Public Markets Theory Of Change

Public Markets Theory Of Change 150 150 charlotte

“WoWE seeks to demonstrate that allocating assets with a GLI screen will yield at least the same risk-adjusted returns as a traditional endowment while delivering impact for women and girls and the communities they empower.” 


Public Markets Theory Of Change

WoWE seeks to demonstrate that the power of capital can tip markets in favor of women and girls and the community they empower.

Launched in October 2018, it has quickly gained momentum sharpening its strategic objectives to include financial product research and engineering.

WoWE seeks to demonstrate that allocating assets with a gender lens investment (“GLI”) screen will yield at least the same risk-adjusted returns as a traditional endowment while delivering impact for women and girls and the communities they empower.

Background

Since inception in 2006, the growth of GLI has been anemic and fragmented. Despite the growing number of GLI products offered through public markets investments, research shows that the overall market size has grown to slightly over USD 3.6 BN, with about a third managed through illiquid Separately Managed Accounts (“SMA”s). Over USD 2 BN has been deployed since 2018 – indicating recent acceleration in interest for GLI products.

Lack of consolidation behind GLI public markets leaders suggests that the marketplace is still in its pioneering stage. The recent jump in invested assets (“AUM”), however, points towards a long-overdue awareness that GLI offers untapped opportunities for strong financial and impact returns. Currently there are no public fixed income GLI products available in the US market, while equity products suffer from fragmentation – hindering GLI sector growth.

This creates a unique opportunity for WoWE to support the acceleration of GLI in public markets development and catalyze funding for GLI through product innovation and aggregation.

The Opportunity

WoWE has a unique opportunity to support the consolidation that is essential to scale GLI in public markets through several key initiatives.

1. Influence industry standard for gender lens criteria

  • Identify data aggregators compiling gender data in a reliable and efficient manner
  • Develop and/or enhance scoring criteria & methodologies for corporate and sovereign issuers
  • Pinpoint the obstacles that limit the universe of gender-rated products and develop mitigating strategies
  • Facilitate consensus among early adopters and asset owners to create GLI sector standards

2. Develop and refine gender lens products

  • Gauge investor demand and prioritize whether debt or equity should be addressed first
  • Facilitate creation of a value chain from data source to index product provider in order to scale a platform with indices, an expanded gender-rated universe and investable products
  • Address the perceived difference in market risk and expected returns for gender lens portfolios through research and financial product engineering

3. Catalyze gender lens investing and market growth

  • Develop a pool of potential investors for each type of asset and product
  • Facilitate the development of a community of investment partners
  • Bring liquid public GLI products to market

Impact Objectives

WoWE aims to catalyze disruption in current gender norms using the power of capital. A significant part of WoWE’s strategy is to facilitate the movement of large pools of capital into GLI around a set of variables that tip broad and deep changes in favor of women and girls and the communities they empower.

On October 18, 2019, WoWE and UN Women co-hosted an SDG Gender Lens Financial Engineering Workshop. Participants included data aggregators, index developers, financial product developers, asset managers and owners. The group co-developed solutions that address challenges including optimal gender data collection; scoring methodologies; and effective collaboration across the financial sector. Participants identified data sets and prototyped scoring methodologies and GLI products.

Below is a summary of the workshop outcomes which can also be found on our Market Moving Innovations page.

Government Scoring

Objective: Develop scoring methodology to evaluate government debt with a gender lens.

Key Insights: No scoring in the market evaluating government products with gender lens thus limiting proper GLI portfolio construction.

Next Steps: Identify data to develop a scoring methodology that incorporates five key indicators as set out in the XX Factor Framework including legal rights; education; health; economic empowerment; and personal safety. Development of methodology is underway in partnership with the Center for High Impact Philanthropy at the University of Pennsylvania.

Debt

Objective: Prototype a comprehensive global aggregate bond index combining existing scoring methodologies (e.g. corporates) and those that are yet to be developed (e.g. governments).  Create a Gender Lens Global Aggregate Bond Index to give investors a benchmark for holistic Gender Lens asset allocation and product developers a basis to create the next generation of liquid GLI products.

Key Insights: Investors want outcome-based scores; broader ESG screens; framework to score state, local and municipal debt.

Next Steps: Develop scoring for government, state and municipal debt; identify a large data provider who has non-Gender Lens index that would source data from partners; identify home for the Gender Lens Global Aggregate Index.

Equity

Objective: Design equity index that will fit easily into current portfolio models.

Key Insights: Some existing products meet impact standards but are not marketed as GLI funds.

Proposed Solution: Enable financial advisors with GLI information to share among investors interested in GLI funds.

Next Steps: Develop new approach to marketing GLI products and highlight intersectionality of GLI with other impact themes (fossil-free, deforestation-free, military weapons-free, guns-free, and tobacco-free).

In January of 2020, WoWE collaborated with As You Sow on a webinar showcasing the potential for outsized risk-adjusted returns from a portfolio constructed based on this sustainability intersectional strategy. More than 240 market actors registered, indicating strong market appetite.

WoWE designed an As You Sow powered portfolio of B or better rated mutual funds.  In the first few weeks of 2020, the portfolio has achieved >10% returns.

Company Scoring

Objective: Develop company scoring methodology/system to mobilize capital for GLI.

Key Insights: Supplemental indicators beyond women in leadership is necessary to deepen the GLI opportunity set.

Proposed Solution: Broad private sector company scoring for debt and equity GLI to be used by both retail and institutional investors.

Next Steps: Collaborate with data aggregators to develop additional criteria for screening in categories including: equal compensation and work-life balance; policies promoting gender equality; friendliness of products/services for women; and supply chain equity.

In May 2020, WoWE hosted its first private markets workshop whose outcomes will be published soon. Stay tuned!

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