Generation XX: Investing in Gender Equality
Gender lens investing is a transformational idea whose time has come. This powerful impact investment strategy aims to close the gender gap, benefit women and potentially generate returns in the process.
It's now a century since the suffragettes won British women the right to vote. And it's 50 years since the Women's Liberation Movement held its first conference in the UK, demanding equality in terms of pay, opportunities and education.
We now take these hard-won rights for granted but gender bias still confronts us every day in many other ways. From the #MeToo and #TimesUp movements against sexual harassment, to the campaign to close the gender pay gap in the UK, ingrained prejudices are being challenged. From June this year, the Advertising Standard Authority will enforce a ban on harmful gender stereotypes, meaning that you'll no longer see hapless men struggling to change nappies or women failing to park cars.
A similar equality-led watershed is happening in the world of investment management. Gender lens investing represents a new and different way of wielding the power of asset management. It seeks to make a positive difference to the lives of women and girls while still generating financial returns for institutional investors.
Its aim was to advance the social and economic status of women by investing in companies that promoted gender equality in the workplace.
After that breakthrough moment it took another quarter of a century for gender lens investment products to achieve inflows of USD1 billion. But the second USD1 billion took just 12 months. The figure now stands at USD2.4 billion2.
As with other forms of impact investing, sustainable investing and Environmental, social and governance (ESG) investing, the moral imperative for gender lens investing is matched by an equally compelling financial and economic case that can be described as ‘doing good while doing well'. Gender lens investing merely seeks to ensure that the good done is on behalf of women.
The link between improving gender equality and boosting economic growth is already widely accepted. In fact, the figures are mind-boggling.
Breaking into the boys' club
The investment world has long been seen a preserve of testosterone-driven male behaviour characterised by so-called masters of the universe taking big bets on raging bull markets. This arguably reached its apex just ahead of the 2008 financial crisis. Significantly, gender lens investing really started to gain momentum shortly afterwards.
Women and girls comprise the world's largest marginalised population, and research indicates that improving their economic status would have a beneficial impact on nearly all of the United Nations' 17 Sustainable Development Goals - and not just in terms of Goal 5, which specifically seeks to improve gender equality4.
There's strong evidence that a more female-oriented approach leads to consistent investment outperformance. Companies with three or more female board members have been shown to generate substantially higher returns on equity, on sales and on invested capital than companies with no women on the board5. They also achieve net margins that are on average 6 per cent higher than those companies with male-dominated leadership teams6.
Of course, charities and philanthropic organisations have been targeting gender inequality for years. But over the last decade, gender lens investing has emerged as a new way of wielding the power of capital. There are many interpretations of what it means, but a general consensus would be investment strategies that seek to achieve one or more of the following: increasing access to capital for women; promoting equality in the workplace; and encouraging the development of goods and services that benefit women and girls.
Another way of looking at it is in terms of investing in women-owned businesses, organisations with a strong track record of employing women, or companies that improve the lives of women and girls through their products and services.
Mindful of the gender lens strategy, a growing number of investors and companies are looking for ways to close the gender gap in areas such as finance, health and education.
Get with the programme
If you are looking to support gender lens investing you currently have a choice of three UK-based equity funds that actively focus on the strategy7.
A growing number of mutual funds are applying gender lens criteria in their investment processes, taking account of such factors as gender representation at board level, equal remuneration, and talent management policies that empower female staff. In the last year Canadian8 and Australian9 banks have taken this a step further by issuing gender bonds. Gender-focused market indices are receiving more attention and further financial products are being developed. The increasing economic power of women is both driving and reflecting this trend.
We are all familiar with the idea of investing in people. On the strength of recent developments, investing specifically in women may just prove to be one of the greatest breakthroughs ever achieved in the world of finance.
For more information about investing in Gender Lens investing, speak to your Relationship Manager or Investment Counsellor.
1 Veris Wealth Partners↩
2 Gender Lens Investing: Bending the Arc of Finance for Women and Girls - Veris Wealth Partners, October↩
3 McKinsey & Company, September 2015↩
4 Peak Insight Journal, September 2018↩
5 The CS Gender 3000: The Reward for Change - Credit Suisse, 2016↩
6 Is Gender Diversity Profitable? Peterson Institute, February 2016↩
7 UK at Tipping Point for Gender Lens Investing – Citywire, 15 November 2018↩
8 Women in Leadership – Canadian Imperial Bank of Commerce, September 2018↩
9 National Australia Bank, March 2017↩