The Criterion Institute has released standards of practice to address “quality of implementation” in gender lens investing.
In a report Outlining the standards, the financial think tank said that while progress is already being made to support investors in formulating and tracking impact metrics, more is needed to identify new ways to improve investors’ ability to ensure that they make the right changes that are needed. to achieve their social change outcomes.
The standards include an analysis of power dynamics and emphasize the importance of including them in investment decisions.
“Understanding the power dynamics at play is critical to evolving implementation on the ground, as current financial practices are often embedded in power dynamics – many of which are unjust,” the report said.
“These practices pose an obstacle to the social change that is being sought, but because they are usually unexamined, their effects are not visible. Many investment firms consider gender equality as a goal, but do not consider power dynamics in their practices.”
The standards consist of principles (which should be applied when considering each standard), leverage points (which segment each part of the investment process under analysis), approaches and then the standards themselves.
These include, for example, investment analysts incorporating patterns of gender inequality to strengthen their evaluation of operational risks in investment opportunities. Or that investment firms challenge existing cost accounting standards and assumptions by considering social inequality as a key cost driver in managing the complexity of transactions.
Each standard also includes an analysis of implementation, including the costs of the organizational changes required, an analysis of the strength required for a standard setter to implement the change (including carrots and sticks), and indicators of change aligned with the principles to assess whether implementation is successful.
The standards are designed to provide standard setters, including investors, with the tools they need to assess the ability of fund managers to achieve the objectives of their investments. The Criterion Institute said it developed the standards as a direct response to investor requests for gender lenses.
“We’ve heard investors and standard setters say that they are willing to ask for different practices, but they also want something that legitimizes what they are asking for within the capabilities of the financial world. This common request is what moves beyond individual practices to a field-level standard,” the report said.
The proposed approach to standards of practice has been built over the years in collaboration with fund managers, activist organizations and governments, drawing on the work of leaders from the gender lens investing world.