What’s one of the biggest drivers of ESG? Women!

The financial sector has long been dominated by men, with very few women on the frontlines of the fund management industry. However, there is one area where women are taking the lead: ESG investing.

ESG (Environmental, Social, Governance) is booming. In 2016, ESG managed assets were valued at $23 trillion (a 73% increase from four years earlier), according to the Global Sustainable Investment Alliance. Now, ESG managed assets are valued at over $30 trillion. With colossal funds such as BlackRock announcing they will redirect $7 trillion of firm-managed assets toward environmental sustainability, ESG growth is bound to continue.

As ESG investing takes hold, hedge funds around the world recognize the need for ESG expertise. A 2020 Collier Capital survey showed that private equity firms plan to hire more people who specialize in ESG investing and that three in five private equity firms currently employ at least one person who focuses on ESG. This shift will drastically change the dynamics of ESG teams at banks, money-management firms, and public companies. Surprisingly, this is a rare area in the finance sector where women are leading.

While hard data is limited, women are proving to be well represented in ESG decision-making roles and currently lead ESG units at firms such as JPMorgan, Invesco, Bank of America, and Fidelity Investments. In the U.K., recruiter Acre Resources reported that over the past five years, 44% of the top ESG jobs were filled by women.

Not only are women impacting ESG investing in the finance sector, but data shows women will have a huge impact on economic growth moving forward, both in the workplace at large and as retail investors.

Women & economic growth

As ESG investing grows, public companies are facing growing pressure from institutional investors, activist shareholders, customers, and internal employees to increase the representation of women in C-suite positions, executive leadership, and on corporate boards, and with good reason!

A study by S&P Global Market Intelligence found that firms with female CFOs are more profitable and have produced superior stock price performance compared to the market average. The research also showed that firms with high gender diversity on their board of directors have been more profitable than firms with minimal gender diversity.

S&P Global found women to be the most underutilized source of growth, one that could send global market valuations soaring. The study reported that U.S. GDP growth lead by an increase in female participation in the labor force could add $5.87 trillion to global market capitalization over the next decade.

Gender diversity is also impacting regulation as governments have become increasingly watchful of company operations. Corporations may begin to face greater regulatory pressure to address gender equality at the executive level and beyond. Despite progress over the last decade, female executives remain enormously underrepresented in the C-suite. For example, women currently occupy less than one-fifth of senior leadership spots at energy companies around the world.

However, many expect to see a demographic shift in industries across the board as public companies continue to face pressure from investors looking closely at ESG benchmarks and data highlights on gender parity.

Women as investors

The profile of retail investors interested in sustainable investing is also shifting, with women leading the charge. According to a study by BMO Wealth Institute, women control $14 trillion in personal wealth in the U.S. Nearly half of American women are the primary breadwinners in their household, a nearly four-fold increase since 1960. In fact, by 2030, women are projected to control two-thirds of all the wealth in the U.S. and are positioned to become the largest beneficiaries of the $30 trillion intergenerational wealth transfer over the next 25 years. In turn, women will begin to shape how wealth is generated, valued, and passed on to the next generation.

Women are known to make financial decisions based on what’s best for their children and their family at large. They historically align their investments with what they feel will benefit their community, neighbors, and the planet. Not surprisingly, studies show women value the principles behind ESG investing. A recent RBC Wealth Management survey found female clients are more likely to prioritize ESG when considering what companies or funds to invest in, while male clients typically prioritize financial performance. According to Green Money Journal, 90% of millennial women say social and environmental issues are very important to them and drive their decision-making.

The ESG future is female

Investors managing more than $80 trillion in assets have recently pledged to integrate ESG data in their investment process as signatories to the Principles for Responsible Investment (PRI). In turn, ESG investing is poised for massive growth moving forward. These figures will only increase as women continue to drive ESG investing while gaining financial wealth and independence.

Women now control 32% of the world’s wealth and are adding $5 trillion to wealth globally every year. McKinsey reported that working towards advancing gender equality could add $13 trillion to global GDP in the next 10 years. Financial advisors and asset managers should take note: the time to recognize and include this powerful group of decision-makers is now.

Ryan Nelson

Ryan Nelson is Conservice's SVP & General Manager, ESG. He has over 20 years in enterprise software and management consulting experience, including supply chain software implementation and process optimization for fortune 50 companies. Since 2009, Ryan has been focused on helping companies amplify their ESG impact with technology.

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