development include a gender lens aggregate bond index, country gender lens scoring against which public debt can be rated to gender criteria, and in-depth company-level gender lens indicators. The Endowment is also managing an equity portfolio that Marime-Ball reports is outperforming its benchmark. Finally, WoWE is establishing regional Centers of Excellence to support the gender lens ecosystem through research, partnership development, and innovation.
The Endowment’s unique multistage investment process is intended to be self-sustaining. Donors will make tax-deductible contributions to the Endowment, and funds will be invested into for-profit gender lens assets. Investment income will be directed as grants to organizations centered on developing system-wide solutions at the intersection of gender and some of today’s most challenging issues. The process is designed to bring in increasing levels of institutional investment.
“We are developing vehicles that we want to invest in while also growing and sharing intelligence needed to bring gender lens investing into the mainstream,” says Marime-Ball.