Will 2019 be Japan’s year to embrace Gender Lens Investing?

The Sasakawa Peace Foundation (SPF) participated as a special partner in the "Impact Investing Forum 2019" held in Tokyo on September 6, 2019. At the Forum, SPF’s Gender Investment and Innovation Department cooperated in hosting a side session on “Gender Lens Investing.” Inviting speakers from the fields of public equity investment, venture capital, and development finance, the session saw discussion on issues including consideration of gender in the analysis and decision-making process for investing, and what kind of actions and processes will be necessary to ensure the establishment of gender lens investing in Japan.

Ms. Ayaka Matsuno, Director of SPF’s Gender Investment and Innovation Department, kicked off the session by giving an overview on gender lens investing (also referred to as gender smart investing). In the public market, gender lens investing has seen increases year by year, reaching 24 billion USD compared to 100 million USD over the past four years. From the perspective of venture capital, 29 new funds were established in 2018, with 87 funds currently collecting 2.2 billion USD, an amount that is further expected to increase in the future. She also mentioned that there is a tailwind toward the mainstreaming of gender lens investing in Japan, with the keywords “gender” and “innovative financing mechanisms” being mentioned in the 2018 and 2019 G20 Summit leaders’ declarations, respectively.

With this backdrop, Ms. Matsuno elaborated on SPF’s efforts to promote women's economic empowerment and gender equality, utilizing investment as a tool to achieve social impact while generating sustainable financial return. First, she gave an overview of the “Asia Women Impact Fund (AWIF)” established in 2017, which aims to invest up to 10 billion Japanese yen from SPF’s assets. Ms. Matsuno also referred to the second phase in this investment, announcing that up to 30 million USD will be invested in the “Japan ASEAN Women Empowerment Fund (JAWEF)” as part of AWIF’s activities. With the “financial gap” an issue often raised as a challenge in achieving the United Nations Sustainable Development Goals (SDGs), Ms. Matsuno stated that SPF is committed to closing this gap through its efforts. Furthermore, she referred to SPF’s various efforts on gender lens investing and women's empowerment, including the publication of a report on unconscious gender bias, and the joint presentation of the first report publicizing the top 100 companies regarding gender equality in Japan, Hong Kong and Singapore, created in collaboration with Equileap, a non-profit organization in the Netherlands that acquires and assesses data provided by public companies in an effort to accelerate progress towards gender equality in the workplace. In addition, she highlighted SPF’s participation in creating a communiqué at W20, one of the private-sector engagement groups that issued recommendations toward the G20 Osaka Summit, in March 2019.
 
Ms. Natasha Shih, Senior Investment Officer at SPF’s Gender Investment and Innovation Department, moderated the panel discussion that followed, discussing gender lens investment with three panelists from various viewpoints.
 
Ms. Minako Takaba, Executive Director of MSCI ESG Research, gave an overview of the “MSCI Japan Empowering Women Index (WIN),” which was adopted as one of the ESG investment indices for Japanese equities at the Government Pension Investment Fund (GPIF). First, she responded to the view that companies are likely to be exposed to long-term human capital risks if gender diversity is not taken into consideration. Ms. Takaba said that WIN focuses on the core elements of “Attraction,” “Retention,” and “Promotion” to produce gender diversity scores, utilizing data and information disclosed by companies following the enactment of the Act on Promotion of Women’s Participation and Advancement in the Workplace in 2016. According to the comparison between 2017 and 2018 data from WIN, there was a slight increase in the percentage of gender balance among new hires and total employees. However, Ms. Takaba mentioned, many issues remain unclear regarding the relationship between number of female managers and board members and stock performance, and that long-term efforts will be necessary to ensure further growth.
 
Regarding the background of the creation of WIN, Ms. Takaba pointed out that enactment of the Act on Promotion of Women’s Participation and Advancement in the Workplace, and the subsequent disclosure of information from companies in Japan, had a major impact. “For the increase of similar initiatives in the future, it will also be necessary to foster understanding on the side of investors,” she said. As the ratio of WIN inclusion varies depending on the participation of women and corporate performance of each brand, Ms. Takaba mentioned that long-term efforts will be necessary for companies committed to both attaining and retaining high rates of gender diversity in the workplace, as an effort to maintain competitive in the long-term.

