Responsible Investing (RI) has increasingly become a rule for today’s socially conscience capitalists that want to implement their value set into portfolio construction. Women, who now account for 51% of investable wealth, and millennials, are proving to traditional investment houses that their money has power. These investors deem it necessary to consider the ethical impact of businesses and companies in their evaluation of investment opportunities. Biotech Metropolitan Women should understand where we fit into this movement and identity our allies in funding to support the inception and growth of our biotech enterprises.
I recently attended a seminar in Connecticut with a network of finance professionals focused on the timely topic of Responsible Investing. This keen group of women and men explored the role of women as leaders and drivers of positive change in the performance of operations in both emerging and developed markets. It was a great opportunity to learn the perspectives of this new generation of investors and how the panel’s respective organizations were successfully integrating Responsible Investing concepts to address the needs of these investors. This platform provided for an exchange of knowledge on initiatives for global standards in sustainable finance and, most importantly, insights on how responsible investing is influencing the way companies are conducting business in this market.
Before this seminar, I understood Responsible Investing as a general concept which challenges the sentiment that social and environmental agendas are only supported by philanthropic efforts and investments in the market are exclusively aimed at financial returns. The industry further defines RI as an investment strategy that implements ethical objectives to bring about social/environmental change and sustainability with expectation of profits.
Subsets of RI include Impact Investing, Environmental, Social and Governance (ESG) Investing, and Socially Responsible Investing (SRI). While these investment disciplines employee different focus and strategies, universally, the goal of these types of approaches are to yield an effective, measurable social and environmental impact in tandem with generating a financial return.
Let’s outline them separately:
The objective of ESG is to actively invest in companies or sectors that both measure and manage environmental, social and governance related factors in their business. The strategy is the integration of ESG factors used to enhance analysis by identifying potential opportunities and risks beyond technical evaluations.
Examples of ESG:
– Environmental – Energy consumption, Pollution, Climate change, Waste production, Natural resource preservation, Biodiversity
– Social – Labor standards, Community engagement, Employee health & safety, Stakeholder/employee relations, Diversity
– Governance – Quality of management, Conflicts of interests, Executive compensation, Transparency & disclosure, Board diversity
The objective in Social Responsible Investing (SRI) is to actively “exclude” companies by removing or choosing investments based on specific ethical guidelines. The strategy is to identify specific risks and practice negative screening of public stocks in efforts to generate returns without violating one’s social conscience.
Examples of negative SRI screens:
– Terrorism affiliations
– Labor violations
– Weapons production and defense tools
– Alcohol and tobacco production
The objective of Impact (also referred to as Thematic) Investing is to focus on helping a business or organization execute specific programs or projects that have a positive social impact or positive impact on the environment. The strategy is the to identify investments in target sectors and establish an intersection with the market.
– Investing in a nonprofit dedicated to research in clean energy
– Investing in an organization to prepare women to succeed in nontraditional industries.
What does this mean for Biotech Metropolitan Women?
Responsible Investment strategies offer viable and diverse opportunities which yield financial performance returns and sustainability. As mentioned, women and millennials are showing to be the face of sustainable, responsible and impact investors. When we look within our comparatively new biotech community, women and millennials are reaching towards satisfying the governance requirements that ESG investors, in particular, are attracted to. One of the missions of Biotech Metropolitan Women is to broaden our funding network of individuals, family office, government institutions, universities, hospitals and venture capital firms that prioritize board diversity and quality of management. Women biotech CEOs and their women board members have the power to outperform financially and make social impacts for our Responsible Investing allies.