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[podcast] How can investors drive performance in their investments and advance gender equality?
January 25, 2018
By Women’s World Banking
Almost every company, be it in technology, consumer goods or finance, says they want to “do well by doing good.” Impact investing has emerged in recent years as a way for players in the financial services industry to deploy capital in a way that advances a social good.
In this podcast featuring Women’s World Banking Asset Management’s Chief Investment Officer CJ Juhasz, we discuss our approach to impact investing: a strategy called gender lens investing.
CJ Juhasz: People are starting to recognize either, you know, we should have gender diversity because it’s going to pay off or there’s also a body of investors who are saying we should have gender diversity because it’s the right thing to do.
Host: Welcome to the inaugural podcast from Women’s World Banking. I’m Gayle Gatchalian, Communications Specialist at Women’s World Banking and your host for today’s conversion.
Women’s World Banking is the global leader in women’s financial inclusion. We work with financial service providers in the emerging markets to bring low-income women access to financial services they’ve never had access to before.
And you know what? We’re feeling pretty good about our work in 2018. Women are on the agenda more and more locally and internationally, from ending sexual harassment in the workplace, supporting women’s entrepreneurship in all levels of the economy. It’s even one of the Sustainable Development Goals.
But you know you’ve made it when an international development issue makes it to this particular, rather unlikely space. What space am I talking about? The world of finance and investing.
The concept of using investment capital to drive toward a social good isn’t new—impact investing has been around for more than a decade. What is new is a strategy that does good in the world (in this case, advancing gender equality) and aims to outperform the market.
That strategy? Investing in women, or as it’s known in the industry, gender lens investing… a strategy that has nearly a billion under management and growing. And I happen to know someone who is doing just that.
CJ Juhasz is the Chief Investment Officer of Women’s World Banking Asset Management, a subsidiary of Women’s World Banking. She manages the Capital Partners Fund, the only private equity fund that exclusively invests in women-focused inclusive finance institutions. But before impact investing, CJ was somewhere very different.
Juhasz: I served in the military in the U.S. military for three years after graduating. And then kind of looking for my next thing. I went to business school and from business school, I kind of trekked into Wall Street.
Juhasz: I was on Wall Street when you know it was a little bit about making bad subprime mortgages and not really doing a whole lot of public service.
The banking industry wasn’t something that you would get super proud to be a part of. But when you look at microfinance and you realize that the true point of banking is to finance people’s dreams to some extent.
And in fact, you know at the height of the mortgage crisis when my excitement about commercial banking was at an all-time low, my excitement about micro finance was at an all-time high. And that’s when I found the opportunity to come over to Women’s World Banking.
So off you went to Women’s World Banking in 2007, whose work in those years focused on providing technical assistance in research and product development to microfinance institutions serving low-income women, as well as a burgeoning practice in leadership training and strengthening gender diversity in institutions.
How does an organization that does that make the leap from technical expert and advisor to fund manager?
Juhasz: These impact funds, investing funds in microfinance, started to really become an important part of the industry and Women’s World Banking. In fact, I was part of the question of whether Women’s World Banking should raise a fund. And you know, we were too naive to really ask ourselves whether we could raise a fund. We were trying to figure out if we should raise a fund.
We looked at it from two sides of the coin. One, the partners that we worked with and in the microfinance industry were actually coming to us and asking if we couldn’t be there investor partners as they were looking for equity investors.
And, of course, the answer was no we’re an NGO. We don’t have any money. But, we also wanted to answer the question of ourselves, you know, should we? Does the world need another private equity fund?
What we found is the world didn’t have a private equity fund in microfinance that was a gender lens investor or that cared about women. So, we were gender lens investors before that was a thing.
Well what IS Gender Lens investing?
Juhasz: There’s usually two windows into it. Either you’re looking at the company and is the company that you’re investing in gender diverse? Is it employing a lot of women? Does it have women on the board or does it have women in senior management?
And that’s what a lot of public gender lens investing or gender lens investing into public securities is doing. Because it’s quite easy to say look I’m investing in this company and, I’m only going to invest in those companies that have 30 percent women on the board. I’m going to vote my shares to ensure that I vote down any slate of board that has no women on it. Things like that you can do with a public company.