Ms. Eriko Suzuki, General Partner at Fresco Capital, gave comments from the perspective of venture capital (VC) funds. She pointed out that there are three factors that contribute significantly to the fact that female entrepreneurs receive considerably less private capital compared their male counterparts, accounting for only 2% of total VC investment. For the first factor, she raised the culture of the technology industry itself. As it is still a male-dominated society, there are issues of prejudice and unconscious biases, along with other social and cultural issues. The second factor is the need to increase the number of female entrepreneurs, and that female entrepreneurs face various hurdles when raising funds, such as inappropriate conduct including sexual harassment. The third factor, she pointed out, is the issue of gender disparity among investors. With women representing only about 4% of investors and investment decision-makers, she said that prejudices and unconscious biases contribute to the difficulty that female entrepreneurs face when raising funds. As an example, she mentioned that for companies specializing in services for women’s needs, there is a tendency to avoid investing for reasons stemming from the fact that investors simply do not understand the field, making it difficult for female entrepreneurs to procure VC funds.
 
Continuing the discussion, Ms. Suzuki raised the point that technology services specializing in women's health needs, referred to as “Femtech,” have been attracting attention in recent years. With Femtech representing a growing market that is seeing a rapid increase in the amount of global funding, she commented that resolving issues specific to women, which accounts for half of the world population, presents a treasure trove of business opportunities. In addition, Ms. Suzuki mentioned that trends regarding gender disparities are gradually changing, with the “MeToo” movement in 2017 fueling the idea that negative factors including behavior such as sexual harassment and sexual violence will not go unheard of, especially in areas such as Europe and North America. Following up on this, she commented that top tier investors are actively investing in and supporting women, and contributing to creating an environment that makes it easier to support female entrepreneurs as a whole. Lastly, Ms. Suzuki raised that civil society organizations have been established overseas providing opportunities for female entrepreneurs and female investors to interact with each other, and expressed hope that going forward, similar organizations and communities will increase in Japan.

Mr. James Soukamneuth, Impact Investing Director at “Investing in Women,” an initiative carried out by the Department of Foreign Affairs and Trade of the Australian Government, outlined the background behind developing the initiative as well as the importance of investing in women. He said that the Australian Government has been actively providing development assistance abroad, with promotion of gender equality as one of its main themes. Mentioning that more women than men are concentrated in the informal economy, Mr. Soukamneuth called for implementing specific measures so that the slogan “no one left behind” will actually be turned into concrete action. With increased movement for innovative finance especially in OECD countries, he said this also provided a natural path for the growth in interest regarding gender lens investing.
 
With regard to the process of advising companies to implement gender lens investing, Mr. Soukamneuth said that he would first have them consider their values and the kinds of messages that they would want to send out to the public. He also mentioned that the process involved encouraging these companies to invest with a gender lens not just because they feel socially responsible, but because it can also generate a financial return. Following up, Mr. Soukamneuth said that with investors beginning to pay attention to the female economy, investing in line with corporate values has also been increasing. In addition, by diversifying portfolios, he mentioned that companies could avoid the long-term risks that may occur during events such as economic slumps.
 
Lastly, in response to a question regarding advice for those looking to start in gender lens investing, the panelists gave answers such as purchasing ETFs with gender criteria and working closely with asset managers, as well as comments on the importance of collaborating with various experts in large corporations and government agencies as part of a larger ecosystem for gender lens investing. In addition, there were comments on the importance of investing in women leaders, and the need to promote gender equality in the workplace as a major preface for catalyzing this movement.
 
Lastly, the panelists answered several questions from the floor, including those on the decision-making process for investing in female entrepreneurs, as well as possible outlooks on ESG indices regarding their increase in number and potential unification in future, to wrap up the session.

*SPF also launched a report entitled "Sustainable Investing in Japan: An Agenda for Action" earlier in the day at the Forum. Created with the Investment Integration Project (TIIP), the report identifies the challenges and opportunities for sustainable investing in Japan. For more information, please see here.