AUGUST 2019

Beyond Conversation: Gender Inclusion Now

Category: Featured, Impact Investing, Managing Partners

By: Dr. Lisette Cooper, Managing Director, Chief Investment Officer 

This past July, I presented the keynote address at the Impact Capitalism Summit, hosted by Big Path Capital. The theme of the conference focused on “Impact at Scale.” While there are many lenses that we could put on the topic of impact investing, I focused on one in particular, and that is a gender lens. Specifically, I shared actionable ideas that investors can implement to promote gender equality at scale. Below is an excerpt from my keynote presentation, “Beyond Conversation: Gender Inclusion Now.” 

Diversity, Equity, and Inclusion
The United Nations’ Sustainable Development Goal #5 is to achieve gender equality and empower all women and girls. The United Nations says “gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous, and sustainable world. Advancing gender equality is critical to all areas of a healthy society, from reducing poverty to promoting the health, education, protection and the well-being of girls and boys.” In other words, gender equality benefits not only women, but all humankind.  

When discussing gender, we pull from the literature on diversity, equity and inclusion (DEI). It is important to recognize how each of these terms are distinct from each other.  

  • Diversity means diverse demographics such as gender, race, and ethnicity, as well as diversity of background and thought. 
  • Equity means the opportunity to be treated fairly and equally; to have a seat at the table.  
  • Inclusion means giving diverse voices an opportunity to be heard when decisions that matter are being made.

And of course, there is intersectionality. That is, a single person can come from more than one group that has been historically oppressed or underrepresented, and we need to be aware of how that operates.  

My research will focus on impact investing at scale and actionable ideas to make a difference in the world by changing the opportunity set for women and girls across all these dimensions. 

A Personal Story
My mother was a mathematician. Her mother, my grandmother, was a chemist, working in the lab. These were my role models and so I always assumed I could do science and math. I went on to get a PhD in geology, specializing in isotope geochemistry. Then, right after I graduated, I changed fields. Geology has very few women and I learned that although I could do the math, it was a misogynist field. Sexual harassment was endemic, so I transitioned to what I naively thought would be a better field—finance. Sadly, there are still issues for women in finance today and especially in Silicon Valley, it’s a “Brotopia.” As recently as this past June, while attending the Aspen Ideas Festival, I heard women entrepreneurs on stage say they are hassled by men who want to take them out for drinks instead of taking seriously their efforts to raise investment capital. 

Over the years, as a founder and entrepreneur, I have built a successful investment company with about 50% women in leadership. Yet, in most ways, I have been oblivious to the systemic issues that women face. About six years ago, a female client asked Athena to build out her investment portfolio to support women, a practice now widely referred to as gender lens investing. Along the way, she asked that I read the book “What Works: Gender Equality by Design” by Iris Bohnet. In doing so, I was shocked to realize that it is not just overt bias women experience, but unconscious bias that we all have and that is pervasive in our society and conditioned by cultural norms. And I realized that I, too, have that unconscious bias. 

So, how do we work around these unconscious biases? At Athena we have been fortunate to build on the shoulders of giants. Milestones include work by the Women’s Inclusion Project, which lead to opportunities such as the Aperio group’s public market strategy favoring companies with women in leadership. We have been able to invest in VC firms founded by women, and we have relied on the research of the Criterion Institute. 

And so there has been progress over the past several years in the field of gender lens investing. Athena’s white paper on “Investing for Gender Equality” was written at an inflection point, just as the #MeToo movement was taking off. There is a real hunger for action on gender equality by investors, and so in 2018 we began hosting a series of small-group women’s events around the country. Out of this work, the three most actionable areas we have found to promote gender equity and inclusion are 1) shareholder engagement, 2) access to capital, and 3) workplace equity. 

Shareholder Engagement
In July of 2019, the Wall Street Journal covered the US Women's World Cup win and again the disparities in pay between women and men were highlighted. The winning players on the women’s team received $250,000 versus $1.6M for the men’s team—and lest you say the women’s championship game had fewer viewers, on an equivalent basis, woman were still paid only a quarter of men. That’s pretty terrible! But the publicity helps spotlight the issue. 

The pay disparity issue is also grim in the workplace. LeanIn.org and McKinsey published a study in which they cited that white men have 36 percent of entry level positions in companies, and yet 68 percent of C-Suite positions. Conversely, men of color, white women, and women of color all have lower representation at every step on the corporate ladder compared to their respective entry level percentages. This overweighting of men in senior positions leads to a huge difference in the median pay of men and women. 

A key area of focus in shareholder resolutions today is the disclosure of the median pay gap. At our women’s group in Boston, we invited in Michael Passoff of Proxy Impact and Natasha Lamb of Arjuna Capital to describe how to file shareholder resolutions. As we learned, it’s very easy to do. It takes just $2,000 worth of stock in a company that you have held for one year to get a spot on the proxy ballot of a public company. A group can be formed without the need for LLC or other legal entity, and a press release highlighting the cause can be sent to a broad range of media contacts for merely hundreds, not thousands of dollars. 

Our group was inspired to co-file four shareholder resolutions. One was with Pfizer, and after negotiation with the company, it agreed to be the second company after Citibank to globally disclose their gender median pay gap. Citibank, which gets an A on Arjuna Capital’s gender pay scorecard, has a 29 percent median pay gap. There is a lot of work still to be done! 