Or you can be looking at a company that’s got a product that is specifically serving women and making women’s lives better. Like Spanx.
And what we’re trying to do is both.
We’re looking at companies that are gender-diverse in terms of their staff and leadership teams. We’re also looking at companies that are particularly trying to reach women with their products and services. As a private investor, sometimes as somebody who sits on the board, I can take that a lot further.
I am not just voting my shares or screening companies. I can actually take an active role with management and require certain things to ensure that women stay part of the picture.
Let’s go back to 2007 for a moment. Women’s World Banking decides to raise a fund and now has to fundraise, meaning knocking on doors, pitching this big idea that institutions that serve women and have gender diverse leadership are a bet worth making. How did that go?
Juhasz: You know looking back, like I said, it was pretty naive to think that we could do it as well. In fact, my West Point friend who turned into a financier himself said to me over breakfast one time, “Let’s see, CJ, bunch of women, no track record, raising a private equity fund. Gee, where do I sign up?”
So (laughs), but you know what sometimes you know necessity being the mother of invention and we weren’t entirely without a track record. If you look at our stock picking ability as a not for profit, choosing the institutions that we worked with globally, was actually pretty compelling.
Women’s World Banking has this portfolio of companies, not that they were invested in, but that they’re partnering with, that were like the cream of the crop. And so a prospective investor looked at that and said “well, wait a minute, Women’s World Banking does know the Industry, and can pick the winners.”
But you know it did take it did take a long time. It took about two years.
It didn’t help that smack in the middle of the fundraising period was a little something called the 2008 subprime mortgage crisis.
But I’m curious, was part of the challenge in fundraising that the woman angle only resonated with women investors?
Juhasz: The interesting thing about the first round that we finally got together, and that we were kind of scratching our heads a little bit, was like every one of the investment officers that said “yes” to us was a man.
There wasn’t one woman really looking at our story and investing in us.
And I remember we closed shortly before International Women’s Day and Women’s World Banking held a breakfast and I got up and talked about the fund. And our CEO, Mary Ellen Iskenderian, and I said “The one tragic thing about the fund is that not one woman has invested in this fund. So ladies, are we really going to let the men walk away with all the returns that this fund is going to generate?”
And I know that none of our subsequent investors were actually in that room hearing it, but I guess we sent that message out to the universe. And in the subsequent rounds, we brought in nine high-net worth women, and two couples where the woman was actually making the investment decision.
And also some brought in another DFI (development finance institution), and that was a woman making the decisions. So the second round really was ‘women investing in women’. And so now, we’re really delighted that we ended up with 27 investors total, which is actually a lot.
Two years and hundreds of doors later, you have a $50 million private equity fund launched in 2012 that, as of last count, is invested in 7 institutions in 6 countries across the emerging markets.
Now I’m curious, what do you think is the differentiator in your approach to impact? How does Women’s World Banking Asset Management ensure your impact on the women’s market and institutional diversity that you promise your Limited Partners?
Juhasz: So when we sign a shareholders’ agreement, you know we asked them to commit upfront to maintaining gender diversity in the client base and in their organization.
And that’s always a fun exercise because all the other investors have to sign up to it. And when you negotiate these documents, you want to be really cautious not to negotiate anything that you might not be able to deliver on.
The other thing that we do is collect gender disaggregated data. And we’ve been really pleased by how much detailed gender disaggregated data we can collect.
And you know, we have very sophisticated core banking systems now, and data right. And it becomes a very difficult argument to make in this day and age that we can’t collect that data.
We’ve found this year across the board: every one of our portfolio companies has a higher staff retention rate among its women than among its men.
And particularly in the developing markets people will always say, “look CJ, I know we’re trying to recruit more women, but you don’t know how difficult it is in these markets because the women they’re always leaving. You know they have family pressure they get married they have kids.
