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Why gender lens investing can be good for the world — and your portfolio

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 disproportionate effects of the coronavirus on women-owned businesses, 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 into their overall investment approach, often called gender lens investing (GLI). GLI is a way to leverage the market to support progress toward 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 potential investment returns, sustainable growth and lower risk.

 

Jackie VanderBrug Headshot“We’re hearing more about gender lens investing today because there is clear data tying women’s economic progress to global growth and 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 in the Chief Investment Office for Merrill and Bank of America Private Bank

Investors and companies are responding

“We’re hearing more about gender lens investing today because there is clear data tying women’s economic progress to global growth and 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 in the Chief Investment Office for Merrill and Bank of America Private Bank. 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 This research indicates a growing trend.
  •  

  • According to research firm Deloitte, millennials and Gen Z want to work for companies that ensure diversity and inclusion across the organization.2
  •  

  • Research suggests that while performance results have varied over time, many 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 can yield 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 study from McKinsey 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 in the majority at all levels of higher education, attaining5

 

64%
of graduate certificates
 
57%
of master’s degrees
 
53%
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 make up 47% of total workforce and 52% of management, professional and related 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. In 2019, an estimated 42% of all U.S. businesses were owned by women, and these businesses employed 9.4 million workers and generated $1.9 trillion in revenue.7 However, on a global scale, startups led by women received only 2.3% of venture capital funds in 2020, a decrease of 0.5% in a record-setting-capital year.8

“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 investment decisions in gender-related issues more available. The use of gender data promised 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, personal safety and human trafficking.

 

The bottom line is this: Investing with a gender lens can help expand the companies that can significantly improve the lives of women and girls. It’s likely that this type of progress will continue. No matter the political environment, the issue of gender is sure to grow in importance — in the workforce, in the home and around the globe.

 

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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.” (Latest available data.)

2 Deloitte. 2020. “The Deloitte Global Millennial Survey 2020.”

3 BofA Global Research. March 2, 2021. “Everybody Counts! Diversity & Inclusion Primer.”

4 McKinsey and Company. 2020. “Diversity Wins: How inclusion matters.”

5 Okahana, H., & Zhou, E. 2018. “Graduate enrollment and degrees: 2007 to 2017.” Washington, DC: Council of Graduate Schools.

6 U.S. Bureau of Labor Statistics. 2019. “Women in the Labor Force: A Databook.”

7 National Women’s Business Council: Annual Report 2020.

8 Entrepreneur. 2021. “Venture Capital’s responsibility to women.”

 

Information is as of 06/14/2021.

 
Opinions are those of the author(s), as of the date of this document and are subject to change.

 

Investing involves risk including possible loss of principal. 

 

Past performance is no guarantee of future results.

 
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation. This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.

 

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.

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