Friday, September 22, 2023

ESG in asset management: breaking the glass ceiling

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Shreya Christina
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Chitra Baskar, Chief Operating Officer and Global Head of Funds & Product at Intertrust Group.

ESG has steadily risen to the top of the investment agenda, with women playing a vital role in driving its popularity. What does this mean for women in the fund management industry?

The relentless rise of ESG investing has revolutionized the asset management industry in recent years. According to the Global Sustainable Investment Alliance, ESG assets reached $35.3 trillion in 2020, 36% of all assets under management, and by 2021 Bloomberg Intelligence estimated that number would rise to $50 trillion by 2025. Who is behind this exponential rise in popularity?

Women: driving the rise of ESG

According to a survey conducted last year by RBC Wealth Management of its customer base in the US, women are in charge. the companies female customers were “More than twice as likely as men to say it is extremely important that the companies they invest in integrate ESG factors into their policies and decisions.” This sentiment was recently reflected in a UBS Investor Sentiment Survey, which found that 71% of women consider sustainable considerations when investing, compared to 58% of men.

Of more money to invest than ever before and a tendency to choose ESG-focused funds, women play a key role in encouraging asset managers to integrate ESG into their investment processes.

Practice what you preach

Not only is the fund management industry under increasing pressure to embrace ESG in its strategy and products, but it is also expected to put into practice what it preaches, including when it comes to diversity.

Gender inequality is notoriously persistent in the financial services industry, but in recent years there has been a lot of focus on addressing it, especially given the proven financial benefits of gender diversity. Goldman Sachs recently found that funds led by women-only or mixed-gender teams were performing better than, for example, fully male-led funds.

While the representation of women still falls short of expectations, asset and asset managers now have the highest percentage of women at executive level in financial services, and the number of women in senior leadership roles in the asset management industry has increased, including in ESG roles. Indeed, HFobserver reported that women were responsible for: 49.6% of ESG hires (subscription required) in 2020 and 2021.

At my own company, female colleagues make up almost half of the total workforce and more than a third of them are in management positions. In the fund team, maintaining and improving diversity and inclusion is a continuous strategy.

ESG as a career opportunity for women

Because women are more likely to invest according to their values, ESG roles have long attracted female candidates. Now that ESG has graduated from a secondary position in the wealth management industry to dominate the business agenda, it offers a great career opportunity for women, empowering them to amplify their voice in what is still a male-dominated industry.

More women in coveted ESG fund management positions will inevitably shape the future of ESG investing. Investing in gender lenses, for example, is likely to gain momentum.

What does gender lens invest?

Genderlens investing is an investment strategy that aims to close the gender gap identified by the World Economic Forum defines as “the difference between men and women as reflected in social, political, intellectual, cultural or economic achievements or attitudes.”

As highlighted by Global Impact Investing Network, closing the gender gap investing can either invest in promoting gender equality, e.g. investments in women-owned or companies that improve women’s lives, or integrate gender considerations into the investment process itself, of pre-investment activities (e.g. sourcing and due diligence) to post-deal monitoring (e.g. strategic advice and exiting). Even if they don’t call it gender-lens investing, female investors are more likely to invest in companies founded by women.

As Covid-19 amplifies the severity of social and economic problems, including inequality and increasing female representation in the fund management industry, gender lens investing will only increase.

Comes full circle

In turn, by playing a central role in the emergence of ESG, women are creating more opportunities for women in the fund management industry, which is under increasing pressure to increase gender diversity. With their unique propensity for ESG, female fund managers seize this opportunity with both hands, ultimately serving as a force for good within the industry and beyond. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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