By: Helena Wasserman Eriksson & Sonalie Figueiras
Empowering more women to become investors will unlock billions into ESG investing and help fight the climate crisis.
You may have seen the recent headlines about Adam Neumann, formerly of WeWork, raising a whopping $350M from leading Silicon Valley venture capitalist Andreessen Horowitz for his new startup Flow after having been famously ousted from his co-working startup for his reckless leadership and for losing billions of dollars of investor money. Apparently, if you are rich, white and male, failing upwards is welcomed and even funded. And this while women and minority founders continue to receive less than 3% of total venture capital investment globally. If white, middle-aged men continue to be the majority of all investors and startup owners, products and services will continue to be designed for them. A good example of this are car seat belts. The automotive industry is a male-led industry. Car seat belts were not designed for women’s bodies or for pregnant women. And wouldn’t you know it, studies show that women are more likely to die or get injured in a car crash. Representation is key so we can build products and services that serve not just a small section of society but also women, children, LGBTQI and people of color.
Women-led VC firm Sogal Ventures, co-founded by Pocket Sun in 2015 , has been investing in diverse founders with ESG criteria right from the start- way before it was popular. As Sun shared with us, “as VCs, we need to exercise our great decision making power of where capital goes with great conscience. To me, this means supporting diverse companies, and fostering more diverse angels and VCs who are more inclined to support world-positive companies benefiting the environmental, social and corporate systems. We’re doing society a disservice and perpetuating the barriers if we do otherwise.”
As of 2022, most famous investors are men. How many of you can name even one of the twelve women on Forbes’ Midas 2022 List? Most of us will draw a blank.This list ranks female investors by their portfolio companies that have gone public or been acquired for at least $200 million over the past five years, or that have at least doubled their private valuation since initial investment to $400 million or more over the same period. But the truth is, when we think of top global investors, most of us are picturing men. Folks like Warren Buffet. Or Bill Gates. Or Ray Dalio. So you can imagine how surprising it was to uncover that actually, women-led investor portfolios perform better than men.
Women outperform men as investors
There are countless more studies underlining this conclusion – see here for proof that women outperform as retail investors and here for data about how. VC firms with 10% more female investing partners make more successful investments at the portfolio company level, have 1.5% higher fund returns, and see 9.7% more profitable exits. Perhaps you’re wondering what makes women so different as investors. According to all the research, women tend to remain calm during market swings, have a tendency to save more, think long term and maintain a balanced portfolio amongst other reasons. None of this will come as a surprise to most women reading this. We are the mothers, the sisters, the family budget managers, the community helpers, the school PTA leaders. Thinking about the future and on behalf of others is in our DNA.
Women are instinctively back ESG-themed stocks and companies
A 2021 UBS study revealed that female investors are more inclined to invest in ways that align with ESG (Environmental and Social Governance) values. In other words, the very same investments that are currently making headlines in all major news outlets due to the climate crisis we are all finally waking up to. So not only does research show that women invest better than men, the data illustrates that women instinctively favor ESG themes when they back companies and stocks.
Women own the corporate sustainability space
As ESG has become the investment trend du jour, corporates have been scrambling to hire talent to create and manage their internal strategy. More and more firms are appointing Chief Sustainability Officers or Heads of ESG, from luxury giant Kering to Big 4 accounting firm EY, as well as German industrial giant Siemens and Swiss bank Credit Suisse. These new leaders are charged with driving climate and equality actions in their organizations. A little bit of Linkedin digging reveals that in over 80% of cases, these leaders are female. This is yet again unsurprising. The same UBS study showed that women are naturally mindful of the social and environmental impact of their investments. In fact, women show a greater tendency to be prosocial, altruistic and empathetic; to display a stronger ethic of care; and to assume a future-focused perspective. In other words, women are more inclined to look for investments that are in line with their values instead of prioritizing opportunistic investments.
Twenty years from now, the best investors will be female and they will back impact
According to 2020 data published by BCG, women make up half of the world’s population but own only a third of all global wealth, despite data suggesting women are investing now more than ever before.
If women are better investors and are naturally good at ESG investing, why aren’t there more women investors? Several reasons: The founders of Girls That Invest, a podcast run by two Australian female investors, collected data from over 200,000 female investors asking them what was holding them back from starting to invest. The studies showed that one of the main reasons is a belief they held that women were bad or frivolous investors instead that they could learn. Given the overwhelming evidence to the contrary, this is a tragedy.
In Singapore, one of the most progressive cities in Asia when it comes to environmental innovation and entrepreneurship, only 2% of VC funding goes into climate tech in Asia. Imagine the progress we could make on the climate emergency if more women became investors? Can you imagine how many trillions of funding would get unlocked if we simply empowered more women to invest whether as retail, angel or venture capital investors?
Becoming a good investor comes with practice. Crucially, it also comes with confidence. And women everywhere need more of it.
Angelina Kwan, CEO of Stratford Finance Ltd and investor, believes training and practice inspires confidence. “Just like professional athletes, women need to learn, train and practice at responsible investing and having the confidence that they are just as good if not better than the Warren Buffets or Ray Dalios of the world! They own it and now they have to SHOW it through their results! Only then can we move the needle to improve the results and have more women on the bench!”
In twenty years from now, the Warren Buffets and Ray Dalios of tomorrow will be female and they won’t be backing coal- they will be funding green hydrogen, medical psychedelics for mental health, progressive education, a safer food system and so much more. Let’s work to help them get there.
Helena Wasserman Eriksson is an impact investor and head of business development at Top Tier Impact – the global ecosystem for impact and sustainability leaders. Follow her on Instagram or contact her on Linkedin.
Sonalie Figueiras is an impact investor, journalist and serial entrepreneur who has dedicated her life to fighting the climate emergency. She is the founder of leading sustainability media Green Queen, climate tech startup Source Green and organic trade platform Ekowarehouse.
Lead image courtesy of Canva.