A Guide to Socially Responsible and Gender Lens Investing

Kay Kramer, CFP®
Oct 3, 2018 7:20:00 AM

gender lens investing

As a woman financial advisor in an overwhelming male profession, I find the recent emphasis on women empowerment funds or gender lens investing is very exciting!

Gender lens investing is a practice of investing for financial return while also considering the benefits to women.

A Shift in Culture

Several months ago, I attended a conference that was titled “Invest in Women”, and for the first time in my 33 years in the financial services industry, there were considerably more women than men in attendance. I walked away very hopeful for the future of our profession with the number of women working on shifting the culture. We heard from a number of speakers who shared some stunning statistics on pay equity, corporate leadership, and the difference women made in the companies they led.

So how does gender lens investing fit into the larger topic of Sustainable Responsible Impact investing (SRI), socially responsible investing, and using ESG (environmental, social and governance) factors in investment decisions?

Responsible Investing

One definition of responsible investing is an approach to investing that that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact1.

There are a range of approaches:

  • Negative screening – excluding assets based on certain criteria
  • Positive screening – including best-in-class assets based on ESG criteria
  • Thematic investing – selection of assets based on their categorization under certain sustainability themes (i.e. women, environment etc.)
  • ESG integration – the systematic and explicit inclusion of ESG data into investment decisions
  • Impact investing – targeted investments aimed at solving social or environmental problems
  • Engagement – active engagement with company management around ESG issues

Gender Lens Investing

Gender lens investing generally means incorporating gender-based factors, to improve returns, reduce investment risk or to promote gender equality. Put another way, it means using capital intentionally to achieve positive impacts on women and girls. It means the integration of gender analysis into financial analysis to achieve better returns. In this approach, gender matters in the investment decision.

Studies show that companies with more women in leadership (boards and executive suites) are associated with higher return on equity and lower price and earnings risk. In addition firms with more gender diversity in leadership also show greater innovation, increased productivity, and higher employee retention and satisfaction. As a result, more money is being invested with an emphasis on gender lens. According to Veris Wealth Partners, gender lens investment strategies have reached over two billion dollars and are compounding exponentially2.  

How Gender Lens Investing is Implemented

As an equity owner in a company you have certain rights that allow your voice to be heard. Proxy voting is used as a tool by some funds in an attempt to influence a company’s management team to take action on certain issues. Shareholders may also have the opportunity to propose resolutions or items for shareholders to vote on in these proxies. One of the areas of focus is on leadership and how many women are on boards or running companies. To encourage more board diversity, shareholders could vote against boards without any and one token woman isn’t enough – at least three seems to be a tipping point.  

Is there pay equity at the company? Recently the United Kingdom began to require companies with more than 250 employees to report on pay by gender, and the initial results show that there is a long way to go to achieve pay equity3.  There is no such reporting requirement in the U.S although the SEC has been urged by some to start to disclose gender pay ratios on an annual basis.

Another key area has been highlighted by the #MeToo movement.  Holding companies accountable for discrimination, pay equity, and sexual harassment and sexual violence remains a high priority for investors. So the strategy can be both proactive in looking for companies with good diversity as well as screening out companies with poor track records in diversity, or a history of sexual harassment issues or exploitation of women.

Suzanne Biegel, a pioneer of gender lens investing, defines it as integrating a financial analysis and a gender analysis to get to a better outcome. It might be using a gender agenda – funding women entrepreneurs since they have less access to capital.  Another point might be products and services that benefit women and girls.

Conclusion

As we continue to work in this area of sustainable responsible investing, considering ESG factors, we know that everyone has different priorities and values.  I’ve been investing this way for decades. Today we have more choices than ever in this area.

1 Source: The Forum for Sustainable and Responsible Investment https://www.ussif.org/sribasics

2 Source: Veris Wealth Partners (2018). The Investment Opportunities In Community Wealth Building and Social Justice https://www.veriswp.com/whats-next-in-community-wealth-building-and-social-equality/

3 Source: Time (April 2018) http://time.com/5229228/gender-wage-gap-uk/ New call-to-action

Topics: Women and Money, SRI

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