Private Markets Theory of Change

Private Markets Theory of Change 150 150 charlotte

“This work is so important because we need to build the science behind gender lens investing, and we need to better understand the “how”, the “who”, and the “what” and ask the right questions. We can’t be answering questions if we don’t know the right questions.”

Private Markets Theory of Change

In May 2020, WoWE hosted a virtual workshop to focus on the state of gender lens private markets investing, informed by the progress made as well as the exciting opportunity to co-create for a post COVID-19 future. This workshop was before the sad passing of Mr. George Floyd and the marches against racial and structural inequities; the discussion and outcomes however remain relevant in the context we are living through.

These two crises have drastically changed our lives and promise to redefine who we are at a personal, local, and global level. At WoWE, we are working every day to do our part to influence how we emerge into a world that is consciously moving towards a gender and structural equal reality. 

Background

The global GLI universe has recently witnessed accelerated growth, yet the private markets universe still lacks consolidation. In 2020, there are over 140 GLI private markets products available, but the offerings are fragmented and lack the scale required for large institutional investors to deploy significant pools of capital – which, unaddressed, hinders GLI private markets AUM growth.  

The opportunity

WoWE has a unique opportunity to work with partners to drive the consolidation of definitions and impact frameworks that are essential to scale GLI in private markets. The May 2020 workshop was the beginning of this process in three key areas:

1. Consolidation of the GLI definition and its nexus with ESG, with a clear link between the “E”, “S” and “G” in order to access capital that is being allocated to ESG mandates, thereby increasing GLI AUM. 

2. Identification of the optimal fund structures and investment instruments that would solve for the issues that institutional investors have with deploying significant capital into gender lens investment vehicles. 

3. Establishment of proxy data to address due diligence criteria that remain difficult for emerging investment managers to fulfill and then socialize a differentiated offering to investors. 

The workshop’s outcomes

Below is a summary of the workshop outcomes, which will be published shortly on our Market Moving Innovations page.

1. GLI Definition and its nexus with ESG

Objective:Develop the nexus between ESG and GLI definitions, with a clear link between GLI and the “E”, “S”, and “G” in ESG.

 Key Insights:

  • Women fund managers invest more in sustainable businesses
  • Women as consumers are more environmentally conscious
  • Women who lead companies focus more on sustainability
  • Women increase the sustainability of supply chains.
  • Women are critical actors in demand-side climate mitigation
  • Access to girls’ education and reproductive benefits lead to reduced carbon emissions

Next Steps:Collect data to prove these statements and interrogate relationships where this correlation exists. Consolidate insights into a comprehensive thesis statement.

2. Fund Structures

Objective:Identify a GLI investment vehicle structure that would enable access to institutional pools of capital, the potential to R&D fund structures and investment instruments as well as support a new crop of diverse investment managers.

Key Insights:Permanent Capital Vehicles (PCV) provide an optimal investment structure because they solve for flexibility, time horizon and diversification constraints. They also allow for potential secondary pipeline opportunities and public markets investments.

Next Steps:Map existing PCVs, identify and due diligence a potential short-list of management teams. Develop an investor-led group to facilitate a common vision by evaluating existing vehicles for partnerships or identifying a potential investment team to build a new vehicle.

3. Data That Matters

Objective:Create proxies for the data that matters to investors but are misaligned with existing due diligence questionnaires (DDQs) and processes.

Key Insights:Institutional investors do not identify GLI as a separate asset class and are often unsure how to due diligence a GLI opportunity within the structure of existing DDQs and legacy portfolios.

Next Steps:Create or contribute to a GLI screening tool and playbook for the industry, which can be a resource for both investment teams (general partners) and investors (limited partners).

As highlighted by Dr. Ruth Shaber, President of the Tara Health Foundation, this workshop gathered a community of experts and allowed us to start answering some really difficult questions for the private markets space. As she explained, “this work is so important because we need to build the science behind gender lens investing, and we need to better understand the “how”, the “who”, and the “what” and ask the right questions. We can’t be answering questions if we don’t know the right questions.”

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