Access to Capital 
The biggest barrier to gender equity in access to capital globally is bias—both conscious and unconscious. 

In emerging markets, there is a lot of conscious bias against women and financial inclusion efforts seek to work around and counter that prejudiceThat is, efforts are being made to work within existing cultural norms to find ways to empower women. 

One example is getting women more access to digital and on-line banking. Personal cell phones are one way to provide women access to their own accounts. Women who culturally can’t travel and must stay close to home, can now join the global economy (i) and when they do, by getting access to loans and banking, there is a multiplier effect in terms of wellbeing in the community. More money to women leads to more funds for food and education (ii) 

Domestically, the biggest challenge in access to capital is unconscious bias. There are very few female fund managers in the mutual fund and hedge fund world; but one of the worst industries in terms of gender representation is venture capital and venture-backed companies, with just 2%-3% of women in lead positions. 

In July 2017, a study published in the Harvard Business Review showed the difference in questions asked by venturcapitalists to male and female entrepreneurs. Questions were categorized as promotion-oriented or prevention-oriented. I like to think of the promotion questions as the reward questions and the prevention questions as the risk questions. 

The results? Men were asked twice as many reward questions. Women were asked twice as many risk questions. Those who were asked mainly the reward questions, i.e. the men, received an average of $16.8M in funding. Those asked mainly the risk questions, i.e. the women, received an average of only $2.3M in funding. 

The lesson here is that if you are in a position as the allocator of capital, it is very important to have a core set of standard questions that you ask both men and women in order to come up with fair outcomes and reduce unconscious biases. 

If you are seeking capital, there’s an interesting twist. The $2.3M is comprised of a range of answers. Some people answered risk questions with risk answers and some people answered risk questions with reward answers. It turns out that those who were asked risk questions but answered with reward answers received an average of $7.9M. Those who were asked risk questions and answered with risk answers received an average of $563k. That’s a 14x difference! 

I wish I knew this before now. It’s like knowing how to get a better score on the SAT. If the game is rigged, you just have to learn the work arounds to make the playing field more fair—and utilize short-term strategies for big impact. 

Workplace Equity
In the workplace, many of us are now familiar with the research that diverse environments have more employee engagement than environments that are less diverse (iii). But, according to research performed by Deloitte, an environment that’s both diverse and inclusive has 2x the employee engagement. 

It’s important to note the importance of inclusivity, because it’s not just about having a token number of women on the board or in leadership, it’s about including them in the decision-making process, where the voices at the table have the benefit of being heard.  

Another factor that benefits from increased diversity and inclusion is the collective intelligence of the workplace. A study published in Science magazine found that a team's performance has relatively little to do with what the average intelligence of the group is or what the highest IQ is of a member of the group, but it had a lot to do with the gender mix of the group. The performance of a group benefits from how socially intelligent the group is. The authors of the study found that on average women tend to score higher on tests of social skills and social intelligence and having more socially intelligent individuals in the group is correlated with higher performance.  

At Athena, we decided to implement a gender and DEI (diversity, equity and inclusion) lens for our manager due diligence process. It quickly became clear that in order to come up with the right questions to seek best practices from our managers, we first needed to look at ourselves.  

So how can we encourage diversity and inclusivity in the workplace? 

Frank Dobbin at Harvard University analyzed three decades’ worth of data from more than 800 U.S. firms, concluding that typical mandatory diversity programs of the last 35 years do not work. For example, job tests are ineffective unless applied uniformly, and the research shows that they rarely are applied uniformly. And grievance systems often don’t work—anything that shames people or makes them think they’re bad actors tends to have a negative effect.

Dobbin’s work shows that systems that help educate people about the benefits of diversity, equity, and inclusion in the workplace are what yield results. Voluntary training gets high marks, as well as diversity task forces. Mentoring is also very effective, particularly for African American and Asian women.  

At Athena, we created a DEI task force. The task force recommended a number of different approaches: We implemented a diversity statement for the firm. We changed our hiring practices in several ways to work around unconscious bias. We retained our formal mentoring programs. And of course, we encourage role models. There are women throughout all levels of the firm. We’re now focused on including other types of diversity and supporting them in management roles. 

Lastly, there’s something I’ve learned from Eileen Fisher and her management style. A diverse and inclusive team can effectively implement a collaborative approach to decision-making, which can be more nimble than a traditional command and control structure. So, at Athena, leveraging off Eileen’s leadership, we decided to implement small leadership groups to make decisions. We substituted an Operating Committee for the COO. And I stepped down as CEO to substitute in an Executive Committee. Using small, diverse groups of 3-5 people with a variety of perspectives has proved highly effective for early buy-in and rapid deployment of decisions. 

What works for one company may be different than what works for another. The commonalities are that effective approaches emphasize strengths instead of weaknesses. 

From Scaling Impact to Impact at Scale
In order to have impact at scale, we must start with ourselves. Cultural and social change starts with personal transformation. Understanding our own biases and what the benefits of gender inclusion are, and educating ourselves as to what actions we can take, is how we can make a difference in the communities around us, including our workplace. In that way, we can then make a difference that influences our culture and society. By changing ourselves, by using our wealth wisely and constructively, we can have real impact at scale.

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[i] https://www.nytimes.com/2015/04/02/business/dealbook/melinda-gates-cellphones-for-women-aid-ascent-from-poverty.html

[ii] https://www.imf.org/external/pubs/ft/fandd/2012/03/revenga.htm

[iii] https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity