Gender-Smart Investing Journeys: Marisa Drew, Credit Suisse

Marisa Drew is the Chief Sustainability Officer & Global Head Sustainability Strategy, Advisory and Finance at Credit Suisse. She draws on a 30-year career in investment banking to reflect on key learnings around organisational bias, and the role of ESG in scaling institutional capital.

How do you define gender-smart investing? 

I consider gender-smart investing as fitting under the overall umbrella of ‘sustainable investing’, however I would make the distinction between ESG investments and those that create a direct impact on or for women. ESG investing practices (ie taking environmental, social and governance factors into consideration) is a tool or lens that leads to you think about gender as part of any sustainable investing strategy. That said, running a simple ESG screen like checking on board diversity as a marker of good governance is gender-smart and helpful but by its nature is more passive and doesn’t necessarily deliver tangible gender outcomes.  If you want to be more intentional with your capital, we move into the realm of ‘impact investing’. As it relates to gender, it would be when you are deliberately trying to drive positive change targeting SDG 5, and holding yourself accountable for delivering measurable outcomes that benefit or support women in addition to generating financial returns. An impact investment in a venture stage woman-owned business or in a business that aims to foster women’s economic empowerment is a different form of gender-smart investing than the 'let me run an ESG screen for good hygiene'.  

Both types of strategies are valid and needed and attract different types of investors. Because impact investments are usually illiquid, they are only appropriate for smaller subset of more seasoned investors. On the other hand, what is required to attract large scaled institutional pools of capital are typically liquid tradable gender-screened investment opportunities falling into the ESG arena.

Can you give us a sense of some of the early conversations you had with stakeholders?

I have always tried to underpin my discussions with data. For instance, it is a fact that women are increasing their share of global wealth holdings and increasingly making investment decisions. We also have ever growing evidence that investing in women generates demonstrable risk-adjusted outperformance and finally, more and more of our clients will not give mandates to firms who do not have a diverse coverage team. Therefore I have approached the ‘business case’ for employing a gender lens from many perspectives: from the eyes of the investments themselves and how a gender lens can deliver returns and mitigate risk, to recognising women as a specific investor segment with unique needs that have been historically underserved, to the notion that a diverse employee base can help us win business because women are more likely to identify with someone of the same gender. Furthermore, in sustainability, which is the fastest growing sector of financial services, women are disproportionately interested in values-aligned, sustainable and impact investments.

Tell us about your gender strategy and how it started.

For investment markets to function and ultimately scale, you need to create proof points, and demonstrate that you can generate returns. In 2014, our Credit Suisse research department produced a ground breaking study which analysed 3000 companies' boards to see if there was a correlation between performance and gender diversity. They found that when you hit 30% or more women on boards, you saw a statistically significant differential in share price performance, return on assets, return on equity. That was really compelling and started a wave of people referring to that (the CS Gender 3000 Report) to make their business case for gender diversity.

It's a wonderful analog to the ESG movement, which is finally scaling fast, but was until fairly recently on the fringes of the financial markets. What has really helped the cause is that during the pandemic, the vast majority of ESG or sustainable funds have outperformed their traditional benchmarks both in the depth of the crisis and through the market’s recovery. As a result, we have experienced this incredible wave of capital flowing into sustainable strategies of all types. While today, gender-focused strategies are still small in comparison to other sustainable thematics, more and more funds are being created which will create more case examples to demonstrate performance which will create that confidence for the attraction of more capital.

Across the bank, gender features across our sustainable investment products and services. As discussed above, gender forms a baseline in ESG oriented funds and single securities. We look at topics such as whether a company has a diverse management suite, equal pay policies, etc. Then in the realm of impact investing, we have impact private equity funds on our platform which have made investments in companies where women are key beneficiaries (in nutritional supplements or in women led SMEs in developing countries). We are also trying to create novel investment structures that are either intentionally targeting SDG5 or incorporated therein. For example, we have in the past and are continuing to create structured products that would be tied to a gender index and we have recently explored strategies with a few clients to create everything from gender specific private equity funds to a gender SPAC (a public acquisition vehicle).

