Diversity – Feature
First principles: investing in diversity Diversity in the context of investing is becoming a bigger issue, so what approaches are being followed to shift the dial on the issue? This was the starting point of portfolio institutional’s diversity debate, a recording of which is available at portfolio-
institutional.co.uk/diversity-hub. Lydia Guett, investment director in Cambridge Associates’ sus- tainable and impact investing group, shared some insights into the ways diversity can be integrated into investment deci- sions. “There are two dimensions in how we look at this: one is looking at asset managers and understanding their corporate diversity as a team. For us, this is important as we believe diverse teams make better decisions.
“The other big part is diverse and inclusive investing – and gender lens investing is probably the most common,” Guett added.
This splits into different levels. “One is access to capital, so looking for female investors, as they have been hugely under- represented,” Guett said, adding that they pay particular inter- est to the investments women make. “We look at any manager that invests in companies that make products specifically tar- geted to women. “And then there is investing in companies that have a specific and favourable environment for women,” she said, citing parental and maternity policies or more flexibility to enable more women to become senior managers. This sits within gender-lens investing as defined by UN Women, which is intentionally allocating capital and align- ing investment strategies, processes and products to “achieve positive and tangible contributions against women’s empow- erment objectives” while having the potential to generate a financial return. Candice Bocle, ESG product specialist at asset manager Carmi- gnac, shared some similar ideas on female investment. “We also focus on women as investors,” she said. “We look for broader and diverse investment teams. Our team is diverse.” For Bocle, it is also the future opportunities offered by compa- nies that make them an attractive investment. “The most important thing for the companies we target, and for us as a firm, is to have a pipeline of talented people, who will be in a position to take future leadership roles versus always looking outside to recruit people with a diverse background,” she adds.
Growing universe
And when it comes to diversity and investment, Guett refer- ences research by Cambridge Associates. “When it comes to ESG, in Europe – the environmental part – is strong and has been ahead in developing products and investment approaches. Whereas in the US – the social part – social equity, is strong.”
Issue 115 | July–August 2022 | portfolio institutional | 41
What is interesting is how the firm believes investors can expand their universe via diversity. “Investing in diverse man- agers, not only gender, but also ethnicity and social back- ground, gives you a broad understanding of diversity, which increases your investment universe,” Guett said. “This is not about exclusion; it is about including new groups of investors with investment opportunities that in the past have not been focused on.” This has clear implications for investors. “If you have a bigger investment universe, you potentially could find more interest- ing, more niche, more valuable investments as you are plug- ging into opportunities you would otherwise overlook,” Guett said. “This is about being more open to innovative investment opportunities.”
She also discussed a myth about diverse investing. “Usually, the understanding is that there are not many [diversity-related investment] products. But if you look at the entire investment scale from public to private investment opportunities, you can build a portfolio that has a strong diversity and inclusion focus, across private markets specifically.”
Improving returns Indeed, the demand for diverse investing methods and
Until you have the data, you cannot understand where the gaps are, where the weaknesses are and where the fixes are needed.
Sachin Bhatia, Invesco and the Diversity Project
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