- Gender-focused investing has grown in popularity over the past two years.
- Research shows that gender equality helps generate higher returns and improve business performance.
- If gender is ignored, business problems could exacerbate and delay the progress of the workforce for decades.
- This article is part of a series called “The Cost of Inequity,” examining the barriers that marginalized and disenfranchised groups face in various sectors.
An increasing number of people are making investment decisions with the intention of generating social or environmental benefits and financial gains.
Consider that 10 years ago, $ 1 in $ 12 was invested in companies or funds with an ESG focus – environmental, social and governance. Last year, that share had fallen to $ 1 in $ 3, according to Andrew Behar, a board member of the US Social Investing Forum and CEO of the nonprofit shareholder advocacy group As You Sow.
“Investing in a gender perspective” was invented in 2009, according to the think tank Criterion Institute, and consists of integrating gender analysis into investment decision-making.
Numerous studies show that this approach benefits people of all genders and institutional and individual investors. And while progress is being made, the
has a long way to go to create a level playing field and provide investors with clear ways to use a gender lens in markets.
For example, from 1999 to 2019, earnings of female-owned U.S. businesses grew 103 percent, according to Global S&P.
And McKinsey & Co. claims that companies in the first quartile 15% more likely to see higher financial returns than their domestic industry medians.
“Companies that care about gender are less risky – it’s that simple. In terms of investment, it boils down to beta,” Behar said. “They are at less risk because they take care of their employees, they create a culture that is going to attract the best and the brightest, they are going to be respectful of their workforce, and therefore they are building better companies that tend to be more profitable in the long run. “
A search engine on gender diversity
But it can be difficult for investors to determine if their money is being invested in companies that work for gender equality.
Partly for this reason, Behar and his team created search engines designed to tell users if they are investing in companies that match their values. For example, the Gender Equality Fund use a letter rating system to rate mutual funds and ETFs on their efforts. These include gender balance in the workforce, the gender pay gap, paid parental leave, commitments to women’s empowerment and policies. fight against sexual harassment, among others.
“I think there are a lot of people on Wall Street who just have no idea that this is a hardware issue. [gender inequality], which means it has an impact on finance, “he said, adding that people don’t take the time or energy to really understand the power of investing with a gender lens.
And when it comes to the financial world, gender equality in asset management still lags behind other sectors such as medicine and law.
Over the past decade, the number of female fund managers in the United States has remained at around 11%, Morningstar data shows.
In 2018, McKinsey & Co. released a report showing that women remained vastly under-represented in the upper levels of financial services firms. He revealed that women and men started careers in finance on an equal basis, but women made up only 19% of senior executives.
What has limited women’s leadership and prevented them from accessing financial tables is their historic exclusion from family, philanthropic, business and government tables, said Alison Pyott, partner and senior wealth manager at Veris, adding that recruiting practices have also contributed.
Although changes are underway, this is a historically undiversified industry given that our natural tendency as humans is to seek out people who are like us, Lori Heinel, chief investment officer, told Insider. Worlds of State Street.
Still, having a more diverse group of executive level managers is beneficial.
“We believe that diversity has a positive impact on fund performance,” said Katherine Jollon Colsher, CEO of the nonprofit Girls Who Invest. “Diverse perspectives ultimately lead to better results, and to have diverse perspectives you need to include people with diverse backgrounds. “
As such, gender inequality can negatively affect fund performance, as well as the ability to retain and advance people within an organization, she added.
“This need to diversify talent and hire and retain women is urgent, and if ignored, the issues will only amplify and delay progress in the workplace for decades to come. opportunity is now and change is happening in real time, ”she said. .
Where there is progress
In fact, progress towards gender equality in many companies, although slow, is underway. Since February 22, all S&P 500 companies have at least one woman on their board of directors.
“We launched Fearless Girl four years ago now, and that coincided with very specific efforts we started at that time to push every company in the S&P 500 – and a few other major indices around the world – to add. at least one woman. by board of directors, and we made that milestone in the S&P 500 last fall, ”Lori Heinel, director of global investments at State Street, told Insider.
Companies are also starting to measure internally and publish more data on gender equity.
“I would say that more and more companies are trying to measure the criteria of gender, that is to say to measure internally and report it externally to us, investors, and we are convinced that companies can’t manage risk if they can measure it so certainly the momentum we’re seeing has been encouraging enough, ”Abigail Ingalls, senior research analyst at Breckinridge Capital Advisors told Insider.
But Pyott at Veris added that there was still a long way to go to close the gender gap and that companies could limit innovation, leadership and diversity of thought if their workforce felt disengaged, insecure or unsupported.
Ingalls continued, “I can tell you with certainty that I am dealing with what is called impostor syndrome seven days a week, 365 days a year. It is a very real part of the experience of Being a businesswoman and yet the ability to lean on my female colleagues, the ability to mentor and partner with male colleagues has of course helped make impostor syndrome less difficult on a day-to-day basis.
“It’s part of the experience, and worth getting over, but still one that exists.”