When you read about the history of investing, most of the names are male. The history of sustainable investing is more balanced, with names such as Joan Bavaria, Amy Domini, and Mindy Lubber appearing among the top ten results of a web search. Women have held their own as leaders in sustainable investing, especially in the early days, when the prevailing view was that sustainable investing delivered inferior results in the 1990s and early 2000s.
That said, it’s still tough for women to achieve the top positions now that larger investment firms have sizeable allocations, or at least significant niches, devoted to sustainable investing. There is still a fear, which is increasingly prominent in today’s political dialogue, that diversity efforts and mandates will impair performance. Some have even gone so far as to suggest that shareholder resolutions urging greater diversity efforts have led to bank failures, a proposition that rests on one example and a boatload of cherry-picking.
That doesn’t mean that there’s no progress. When I was talking to companies and the media about board gender diversity in the early 2000s, the question I got most often was “But can you prove that women can fill those roles as well as men?” Let’s set the Wayback Machine for 2001, when the US experienced one of the worst recessions in the postwar period. There were many culprits in that economic pain, but one was terrible governance, with companies like Enron and WorldCom serving as poster children. Looking at those boards in that era, perhaps a better question, in light of experience, would be: “Can you prove that women would do any worse?” Board diversity has improved in most developed countries since then, as has executive diversity. And I haven’t heard that question in two decades.
But we’re still far from gender parity. And the occasional fear that diversity mandates would impair performance is not well-supported by a fair examination. MSCI reported in 2004 that among the constituents of the MSCI ACWI index, companies with at least 30% female directors “achieved cumulative returns that were 18.9% higher than those without, between July 31, 2019, and Sept. 30, 2024.” Of course, board diversity is not what biologists call an indicator species, or something that indicates the health of a much broader ecosystem. We need to vanquish gender-based discrimination from the shop floor to the executive suite in order to really achieve gender parity. While progress on that front is glacial, we are at least heading in the right direction. That is not the case for other major problems, like climate change and biodiversity loss.
The central argument is clear and pressing: advancing gender parity is vital for progress on all other sustainability issues, just as solving climate change will help reduce gender inequalities. Addressing multiple sustainability issues together makes each one more solvable, and only comprehensive, collective progress will keep the planet livable for future generations.
But as I said earlier, women are in the pantheon of founders and leaders in sustainable finance, unlike mainstream finance. A few years ago, when it looked like sustainable investing would become the industry standard, the opportunity set for women looked bright. We’re living in a different political reality now. But here’s the thing: in politics, a lie can live forever, and it often seems like “alternative facts” get halfway around the world before the real truth gets its shoes on. In finance, however, the facts actually shape performance. If more sustainable companies and investment strategies do better in the long term—as they have proven for at least the last couple of decades—it’s harder to sustain the idea that sustainable investing is costing investors real money. Financial markets can and do fall victim to fads and manias, and the current fashion is to call sustainable investing second-rate. But as long as performance is comparable or better, that fashion will pass into the mist of history, like the Dutch Tulip Mania or the dotcom boom.
Article by Julie Gorte, Ph.D., an expert in sustainable investment, now retired.
Before retiring, she served as Senior Vice President for Sustainable Investing at Impax Asset Management LLC. She contributed to ESG-related research on prospective and current investments as well as the firm’s shareholder engagement and public policy advocacy.
Prior to joining Impax, Julie served as Vice President and Chief Social Investment Strategist at Calvert. Her experience before joining the investment world in 1999 included a variety of roles. Julie spent nearly 14 years as Senior Associate and Project Director at the Congressional Office of Technology Assessment. Julie serves on the boards of the Endangered Species Coalition, E4theFuture, and Clean Production Action, and has served on several other nonprofit boards, including Ceres. Julie received a Ph.D. and a Master of Science in resource economics from Michigan State University and a Bachelor of Science in forest management from Northern Arizona University.
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