Data, demand, and engagement: An interview with Pathstone’s Katherine Pease
Katherine Pease is Managing Director at Pathstone, an investment advisory firm working with family offices and institutions across the US. We spoke to her about the challenges in unlocking larger pools of gender-smart capital, what clients are paying attention to, and why it’s critical to get better at communicating gender’s relevance across investment portfolios and thematics.
What are the biggest challenges around deploying gender-smart capital?
The first challenge is a lack of alignment in the industry around what gender lens investing means, which leads to a lack of quality data. The biggest lever that we, as investment advisors, have to pull in terms of actually allocating capital is through working with asset managers. We find that there is inconsistency in how they think about and talk about all the dimensions of JEDI [justice, equity, diversity and inclusion], but particularly around gender. So when we ask for information from asset managers, they're not always consistent in terms of what they're giving us. Moreover, there is a spectrum of gender-smart solutions across asset classes, including diverse management teams; allocating capital to products and services that benefit women and girls; strategies that integrate an intersectional analysis where gender is linked to racial justice and other forms of equity; and solutions that do all of the above. I think this variation in understanding of what is meant when we ask for a gender-smart analysis by managers is a big issue and the lack of quality data relates to this issue.
Do you have an idea around what will help solve the data problem?
It's a little bit of chicken and egg. Part of the reason we don't have better data is because people aren't committing enough energy to it. There’s also the problem that corporations generally don’t disclose useful data related to gender and DEI factors, and few asset managers are asking for it from companies. Nonetheless, it is slowly getting better, which I think is in large part driven by the few asset managers and clients who demand better data. For example, institutional investors, particularly foundations and endowments, are asking their investment advisors for concrete data on DEI factors. One trend I’ve noticed is that a number of foundations are asking us not only about DEI factors among the managers we work with - they are also asking us to report on the diversity of the managers we are meeting with. I think the intention behind this is good, because it acknowledges that the industry is in a transition phase. But I also wonder if it gives some investment advisors incentive to meet with diverse and emerging managers for optics, not because they intend to hire diverse managers. This ends up wasting managers’ time, which is a particularly big problem for small teams that are trying to break through the entrenched systems.
We would certainly like to see more organised efforts to collect and report on DEI data. The McKnight Foundation is a good example. They believe deeply in the importance of having diversity at the asset manager level and have studied their own practices and those of other foundations, and importantly, they have shared their data with the field. This has been a very persuasive tool for making the case that clients and prospects care about diversity with their investments.
In addition to racial equity and gender, is there anything else that clients are paying attention to? Has their understanding of gender evolved as an investable theme?
Recently I would say there are three areas that we see the most. First, there’s an emerging focus on women's health. This is partly because health is very investable. Within the U.S. context, the overturning of Roe vs. Wade has accelerated this trend as there is a renewed focus on maternal health and medication abortions. One asset manager we work with, RH Capital, noted that in the three days after Roe vs. Wade was overturned, they had more investor interest in their reproductive health investment strategy than they had seen in the previous six months. A second theme that we are seeing more is the nexus of climate and gender. For example, some clients are interested in a reproductive health strategy as a climate solution. They are paying attention to the Drawdown numbers and they see a very clear through-line between reproductive self-determination and climate. A third theme is economic opportunity and gender. Economic opportunity goes hand-in-glove with the increased focus on racial equity. The intersection of gender, race, and economic justice is increasingly understood as critical to addressing systemic inequities.
What else do you think is needed to unlock more gender lens investing capital and JEDI capital?
“We know that gender is a lever that can be pulled on almost any issue, period. So let’s make that much better understood.”
I want us to get out of an echo chamber and I think it is difficult to do because in movements you have to identify the people who care and who lead, but now we are very much at a critical moment where allies and others must be engaged. I also think doing more work in an intersectional way with other movements really helps to build on the momentum. For example, I am on the Board of Global Greengrants Fund, and we've done a tonne of work on the intersection of gender and environment with foundations globally. This work has brought more environment-focused funders to understand the importance of gender. We have to do more of that. We have so much siloing that happens as a result of the way we work as advocates and investors. We've got to be building more bridges to folks outside of the base and we've got to get more male advocates to be a part of that work. We know that gender is a lever that can be pulled on almost any issue, period. So let's make that much better understood.
In terms of impact and success, what frameworks of measurement are you using?
“Investors who care about gender should care about more than just the diversity of a company. For example, they should understand what that company is doing to either improve or deplete natural resources. To think about gender devoid of these other factors is not a very deep way of understanding reality.”
Through our Access Impact Framework™ we've been developing an intersectional approach to looking at impact. With gender lens investors, we don't just look at board diversity for a company, we also look at climate issues and health issues. We use 11 so-called access themes - such as Access to Technology, or Access to Healthcare - that underpin the Sustainable Development Goals in order to understand the impact of a portfolio. We really think investors who care about gender should care about more than just the diversity of a company. For example, they should understand what that company is doing to either improve or deplete natural resources. To think about gender devoid of these other factors is not a very deep way of understanding reality. Put all this together with gender and you really start to think about the corporate opportunities for making real change in the world.
There's been a lot written about the S in ESG, and whether or not gender should be integrated as part of the S. What do you think about this?
Gender should absolutely be incorporated - and is fundamental to - the ‘Social’ part of ‘ESG’ already. So if you’re asking if we should spend energy to explicitly name Gender as part of the ESG framework, I would say no. Though I understand that representation is power, within an investment context, I wouldn't put a tonne of energy into trying to redefine the ESG framework, in part because it's a little bit flawed to begin with so once you start, there’s going to be a lot of tinkering to be done. At this stage, I think it is more important to build bridges and get more people involved in ESG and impact, including gender and JEDI strategies, than it is to debate the language. It’s also worth noting that the existing “G” in ESG – Governance – is fundamental to all of this. At Pathstone, we often say that the “G” is first among equals because good governance is foundational to transparency and accountability, which is imperative to making social and environmental changes in companies. Sometimes I feel like the gender-smart investing community doesn’t think enough about this critical issue beyond the diversity of board rooms.
Where do you want to be in 12 months?
I think we have to move all of these different areas forward in terms of data, client demand and corporate engagement. Internally I want us to be more deeply connected and hold ourselves to degrees of accountability around all of the DEI factors that we're looking at and to be authentically in partnership with others who are committed to this work.
What do you see as the long-view for the field of gender lens investing?
I think the shift surrounding integrating gender into a broader framework around JEDI is incredibly important and powerful. Watching this shift has been invigorating and I hope to see us take that throughout the whole gender lens investing movement in a deeper way. Also I have to take the long-view and work toward a world when everyone really understands how gender is impacted by every impact theme on the planet and vice versa. I want us all to understand that these things are deeply connected, and have practical ways of approaching solution sets.
