I am delighted to be co-authoring this column with Ellen Martin, Circulate Capital’s Chief Impact Officer.
In the “real world” application of investing for impact, environmental and social outcomes are inextricably linked. It is only by understanding this fact that innovative investment asset managers can deploy capital to drive multiple positive outcomes at the same time. One such area is the intersection of innovations that address climate change and gender equality.
For anyone that follows this column, you’ll know that since our inception we have been focused on the plastic circular economy, and specifically its impact on climate change. But very much related to this is our commitment to creating positive outcomes for women through our work. Our firm recently committed to the 2X Challenge, which Ellen Martin spearheaded, with the goal of at least 30% female representation in senior positions at our portfolio companies.
We want to provide some insights into our commitment to the 2X Challenge and our work with our portfolio companies to achieve this goal in the hopes that we can catalyze others to take similar actions in whatever field you are working in.
The starting point? Recognizing that investing in women makes good financial sense.
This isn’t just about doing the right thing or the nice thing. We know that inclusive investing is smart investing. When it comes to climate change, women are innovators, leaders, entrepreneurs, workers, suppliers and customers in climate-related fields, but they remain underrepresented in key decision-making positions and as users of capital.
Yet there is an ever-growing body of evidence that identiﬁes the benefits of gender equality offers for economic development and addressing climate change. According to a McKinsey study, closing the gender labor gap could add $28 trillion, or 26%, to annual global GDP by 2025. In addition, research by BIS found that a 1 percentage point increase in the share of female managers has led to a 0.5 percent decrease in CO2 emission across 2,000 listed companies in 24 industrialized economies over a 10-year period.
Not only does having more women in decision-making positions result in better climate outcomes, but there is also a clear business case for making the waste management and recycling industry more inclusive. Many of the solutions our portfolio companies have implemented to address gender gaps have also just been good people practices that foster stronger recruiting and retention overall. For example, one of our portfolio companies has committed to expanding the representation of women across the total workforce by institutionalizing a structured, unbiased performance management system. We shared tools and templates to help them reach that commitment. It’s also smart portfolio management, and helps these enterprises establish stronger foundations for growth, which leads to positive financial results.