We also want to experiment with blended finance on seemingly intractable issues where the lack of commercial returns or higher risk does not lend itself to private capital participants. One such project is a partnership with Merck for Mothers (www.merckformothers.com) that is focused on supporting maternal health in developing markets. Blended finance is where we bring historically unnatural collaborators from civil society, corporates, development funding organisations and the private sector together into the same project or capital structure and structuring different layers that appeal to their different skill sets and return expectations. Each of those layers can enhance the other and that is what's fascinating because in the past each largely operated in silos. And now the view is that there's a multiplier effect that comes through these collaborations.

What have been some major moments of learning or insight?

In terms of my history, it was uncovering organisational bias that we didn't know existed by really asking the deep questions and not accepting the status quo. An example from many years ago surfaced when I was running a large part of our investment banking business and I was looking into development and retention inflection points for our female population. So much career foundation building for young professionals in banking depends on work handed out by group staffers. What I saw happening because of the gender imbalance that existed back then and the laws of percentages, the staffers were almost always men. And they didn't even know they were doing it, but they would often dole out the technical modelling assignments to the men, and give the ‘softer’ marketing pitch book tasks to the women. And then once the male analyst had done the technical modelling assignment, an MD would say to the staffer, "I need the best modeller right now because my client needs something yesterday." What's the natural thing the staffer would do? Give it to the guy who did the last model and this would reinforce the notion in the hallways that this analyst is the ‘technical one’. And similarly because the female junior did the last board book, she would become the one good at the marketing materials. All of a sudden you start to see two different career paths emerge. By doing the research and probing for answers, we uncovered the structural issue and were able to correct for it.

Do you think that taking that bias out the organisation has a knock-on effect on where capital ends up going?

Let’s take venture capital as an example where women receive less than 5% of VC money globally and there is a perception that women-owned businesses carry a higher risk. By its nature venture capital is very risky. As a venture investor myself, I know you need to have at least 20 to 30 investments in your mix, because 75% of them are going to fail. A handful will knock it out of the park and those winners will allow you to make the appropriate overall risk-adjusted return for your portfolio.  Because there are fewer women-owned businesses seeking venture money to start with and your addressable market of women-owned businesses is therefore smaller, a failure of female-owned business is going to disproportionately skew the data for the logic of investing in women. So investors need to ask, ‘Is it really true’ or is the way the data is viewed inherently biased? This example is a version of organisational bias that can lead to market bias or perception bias and have a negative knock-on effect for the availability of capital.

What's a standout investment that illustrates that gender impact?

We just raised the last fund for Quadria Capital, a healthcare focused impact private equity firm operating in frontier markets in Southeast Asia and India. Their fund is not directly a gender thematic one, but as part of their impact journey, they've started to look much more deeply at gender topics. I love this story because it so nicely illustrates how a gender lens can enhance returns and mitigate operational risk. In one of their hospitals in rural India, they took a chance on hiring a female security guard whose husband had died and left her in a dire strait as a single mother with no source of income. Prior to her hire, they had experienced issues with agitated patients becoming unruly and disrupting their operations and the male security guards were not effective diffusing the issue and in fact on some cases, they seemed to exacerbate it. When she came on board, she immediately brought down the agitation levels and created calm with her bedside manner and in the way that she interacted with the patients. It was a real ‘a-ha’ moment for the management team, and now they are very deliberately seeking out ways to employ women within their hospital chains – these are women who would have never otherwise had an opportunity in that part of the world to be on the economic ladder.

Do you feel like you've built a cohort of champions across Credit Suisse that have helped move this agenda forward? Or has this been more like individual leadership? 

As my group has grown, and we've had success, and raised awareness, we now have sustainability champions sprinkled throughout the bank. They are taking the agenda forward across the range of sustainability topics and it has created its own momentum and dynamic enhanced by full support and endorsement from senior leadership – it has become a mutually reinforcing phenomenon. And what is gratifying is that creativity is surfacing across the bank to get involved in the gender equation -- even parties in the heavily male dominated arena of structured products recently came to my team and said, “You know the really innovative structured note we did with the World Bank on targeting ocean health, why can’t we use that technology to replicate the structure but this time targeting gender?”….Music to my ears!