The movement toward greater gender equality is impacting every level of society. And investors are taking note.
THE PERSISTENT ISSUE OF GENDER INEQUALITY makes headlines on an almost daily basis. From all-male boardrooms to the lack of gender parity in secondary education, the inequalities that women face are motivating investors to seek positive change while continuing to pursue their investment goals. They’re doing so by incorporating gender factors to their overall investment approach, often called gender lens investing (GLI). GLI is a way to leverage the market to support progress towards gender equality—in the workplace, the supply chain, the consumer market, and elsewhere—by giving companies a financial and ethical incentive to hire and promote with equality in mind. And simultaneously, it’s a way to identify areas of opportunity in the search for enhanced investment returns, sustainable growth and lower risk.
Gender lens investing (GLI) is the intentional incorporation of gender-based factors into investment analysis with the intention of driving both financial performance and social benefit.
Investors and companies are responding
“We’re hearing more about gender lens investing today because there is a growing interest among consumers and investors in supporting gender equality as a fundamental human right,” says Jackie VanderBrug, Head of Sustainable and Impact Investment Strategy for the Chief Investment Office (CIO). This support is reflected in increasing calls for equal pay for women, more diversity on boards and in upper management, the production of consumer products beneficial to women, and other areas. Consider the following:
- Research company McKinsey estimates that achieving global gender parity could boost global gross domestic product (GDP) by $12–28 trillion.1
- According to research firm Deloitte, the best emerging talent wants to work for companies that value diversity and have a forward-thinking mindset.2
- Research suggests that while performance results have varied over time, companies with higher scores on board diversity and management diversity saw consistently higher future return on equities (ROEs) than counterparts with lower scores.3
Gender diversity yields many benefits
Equally important, research indicates that a company’s gender diversity can be a fairly reliable indicator—along with traditional metrics such as return on equity and debt-free cash flow—of its potential for investment outperformance relative to the broader market. A recent study suggests that outperformance may derive, for example, from better decision-making by a more diverse group of directors—including those with a greater representation of women.4 Outperformance may also be tied to greater gender diversity among senior leadership and the rest of the workforce, which may in turn be correlated with reduced turnover and higher employee engagement.
Education, Employment & Entrepreneurship
Higher education is considered a gateway to advancement in the workplace, and while there is still a long way to go to reach gender parity, especially in secondary education, in the United States women are now in the majority at all levels of higher education, attaining 5:
|of bachelor’s degrees
|of master’s degrees
|of doctoral degrees
The underrepresentation of women in business, particularly in the upper levels of management, points to a notable waste of talent. However, we have seen progress as women now make up 47% of total workforce and 52% of professional occupations. 6 As organizations do a better job of incorporating women’s skills, they stand to benefit from it on the financial bottom line.
Entrepreneurship is, by almost any measure, the backbone of the U.S. economy, and women have seen incredible progress. Over 40% of total U.S. businesses are now owned by women, with 1,821 women-owned businesses launched daily, on average. 7 However, entrepreneurship is an area with persistent gaps and opportunities—only 2% of global venture capital dollars are granted to female founders. 8
“We’re hearing more about gender lens investing today because there is a growing interest among consumers and investors in supporting gender equality as a fundamental human right.”— Jackie VanderBrug,Head of Sustainable and Impact Investment Strategy for the Chief Investment Office (CIO)
“While the advantages of women in the boardroom and executive suite are reasonably well documented, the benefit of adding women extends across an entire company or organization, from every level of the workforce and all the way down the supply chain.” VanderBrug says.
The future of gender lens investing
Going forward, the quality and quantity of gender-related data and research should continue to expand, making it easier for investors to consider gender-related issues in making investment decisions. The use of gender data promises advances in fields from life sciences to software, with innovations standing to benefit not just women but all consumers. Opportunity can also be found in investing in products that address global issues disproportionately affecting women, such as maternal mortality, clean water, indoor air pollution, personal safety and human trafficking.
The bottom line is this: investing with a gender lens can help scale up the companies that significantly improve the lives of women and girls. This type of progress is something we are confident will continue. No matter the political environment, we believe the issue of gender will only grow in importance—in the workforce, in the home and around the globe.
3 Questions to Ask Your Advisor
- How can I incorporate gender lens investing into my current financial strategy?
- How can I identify companies that are focused on promoting greater gender equality?
- Are there mutual funds or exchange traded funds (ETFs) that focus on this issue?
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1 McKinsey and Company. 2015. “The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth”.
2 Deloitte. 2018. “2018 Deloitte Millennial Survey”.
3 BofA Merrill Lynch Global Research. March 6, 2019. “Thematic Investing: The She-conomy.”
4 “The Tipping Point: Women on Boards and Financial Performance,” MSCI ESG Research (2016).
5 Okahana, H., & Zhou, E. 2018. “Graduate enrollment and degrees: 2007 to 2017”. Washington, DC: Council of Graduate Schools.
6 Women in the labor force: a databook,” Bureau of Labor Statistics, December 2018.
7 American Express. 2019. “The 2018 State Of Women-Owned Businesses Report”. American Express.
8 PitchBook and National Venture Capital Association. 2019. “Venture Monitor: 1Q 2019”. PitchBook Data, Inc.
Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.