While women form more than 50% of businesses in the United States and 30% of businesses globally, they continue to receive only 2-3% of entrepreneurial private capital funding (of which 77% is focused on technology) and have disproportionately low participation in private debt funding. Much of this disparity has been attributed to poor diversity and inclusion practices, ranging from predatory behaviors such as harassment to more subtle factors such as unconscious bias.
The EQUALS Leadership Coalition, together with United Nations PRI (PRI), is embarking on a program to systematically address diversity and inclusion in investing.
Tackling the problem
Technology is both the dominant frontier of jobs for the future and the majority of most high potential investment. These issues are of critical importance for the mission of EQUALS; this program aims to support investors (asset owners, managers and sovereign wealth funds) in reducing the investment gender gap with a tangible action roadmap and a community of practice within the framework of the WEP principles.
We launched our efforts with the first EQUALS-PRI roundtable on September 14, 2018. The EQUALS Leadership Coalition and PRI hosted an Asset Owner/Limited Partner (LP)-led breakfast roundtable discussion, focused on understanding the business case for diversity and inclusion in tech investing. This interactive investor roundtable shed light on the true costs and benefits of diversity and inclusion practice, using recent research from both academia (Berkeley, George Mason University, Harvard) and industry (BCG) to discuss how the findings show a quantitative, demonstrated correlation between good diversity and inclusion practice and investment performance.
September 2018 round-table results
The September event concluded with the following outcomes:
The most effective ways to initiate a discussion on diversity with investees includes highlighting key points such as the fact that institutional values require investing in ways that support 1) institutional beliefs and commitment, 2) desire for the best returns, and 3) avoiding the missed opportunities that result when some of the best people are excluded because of gender, race or other discriminatory factors.
The roundtable discussions laid the groundwork for continued constructive dialogue, sharing of best practices and organized action--all with the aim of acknowledging the true cost of predatory and discriminatory behavior and leveraging the true value of diversity and inclusion. EQUALS and PRI will commit to the action steps laid out by hosting a second event and developing a draft guidance document over the first half of 2019.
March 2019 round-table results
The second event in the round-table series was held on 22 March 2019 at the UN Global Compact in New York. EQUALS, UN Global Compact, and Dalberg Advisors co-hosted an interactive round-table discussion with leading asset owners, fund managers, UN agencies, and other interested stakeholders to discuss key topics related to gender equitable investing in the technology sector.
The discussion highlighted perspectives on how to build buy-in for a gender equitable investment strategy and provided a roadmap of high potential actions that investors can take at various stages of their investment journey. Nearly 50 asset owner, government and entrepreneurial participants responded for a discussion that followed the Chatham House rules and was endorsed by UNPRI. The event was titled "AN INVESTOR ROADMAP FOR MAKING TECH INVESTMENT GENDER-EQUITABLE"
This productive round-table laid out critical internal and external best practices that include finding the right incentives, engaging a broader set of stakeholders, changing institutional approaches, and leading by example. The end result was crystallized in the form of the best practice roadmap for investors that can be accessed in the event findings document. The conclusions determined that it is critical to engage with investors, governments and entrepreneurs to continue and broaden this dialogue and to provide continued guidance. There is much potential and need for expanding into a multi-lateral stakeholder roadmap (or set of roadmaps) and joining together to form a global innovation or investment council under the aegis of various UN efforts to ensure coordinated collective action.
Findings and Documents
Roundtable 1: EQUALS-PRI Fall Asset Owner Roundtable at Annual PRI Conference, September 2018
Presentation from EQUALS-supported World Investment Forum Investor Breakfast at WIF Conference, October 2018
Roundtable 2: EQUALS-UNGC-Dalberg Roundtable Final Findings, March 2019
· EQUALS Investor Page
· Athena Alliance
· Barclays Report and Action Plan on Gender Wage Gap
· Bloomberg Gender-Equality Index (to be released in May 2019)
· Decoding Diversity report by Dalberg Advisors and Intel
· Global Impact Investing Network Resource Repository
· Male Champions of Change for STEM
· The Growing Market Investors are Missing
· Thirty Percent Coalition
· The United Nations Women’s Empowerment Principles (UN Global Compact and UN Women)
Relevant Research & Reports
STATE OF DIVERSITY
Financial Times, Female tech entrepreneurs are given less space to fail, 10 December 2018
BVCA, Women in Private Equity, May 2018
Private Equity International, BVCA report highlights PE’s gender problem, 4 June 2018
Maria Gabriela Henderson, The case for gender diversity in private equity, 9 February 2018
Axelrod, Scott and Leitner, James, Correlation of Democracy Indicators and Markets Returns (8 December 2016). V-Dem Working Paper 2016:04
Financial Times, Private equity in Africa can drive gender equality, 7 March 2017
Diversity Today, Firmex, Private equity lags on gender diversity, 7 July 2014
DIVERSITY AND PERFORMANCE
The Boston Consulting Group, The Mix That Matters: Innovation Through Diversity, February 2017
The Boston Consulting Group, Why Women-Owned Startups are a Better Bet, June 2018
Vivian Hunt, Dennis Layton, Sara Prince, Why Diversity Matters, McKinsey & Company, January 2015
Gompers, Paul A. and Mukharlyamov, Vladimir and Weisburst, Emily and Xuan, Yuhai, Gender Effects in Venture Capital, 4 June 2014
Rose-Smith, Auerswald & Swamy, Relating Sexually Predatory, Discriminatory Behavior to Private Capital Performance, 23 September 2018
SOCIAL NORMS AROUND DIVERSITY
Ewens, Michael and Townsend, Richard, Are Early Stage Investors Biased Against Women?, 17 April 2017
Mitchell, Lesa, Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers, 1 September 2011
Aggarwal, Rajesh K. and Boyson, Nicole M., The Performance of Female Hedge Fund Managers (29 August 2015). Review of Financial Economics, Forthcoming; Northeastern U. D’Amore-McKim School of Business Research Paper No. 2726584.
Bloomberg, Private Equity Has an Incentive to Prioritize Women, 8 March 2018
Forbes, Private Equity Has Something To Add To The Diversity Discussion. Yes, Really, 20 November 2017
Medium, Private Equity And Gender Diversity, 8 November 2017|
DIVERSITY INTERVENTION BEST PRACTICE
Herb Engert, How private equity leaders can tackle gender inequality, 29 March 2018
Lisette Cooper, Jeff Finkelman, Kate Huntington, Investing in Gender Equality, January 2018
Ghosh, Chinmoy and Petrova, Milena T. and Sun, Jerry and Xiao, Yihong, Increasing Gender Diversity in Corporate Boards: Are Firms Catering to Investor Preferences?, October 2016
Economist, Investment by women, and in them, is growing, 8 March 2018
Firmex, The Path to Gender Parity in M&A and Private Capital, 6 March 2018
Quartz, More investment firms are letting clients put their money where their mouth is on gender equality, 13 February 2018
DIVERSITY INVESTMENT POLICY
CalSTRS, Investment Policy for Mitigating Environmental, Social and Governance Risks (ESG)
CalSTRS, Letter to the SEC on Dec. 4, 2017 on Sexual Harassment and Misconduct
CalSTRS, Diversity in the Management of Investments, February 2018
CalSTRS, Corporate Governance Principles, November 2017
CalSTRS, The Value of CalSTRS Engagements, August 2018