International Women’s Day: Why a diverse green finance sector is key to delivering a just net-zero transition
To mark International Women's Day (IWD) 2023, edie speaks to three women leaders that are driving change and improving approaches to green finance and environmental, social and governance (ESG) investing.
It is a well-known fact that the climate crisis disproportionately impacts women and girls globally. However, women and girls account for 51% of the global population but only 21% of government ministers are women. The percentage drops even further for governmental positions heading up nations or states. In short, the decisions to combat the climate crisis and alleviate the most severe impacts are being decided by men.
The OECD itself states that “It is increasingly recognised that women and girls tend to be disproportionately impacted by climate change and other environmental challenges, especially in developing countries. Yet, little research or policy action has focused on how gender equality and environmental goals can be mutually reinforcing”. If nations are to realise this vision, then it only makes sense that women are adequately represented in this burgeoning green finance market.
Money makes the world go round
A just and equitable net-zero transition will hinge on the finance sector and how it can unlock funding for innovation and responsible businesses and fortunately, the market continues to grow.
Research from TheCityUK, with the support of BNP Paribas, has found that the global green finance market has grown from $5.2bn in 2012 to more than $540bn in 2021. However, the ‘Green finance: a quantitative assessment of market trends’ report, which uses data provided by Refinitiv, states that the share of green finance in the total finance market sits at just above 4% globally.
When markets grow at such a dizzying pace it can be easy for issues and challenges to swell up, with greenwashing, for example, currently a huge challenge for ESG investors, pension providers and those operating in the bonds market.
So, just how important is increasing the diversity in this sector in terms of the wider efforts to decarbonise while creating a fairer global society that delivers the Sustainable Development Goals (SDGs)?
For Shami Nissan, head of sustainability at Actis – a leading global investor in sustainable infrastructure – diversity in leadership roles is crucial to ensuring that the finance sector can position itself towards “common goals” that benefit the planet and society.
“Diversity in leadership roles in green finance, or indeed, any discipline is important in order to ensure that decision-making is robust, that group think is challenged/avoided and that the richest possible perspectives can be heard and leveraged for success against the common goal,” Nissan tells edie.
“Green finance is no different. A recent IFC report also found that funds with gender-balanced senior investment teams generated 10%-20% higher returns compared with funds that have a majority of male or female leaders.
“There is also data that indicates that female investors are more likely to invest in female-founded and/or female-focused businesses. So there are knock-on, multiplier effects for inclusion and gender more broadly when we succeed in increasing women in the green finance field.”
As sectors go, green finance isn’t the worst when it comes to diversity.
According to recruitment company Acre, 44% of the top ESG jobs it has helped recruit for have gone to women over the past five years. In comparison, the broader finance industry has women account for just 19% of C-suite positions, according to a McKinsey report.
However, very few sectors will play such a crucial role in shaping others on the low-carbon transition, and as Maria Nazarova-Doyle, head of responsible investments and stewardship at Scottish Widows tells edie, diverse representation will help ensure that no one is left behind.
“Fundamentally, the transition towards a green economy will affect everyone in today’s society – and that change needs to be equitable,” Nazarova-Doyle says. “A huge part of that equity comes down to the way we finance the change. This doesn’t just depend on investment policies, or even on engagement and voting guidelines – it depends on leadership.
“If we’re serious about realising a net-zero transition that works for the broadest possible set of people, then we need to ensure the big decisions are taken by a truly representative group of leaders who benefit from high levels of cognitive diversity as a group. People need to see and trust that there is a diversity of thought, background, and experience, and that all voices are being heard.
“Women and people from historically marginalised communities know full well what happens when the architects of a system all belong to one group. We have a huge opportunity to make sure the same doesn’t happen with the net zero economy.”
While things look promising for green finance, ultimately all financial markets will need to be enveloped under the “green” badge if a global net-zero transition is to be met. It is, therefore, important that organisations within the sector continue to give opportunities that can help support women with an interest in the sector.
One of the main issues with the wider finance industry is that men tend to rise to leadership positions faster than women. For example, among senior roles in venture capital (VC) firms, only 4.9% of the partners are female.
The lack of leadership positions for women in the wider finance sector may start to deter younger women from entering that field. Indeed, a study by the Forte Foundation found that women accounted for 41% of all full-time business students in 2021. While this is a record-high, it does showcase how men are more likely to enter into this profession.
For Blackstone’s managing director of ESG Caroline Hill, companies within the sector have a responsibility to help improve access for women.
“Diversity is incredibly important in any workplace and every sector, including green finance,” Hill tells edie. “I am a firm believer in diverse teams producing better results and am proud to work at Blackstone where that is certainly the view, alongside creating inclusive workplaces where everyone feels like they are included seen and can belong.
“We’ve made great strides, but there is clearly a need to continue improving diversity in the finance industry. I’m pleased we are seeing more programmes to support this. At Blackstone, we’ve introduced several initiatives to support diversity, including our Diverse Future Leaders and Women Future Leaders programmes, and our partnerships with organisations like Level 20 and SEO London. The impact of these is clear to see – in 2021, 41% of our global analyst class were women, now it’s over 49%. I’m proud of how far we’ve come, but we are never complacent, both at Blackstone and across the wider industry.”
Even women in leadership roles within the finance sector will know that delivering a just transition still means overcoming major issues, and not those necessarily related to climate change.
Last May, for example, Aviva chief executive Amanda Blanc was “the target of sexist remarks from individual shareholders” at the company’s AGM, as reported by the Guardian.
Nazarova-Doyle was “shaken to her core” that people “could still get away with treating women like that in 2022”, but she has since used it as a powerful reminder that women can be the catalyst for more systemic change.
“At first, I felt depressed,” Nazarova-Doyle says. “But then I realised that I should take it as a helpful reminder of how important it is to keep promoting a healthier, more equitable culture in my own sector. We can and should all do more to create a welcoming space for female talent to flourish as this will make our industry so much more successful.
“As a field, sustainable finance owes its existence to the desire of leading professionals to build a greener, fairer world. I believe that progressive mindset within the field has naturally helped provide a more respectful, positive space for women to advance their careers too.”
The road ahead
The respectful and positive space cited by Nazarova-Doyle will need to be introduced very quickly as green finance professionals are already juggling a lot of key frameworks and legislative reforms that will shape their industry moving forward.
Actis’ Nissan told edie of the rising prominence of biodiversity and the workings of the Taskforce on Nature-related Financial Disclosures (TNFD) to protect the planet while delivering “socio-economic benefits”, but that ultimately all parts of ESG need to be aligned with the net-zero trajectory.
“The implementation of net-zero commitments should be the main focus for all: the commitment-setting phase is the first and easy part, and the real work begins in earnest to meet those commitments,” Nissan adds.
This may well mean that the lines between ESG finance and sustainable business are blurred even further. A chasm used to exist between largely siloed sustainability teams working in-house and the broader investor community.
For Blackstone’s Hill, who formerly led the sustainability team at real estate firm Landsec, the burgeoning interest in sustainability and the mainstream coverage of the climate crisis will only create more appetite amongst younger generations to work for sustainable organisations. This, in turn, can create a new pipeline of talent for companies to help shape this much-needed just transition.
“There has never been a better time to be involved in sustainability,” Hill says. “Many organisations are growing their teams and the sector is continually changing, for example, attracting people from different backgrounds for the first time. In real estate for example, we are seeing people moving into sustainability roles from their traditional real estate financing background.
“I find this reassuring as it means we have and will continue to have a great mix of sustainability professionals in the field in coming years.”
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