With the generous support of a grant from Mission Throttle, and in partnership with Mission Investor Exchange, The Philanthropic Initiative (TPI) is conducting research on women’s participation and leadership in impact investing. As part of this scan, TPI interviewed leading practitioner Kristin Hull of Nia Community Investments and Green Alpha Advisors on her views of Women in the field of Impact Investing. Below is Part 2 of our interview with Kristin (Part 1 is available here).
TPI: What are the barriers to female participation in impact investing?
KH: At this time we have some significant barriers to overcome before impact investing becomes mainstream practice. Including women will be integral to our success. Financial literacy levels may be our largest hurdle. Unfortunately, we live in a society where investing practices are not widely taught in either school settings or within families. Most schools (public or otherwise) do not even address basic banking. In the United States, it is oddly acceptable for women to admit they “don’t do math,” which can make investing somewhat inaccessible to the average individual.
Adding to the layers of inaccessibility is the jargon that proliferates within the investment industry. From SRI to ESG, the the alphabet soup of acronyms serves to distance women from entry to financial involvement, confidence and mastery.
Additionally, we have allowed our financial industry to market complex and layered products. The result is a vast amount of people that have extremely limited knowledge of their own finances and have few easy entry points to learn more. Even when working with an advisor, there are few straightforward investment products for them to access. We as individual investors and as an industry need to push for easy to access and easy to understand impact investing options in each asset class.
Another significant barrier to impact investing is simply the time it takes to learn a new, growing and shifting field of options. Because traditional investing has been experienced by many as both overwhelming and “boring,” there are many women that are reluctant to devote time to something that might turn out to be confusing and less interesting than their current daily activities and responsibilities. Providing enticing and easy to access onramps will be essential to growing women participation.
While financial advisors can potentially be a bridge to learning about finances and impact, some have been known to serve as gatekeepers, often keeping doors to impact investing closed.
From a lack of knowledge about basic investing concepts, a lack of transparency in our financial industry, to women not feeling empowered in directing investment decisions, we have some systemic work to do to invite women in, and prepare them to be more involved in directing their finances.
TPI: How do you think those barriers may be best overcome?
KH: While the lift is a heavy one, and has several structural components, the good news is there are many of us working on this, recognizing the issues, and creating various onramps for entry to impact investing.
Education is key. We absolutely need to educate women and girls on investing basics. This means starting in elementary school covering saving as well as investing. And while we need to build financial literacy into public school curriculum, for women who have already completed school, we will do well by offering vehicles as well as places for them to learn about impact investing such as investment circles; supportive environments where women can go to get questions answered.
We at Nia Community are developing a website to provide definitions on financial terms offering a place for women to learn about different approaches to impact investing. While we need to provide women with investing education, many will still require excellent advisors. Financial advisors will need additional education about the principles of ESG, as well as impact. While we also need financial advisors to step up and learn more about impact investing, providing education on the advantages of impact investing for advisors is a necessary step.
Another important piece to fill is preparing women just how to talk to their advisors; empowering women to make the connections between their investments and their goals for the world and their communities. Providing women with knowledge of how to advocate for their values and interests and to push their advisors for more meaningful investment products, as that is a key lever for change in our industry.
In addition to educating and empowering women and their advisors, change also is also required within the financial industry. Rather than indexes and complicated hedge funds, we need to bring portfolio concepts to life by making them more tangible, more straightforward, and thus, more accessible. Products need to be transparent, meaningful and easy to understand. This can be accomplished by simplifying investment vehicle structures, having more direct loan and equity opportunities and incorporating actual stories of real people and projects about where the money is being used. At Nia Global Solutions, we offer a portfolio of publicly traded, solutions focused companies, all of which have women in leadership. This and other easy to access products are needed to fill out an impact portfolio.
TPI: What has been the role of female professional advisors?
KH: Females are so outnumbered in this industry! Fortunately, the numbers are starting to increase slowly. Interesting to our efforts, the Calvert Foundation found that female advisors are more likely to know about alternative investing opportunities and more likely to offer them as options to their clients. These findings bode well for women and values aligned investing.
We are entering a very interesting time for advisors. Those that are able to listen to their clients’ needs and to think outside of the box of traditional financial allocations, those that are able to move beyond Modern Portfolio Theory to new and different ways to account for risk, have a lot to offer. The successful advisors are going beyond standard portfolios to personalize their strategies to meet the needs and interests of their clients.
This excerpt is Part 2 of a 3 part interview series. Watch out for Part 3 later this month.