24-03-2021 14:21

Using the financial markets to close the gender gap

The importance of gender equality is getting a lot of attention, not least from the financial markets. That was the message at a recent fireside chat from the 2021 SHE Conference, featuring Heike Reichelt from the World Bank Treasury and Elin Ljung from Nordic Capital.

While the financial sector may not be known for its gender diversity, it can serve as an agent of change in driving gender equality.

At a recent fireside chat at the 2021 SHE Conference, two female leaders in the financial industry described the innovative ways their organisations are using the financial markets to try to close the gender gap.

Heike Reichelt, Head of Investor Relations and Sustainable Finance at World Bank Treasury, explained how the World Bank engages with investors on the issue of gender equality using sustainable development bonds. On the private investor side, Elin Ljung, Director of Communication and Sustainability at Nordic Capital, described how the private equity firm uses its active ownership model to drive the diversity and inclusion agenda within its portfolio companies.

Banner for SHE Conference session: Gender diversity in the financial markets

Covid-19’s impact on women

Kicking off the chat, host Jacob Michaelsen, Head of Sustainable Finance Advisory at Nordea, noted the disproportionate impact the Covid-19 pandemic has had on women. He pointed to a US jobs report, which showed that employers cut 140,000 jobs in December 2020, and that women accounted for all of the job losses.

“The World Bank is very concerned that the gains in gender equality that were made over the past decade could be at risk. Even before the pandemic, there was still work to do, to close gaps in many areas,” said Reichelt.

Nordic Capital’s Ljung echoed that women have been hit harder by the pandemic, suffering steep job losses in sectors most affected by the lockdowns, such as hospitality, travel and retail. However, she also noted that the global crisis has brought social sustainability into focus for many investors.

“It increased interest, importance and awareness of how to integrate social sustainability factors into your investments,” she said, with an added push from the political agenda and stimulus packages.

Reichelt cited a recent Moody’s report, finding that measures to narrow the gender gaps widened by Covid-19 would have positive credit effects.

“The importance of gender equality is getting a lot of attention,” she said.

Engaging with investors on gender

The World Bank, an international development organisation owned by 189 countries, works with its member countries towards the twin goals of eradicating poverty and boosting shared prosperity. Earlier this year, the bank issued sustainable development bonds to raise awareness for its strategy, projects and programs that focus on gender equality. These include a CAD 25 million 5-year bond and a record-breaking NOK 5 billion issue, for which Nordea was the lead manager.

The World Bank has been a pioneer in the sustainable finance space, issuing the first green bond over a decade ago. Reichelt described how the green bond – a simple, fixed-income product – sparked a revolution in the market by getting investors focused on “purpose.”

“Over the last few years, sustainability topics have become so front and centre. There’s no conversation with investors that doesn’t include mention of ‘purpose.’ Gender equality is one of those topics people are very focused on,” Reichelt said.

She noted that the first times the World Bank issued bonds to raise awareness for gender equality, investors asked to see “women projects.” However, the Bank’s work on gender equality is holistic, focusing on areas such as building human capital, access to more and better jobs, ownership of assets, and voice and agency where closing gender gaps will have the greatest impact. This work cuts across everything the World Bank does, from health and education to sustainable transportation so women have a safe and practical way to get to work. That’s why the World Bank uses the sustainable development bond format, which covers the entire balance sheet.

“Being able to have this holistic discussion with investors is very constructive,” she said.

There’s no conversation with investors that doesn’t include mention of ‘purpose’. Gender equality is one of those topics people are very focused on.

Heike Reichelt, Head of Investor Relations and Sustainable Finance, World Bank Treasury

Driving change through active ownership

As a private equity firm, Nordic Capital approaches the issue from a different angle, aiming to make an impact as an owner and investor. The firm has made diversity and inclusion one of the three focus areas of its sustainability agenda.

“Sustainability, including diversity and inclusion… needs to be integrated into the business plan, into the strategy of creating value opportunities,” Ljung said.

She pointed to the finding that achieving the UN’s 2030 global agenda can open up an estimated USD 12 trillion in market opportunities. In addition, companies with high ESG standards are valued with a premium at an exit, while those with ESG risks are valued with a discount, she said.

With its active ownership model, Nordic Capital works closely with portfolio companies’ management teams to integrate diversity and inclusion into their value-creation plans.

“We can really require, measure and support companies to become more sustainable during the ownership,” she said.

Ljung outlined three success factors for companies:

  • Clarify why diversity and inclusion is important to your business, your workforce and your stakeholders, and set the tone from the top.
  • Focus on material actions from a financial, operational and reputational point of view, and prioritise those actions.
  • Hold people accountable for actions, and measure progress, from the top management down to every individual in the organisation.

Asked whether Nordic Capital would invest in a company that doesn’t have a woman in its leadership team, Ljung said, “Yes, probably,” adding:

“Because this is reality today. The key question is: Would we be making a change during the ownership period? This is where you really can drive, and where the financial markets can integrate this into making a change.”