And then I can say, “no they’re not” or “they’re not leaving as fast as your men are leaving.” So, it really is, collecting that data is really powerful. And also, everybody manages to what’s being measured. So if somebody is measuring promotion rates, retention rates, recruitment rates, somebody is going to manage to that. It’s not rocket science, it’s not that hard to do.
But an investor, particularly one who’s sitting on the board, I can ask for a report every quarter. And I can ask questions like, “you know we said we were going to do this, why are we not doing it?”
But if you don’t do it, the gender mission is going to get lost.
One thing you haven’t mentioned is the deep tie of Women’s World Banking Asset Management to its parent NGO, Women’s World Banking.
I have to imagine that its expertise in designing financial products for low-income women plays some role in improving the value of your investments, no?
Juhasz: Our first investment, which today is our most successful because we exited it, and we exited it to the most oversubscribed IPO in Indian market history. We did well at that transaction.
But it was really interesting to watch our interventions, and how that sort of tracked the pricing of subsequent rounds of investment. We came in and we were really working with them to figure out how could they reach women. Because often if you’re doing individual loans instead of group loans you’re starting to reach men.
By working with them in how to reach more women, we basically helped them develop a more convenient product, one that the whole process was smoother, it was more doorstop, and they really started to get some traction on their individual lending portfolio, which differentiated them again from their competitors.
We’re more than halfway through the fund’s lifespan and I know you and your team have been busy working with your investees, in particular, addressing the gender diversity issues you’re able to uncover through your dogged collection of gender disaggregated data. How are you feeling about the fund these days?
Juhasz: We’re at a watershed moment where we’re at the end of the investment period. We had evaluators a third party evaluator come in and check how we did. I’m happy to say it was good.
But they also interviewed a lot of our LPs, and what came out very strongly is that those LPs really were looking for that gender. For us to deliver on the gender promise when they invested with us. That was the thing. It wasn’t like microfinance, obviously was, but you know the thing that really made them decide to invest in us versus another fund or not to invest in us was this focus on gender.
Do you think we’ve reached a tipping point for gender in investing more broadly?
Juhasz: So there’s been a lot of studies, people are starting to recognize either you know we should have gender diversity because it’s going to pay off or there’s also a body of investors who are saying we should have gender diversity because it’s the right thing to do.
And the other way to look at it is, if you don’t have gender diversity, you are missing out on 50 percent of your talent pool. So could you really be finding the best, most talented people if you’re only looking at half the available market?
There is an acceptance that investing more in women is a good thing to do , whether because it’s the right thing to do or it’s the profitable thing to do. And there has been some momentum generated around this.
And I think we have to give kudos to the people who have been working on this for a long time. There’s the Criterion Institute, there’s Catalyst, Suzanne Biegel and Jackie Vanderbrug, had kind of coined the term “Gender Lens’s Investing”.
I don’t downplay Women’s World Banking’s own role in continuing to point out that it is the gender diversity in microfinance that has made it so sustainable.
And also the Sustainable Development Goals which is coming at it from the perspective of the development community. A lot of governments have signed up on the Sustainable Development Goals. One of them, SDG5, is, we have to work towards gender equality. A recognition that we have got to do this thing right.
If you’re asking for the gender disaggregated data, we can also get learnings from that and we can learn what is the best approaches to being more gender parity and we can share that.
Because really not you know we’re not doing this just for ourselves. We can’t change the world with our fund and you know the 10 to 15 institutions that we’re working with. But if we put those learnings out in the public realm, and people start realizing ‘this is valuable, I want to do this too’. Now we can really start to have an impact you know on a global level.
Gatchalian: Thank you CJ, that was an absolute pleasure. Like CJ said, we can’t change the world with just our one fund. But we’ll stand a chance if more and more investors take up this call.
Women’s World Banking’s impact investing arm is just one of the three waya our organization is working to accelerate women’s financial inclusion around the world.
For more on Capital Partners or our work in developing solutions to serve low-income women and building strong, gender-diverse institutions that serve this market, visit womensworldbanking.org. You can follow us on Twittter, @womensworldbnkg or Facebook at Women’s World Banking.
This has been Gayle Gatchalian. Thanks for listening.