The women-led investment teams banking on social returns
As one of the first investors in Tesla Motors and NEXTracker, which was sold to electronics supplier Flextronics in 2015, Nancy Pfund has a record of spotting a promising trend. But when in early 2000 she saw the potential for investing in companies that combine financial returns with a positive social impact, the investors she was trying to convince were not so sure.
“We were pioneers,” says Ms Pfund, now managing partner of venture capital firm DBL Partners. “The typical reaction to our pitch was a negative one, we got a lot of doors slammed in our face,” she says. “People thought that by introducing something other than an economic driver into your investment decisions you would lose money.”
Today, demand for investments that incorporate environmental, social and governance standards, or impact investing, has grown substantially. In a recent study, Morgan Stanley compared the interest shown in sustainable investing by male and female clients. In 2017, 84 per cent of the women expressed interest, up from78 per cent in 2015; for men the figure was 67 per cent, up from 62 per cent.
Within this investment subcategory there is a relatively high representation of women compared with the broader VC field, says Ms Pfund, whether as managers or investors. At DBL, the two managing partners are one woman and one man; at general partner level, two of the five are women, including Ms Pfund.
As an emerging field of finance, there was an early opportunity for newcomers to make their way as practitioners, says Ms Pfund. “Women have not been as invested in the status quo as men . . . This, coupled with impact investing’s reach into social and environmental domains, towards which many women gravitate anyway, has allowed the field to grow in a more diverse way from the get-go.”
DBL stands for “double bottom line”: the aim is to achieve attractive financial returns for investors, while also delivering social, economic and environmental benefits to the sectors and regions in which they invest. One example is Farmers Business Network in the US, which uses big data to give farmers an insight into their supply chains and enables them to make changes that are both more sustainable and economical. Supporting farmers in this way helps rural Americans thrive on their farms, thus serving a social purpose, while the network has boosted employment.
Laurie Spengler, chief executive of Enclude, a UK-based specialist advisory intermediary in impact investing, says: “It’s deeply satisfying to integrate what you care about with what you do professionally.”
An early adopter of impact investing, Ms Spengler was able to use her experience in development finance to move into the field quickly. In addition, as with any new movement, she says, the barriers to entry and career advancement for women are not so embedded.
The gender balance of staff at Enclude is just over 40 per cent female and, like MsPfund, she is struck by the relatively high number of women working in impact investment compared with other areas of investing. “We are intrigued by the role of finance in society and using it as a tool to create better outcomes,” she says.
Rachel Whittaker, a sustainable investment strategist at UBS, started her career as an analyst in an investment bank in 2000, where she was often the only woman in meetings. “When I made the move into sustainable investing it was a major change,” she says.
In the organisations she worked for over the past decade Ms Whittaker has noted the different gender splits in sustainable investment teams compared with traditional teams. Despite this, she sees the same trends as in other sectors, where the number of women drops the higher up the ranks you look.
Role models in the sector are important, says Ms Pfund. “We go out of our way to find women entrepreneurs,” she says. “We want to make the best investments, and if you leave out half the talent pool you’re probably not going to do that.”
The firm has a strong deal flow coming from women, she says. “We don’t really need to go finding them. They’re finding us . . . because they know that some of the barriers that have existed have melted away.”