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From Scrooge to Gordon Gekko and the Wolf of Wall Street, it is an accepted cultural trope that those who work with money are untrustworthy, callous, grasping – and mostly male. “A decade ago, I was being sent to London day schools to talk to the girls about a career in banking,” recalls Eva Lindholm, the head of UBS’ Wealth Management business in the UK and Jersey. “I wondered why they were so uninterested, until I did a straw poll about the words they associated with banking. When I said “male”, all the hands went up, and at least half agreed with “corrupt”. But when I said “ethical”, nobody put their hand up. They had already formed the view that it was male, and bad.”
There are encouraging signs, however, that a female-driven trend is revolutionising this hitherto dismal image. Social impact investing (SII) aims to unite God and Mammon, by putting money behind companies that, for instance, have an environmental focus or a gender-balanced leadership. The idea is simultaneously to deliver attractive financial returns and positive results for society – as well as for the investor’s own mental wellbeing.
“Impact investing is a really good approach to wealth in terms of happiness,” says Diana Chambers, a ‘family wealth mentor’ whom I meet over coffee at the Conduit, a London private members’ club aimed at social changemakers. “There are two correlates of happiness: having strong social networks, and a sense of meaning and purpose. Impact investing will bring you both – because if you care about and put money behind a particular cause, you will meet other people who feel as strongly about it as you do. Impact investing can give you a sense of community that an exchange-traded fund is never going to do.”
For many years, such a win-win strategy was assumed to be impossible. According to the venture capitalist Nancy Pfund: “We got a lot of doors slammed in our face. People thought that by introducing something other than an economic driver into your investment decisions you would lose money.” Her own early investments in ‘cleantech’ companies such as Tesla have been eloquent testimony to the opposite.
“It started off as an avoidance strategy; a rudimentary way of saying, don’t give me any “sin stocks” – no gambling, no tobacco,” says Lindholm. ‘But there’s science behind the fact that companies with better scores on certain indices, like equality, treatment of their employees or carbon footprint, do tend to perform better over the long run.”
“Sustainability is a big part of financial performance,” agrees Helena Morrissey, who runs Legal & General’s personal-investing business. “If you had shares in a car manufacturer that wasn’t thinking about electric cars, you probably wouldn’t get a great return.” One has only to consider recent high-profile PR debacles and the subsequent consumer boycotts experienced by numerous brands to be aware that companies that are perceived by the public to be behaving irresponsibly can pay a heavy price in terms of lost revenue. “Eventually, all the mainstream money will be invested on this basis because it will be very risky to do otherwise,” says Morrissey. The next decade will see a huge transfer of wealth into the hands of women, who have consistently been shown to have more positive attitudes towards social investing than their male counterparts.
A survey carried out this year by Kantar for the newly formed WealthiHer Network found that some 67 per cent of female respondents said making a positive impact was of high importance when considering where to invest. “Women have for a long time looked at wealth differently – even in very traditional societies, you tend to see the female family members engaged in the social, philanthropy and community directions,” agrees Lindholm. “Now you add the millennials into the mix, who have a completely different moral compass. They care about all sorts of things, which they integrate into how they think about money. You’re starting to see our industry respond to that. Once the wall of money starts moving behind a trend, it becomes the established way of doing things.”
Last year, UBS launched the first 100 per cent sustainable cross-asset portfolio for private clients, which now has £3.8 billion under management. L&G’s Future World Gender in Leadership fund (the ‘Girl Fund’), which Morrissey spearheaded last year, only invests in companies with higher-than-average gender diversity in their top ranks. “We measure the number of women on boards, women in the workforce, women in leadership positions, and we are also looking to introduce the gender pay gap as a measure,” says Morrissey, who invested her own ISA into the Girl Fund this year. “I really want to put my money where my mouth is,” she says. ‘When we tested the results, it produced very similar returns to a normal index, but at a lower risk – which shouldn’t come as a surprise.”
Colleen Ebbitt is a senior policy advisor in the government’s Inclusive Economy Unit and has led its work on ‘innovative finance’ – blending public and commercial investment funds to help solve social issues, overseeing such projects as Big Society Capital, established by the Cabinet Office in 2012 with £600 million of funds taken from dormant bank accounts to support social-investment projects. “Now we have over 100,000 social businesses in the UK, contributing £70 billion to our GDP. It’s very exciting,” she says. “I was at JP Morgan for almost a decade, but working on SII policy, and raising awareness of the major, pressing social issues is really satisfying. There are a lot of recovering bankers working in this area… Gordon Gekko is dead.”