Applying a gender lens to climate investing

Our key takeaway: One key takeaway: Integrate a gender lens into climate investments. It is is key for a just and effective transition; in fact, it is the only way to get there. A recent report finds that women are “key stakeholders in solutions, to ensure not only a better path, a more ‘Just Transition’, but also a shorter one, unleashing the potential of women as changemakers.” A number of studies concur: a 1% increase in the share of women managers within a firm leads to a 0.5% decrease in CO2 emissions; women are twice as likely to highlight the importance of investee companies integrating ESG factors into their policies and decisions; etc. This is relevant for investors, who are expected to integrate a gender lens to their investments, as well as for companies themselves. Where are the women in companies, and where are the women being impacted by companies? 

The Women in Finance Climate Action Group (WIFCAG) in collaboration with 2X Global, Aviva, and the Oliver Wyman Forum, published ‘Applying a gender lens to climate investing – An action framework’ (2023): 

• Integrating a gender lens into climate investments is key for a “just and effective transition”: The report finds that women are disproportionately impacted by climate change: “80% of the people displaced by climate change are women.” At the same time, women play a key role in helping investors deliver their climate targets: “Studies have shown that a 1% increase in the share of women managers within a firm leads to a 0.5% decrease in CO2 emissions” and “Women are twice as likely to highlight the importance of investee companies integrating ESG factors into their policies and decisions.” In short, it “is important to value women as key stakeholders in solutions, to ensure not only a better path, a more ‘Just Transition’, but also a shorter one, unleashing the potential of women as changemakers.”

• Integrating a gender lens into climate investments also creates value for investors and companies: The report finds that increasing the representation of women at all levels of the business will reduce risk and increase returns: “Including women in senior management reduces risk; an analysis of S&P 500 companies found that above median representation resulted in 30% lower earnings risk relative to lower ranked peers” and “Studies also show that higher representation of women at all levels of the organisation is correlated with higher average returns, with a return on equity which is 2% higher than companies with low gender diversity.”

• Actions investors can take: The report provides a three-pillar framework to help investors integrate a gender lens when carrying out transition planning, climate-related disclosures, or sustainability reporting. The first step is to “[d]efine target outcomes,” which can include one, or a combination, of the following: “ensure climate investments contribute to addressing gender-related issues or promoting gender equity; mitigate the disproportionate impact of climate change on women; mitigate the risks of not considering gender in climate investments; and value women as changemakers in climate investments”. The second step is to “[a]lign organization and investment processes with target outcomes,” which involves considering the following: “Investors should ensure that their own governance and teams are diverse and representative and set internal targets to ensure this is the case; [adopt] gender-lens targets when setting portfolio climate targets and monitor progress against these; assess the impact of each climate investment on women when sourcing, analysing and deciding on investments; engage with each climate investment portfolio company on agreed gender stewardship priorities and monitor progress.” The third step is to “[i]ntegrate metrics into organisation and investment processes,” which includes setting targets and monitoring progress within an investment portfolio, internally or with investee companies.