The financial industry has long been dominated by men, but as more women enter the playing field, the very nature of investing is showing a marked shift. Over the past several years, interest in Environmental Social Governance (ESG) investing, also known as impact investing, has skyrocketed – and it’s largely due to women. When it comes to ESG, individuals invest in a business that is providing a benefit of some kind. For some companies, that could be combating climate change, addressing racial inequities, or improving access to education, among others.
According to an article from Bloomberg, ESG assets could reach $53 trillion by 2025. That would mean more than 33 percent of all global assets under management would be considered ESG assets. Women are sending a clear message with their investment choices. Building wealth is no longer the only goal; female investors also want to make an impact on the world around them.
When it comes to ESG, women are undeniably present in every aspect. They are running socially responsible businesses, investing in funds that reflect their values, and lending money to support causes in which they believe. Below, we’ll discuss four ways female investors are leading the ESG movement.
Building Up Business
Women are backing up their values with their actions. As entrepreneurs, they can put all their efforts and resources behind social and environmental issues that matter to them, affecting change and directing dollars to make a change.
Yelitsa Jean-Charles is one such entrepreneur. The founder of Healthy Roots, Jean-Charles creates diverse dolls to empower girls and show them that there is no single definition of beauty. As the founder of The Mentor Method, Janice Omadeke’s company also promotes diversity, using a software that finds mentors to improve employee retention and increase diversity in the workplace.
Some entrepreneurs use their profits to support their interests, such as clean water, waste management, renewable energy, immigration issues, racial equity, and many others. Other companies are built around helping investors find causes to support. CNote, a women-led investment platform, seeks to promote the prosperity of “financially underserved communities across America.”
Investing for Impact
A recent study conducted by RBC Wealth Management found that women were “more than twice as likely as men” to consider it “extremely important that the companies they invest in integrate ESG factors into their policies and decisions.” While men also expressed interest in impact investing, the study noted that women were clearly the leaders for ESG investing, which had long been considered a niche investment strategy.
Over the next decade, women will continue to increase the total amount of wealth they control. In fact, a report from MaxImpact anticipates that women will hold nearly 67 percent of private wealth in the U.S. by 2030. This is promising news for ESG investing, as women’s interest in global responsibility also continues to grow.
Women are not just investing in companies that reflect their values; they are actively creating investment opportunities with social and environmental impact. For example, Nancy Pfund, a venture capitalist, founded DBL Partners with the dual goals of investing in companies to achieve financial returns as well as “social, environmental and economic improvements in the regions in which they operate.”
Leading the Way
Not only do women believe in ESG investing, but they also understand it on a deep level. They are stepping into leadership roles to advance its position in the world of finance, from measuring the impact of investments to advocating for government policy and supporting academic research on the topic.
With a background in economics and entrepreneurship, Sonal Shah has been pushing for action related to social and environmental issues throughout her career. The Georgetown University professor is the founding executive director of the Beeck Center for Social Impact + Innovation. She previously served as the deputy assistant to the president and director of the first White House Office of Social Innovation and Civic Participation. Prior to that, she led global philanthropy for Google and environmental strategy for Goldman Sachs. She also brought her expertise to address development issues as an international economist in the U.S. Department of Treasury and co-founded Indicorps, a nonprofit that connects Indian-Americans with development opportunities in India through fellowships.
Jessica Jackley is one of the founding members of Kiva, an international nonprofit organization founded in 2005 with the mission to “expand financial access to help underserved communities thrive.” Through Kiva, someone in Los Angeles can lend $25 to an entrepreneur in Palestine toward a microloan of $2,500. Once the loan is fully funded, the entrepreneur uses that money to advance their business and then pays it back, allowing the lenders to support other entrepreneurs in a continuous philanthropic cycle. To date, more than 4.1 million people have received loans from nearly 2 million lenders.
Microfinance, such as the loans offered through Kiva, is particularly relevant to women entrepreneurs. These kinds of loans are often more accessible to women than traditional loans, and they help them gain the financial stability they need to move out of poverty.
What Will Women Do Next?
Issues still abound in the financial world, and women are often fighting for the same access to opportunities and pay as their male counterparts. Yet, the success of ESG investing – and the tremendous role women have played and continue to play in it – speaks volumes. The potential of women in investing is limitless, and so is their ability to transform whole industries to shape a better future for others.
If you are interested in learning more about how you can affect change through your investments, visit our ESG resource page. And if you’re interested in starting to make an impact, the professionals here at Flourish Wealth Management can help align your financial goals with your values. From exploring investment themes to building out your portfolio, we will work with you to ensure that your plan is customized to reflect what matters most to you.