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Answering 5 Questions about Gender-Lens Investing

After the #MeToo and #TimesUp movements brought the fight for equity to center stage, pundits dubbed 2018 the Year of the Woman. “Not since the feminist movement of the 1960s has there been more focus on gender inequality,” writes Deborah Christie, managing director at Cambridge Associates.

The issue hasn’t escaped the notice of investors, who are pursuing ways to incorporate gender equality into their portfolios and strategies. As the gender-lens investing movement continues to gain momentum, questions will continue to arise. We’ve gathered some of the answers.

1. What Is Gender-Lens Investing?

The Global Impact Investing Network defines gender-lens investing as a set of strategies that either “seek to intentionally and measurably address gender disparities” or “examine gender dynamics to better inform investment decisions.”

In practice, gender-lens investing takes many shapes. Beyond simply screening out companies or industries with poor records on gender equality, investors may actively fund women-owned companies or those working to advance women and girls through their internal governance or products and services. Investors also use shareholder engagement strategies to advance gender parity. The Pax Ellevate Global Women’s Index Fund, for example, brought a shareholder resolution to Apple in 2016 that prompted the company to audit and address its gender pay gap.

2. Why Is It Important?

Recent data may help gender-lens investing gain momentum. For example, women represent just 5% of Fortune 500 CEOs, receive only 2.2% of venture capital funding, and earn as little as 49 cents for every dollar made by a man. In some areas of the world, women and girls face obstacles to political representation, educational attainment, economic participation, and basic health and safety.

Research points toward the positive effect a focus on gender can have. Gender equality is one of the United Nations’ Sustainable Development Goals, and UN Women has found that closing inequality gaps would allow for trickle-down progress to be made on the UN’s other 16 goals. Additionally, McKinsey has published research suggesting that diversity and inclusion can benefit company performance; it also calculated in 2015 that improving gender equality could add up to $28 trillion to the global economy by 2025.

3. Who Are the Major Players Driving Its Growth?

More than 100 public and private funds have launched gender-lens investing products or initiatives, including well-known firms like BNY Mellon, Goldman Sachs, and Morgan Stanley. They’re also using their position as large shareholders to demand change. State Street and BlackRock, for example, have begun to vote against companies with no plans to add women to their all-male boards.

It’s also easier than ever for retail investors to apply a gender lens when choosing assets for their portfolios. Resources such as the University of Pennsylvania’s XX Factor Guidebook or nonprofit As You Sow provide reliable information to investors, helping them make more educated investment decisions. Additionally, Equileap and As You Sow’s online tool allows users to evaluate funds based on their performance on 12 key gender indicators. The robo-advising platform Ellevest has also unveiled an impact portfolio option aimed at promoting the advancement of women.

Research points toward the positive effect a focus on gender can have.

4. What Challenges Does It Face?

Even with new tools, gender-lens investors need additional data—both to determine whether investments are making an impact and to establish the scope of issues to address. Research like Equileap’s annual Gender Equality Global Report and Ranking and companies’ own data reporting help to fill gaps, but it’s still important to view available data critically. For example, in January 2019 Citigroup released gender pay data that showed nearly equal pay between men and women after adjusting the numbers to reflect differences in job title, education, and other factors. But ceding to pressure from shareholders, Citigroup eventually released the unadjusted data, which revealed that women at the company make 29% less than men do.

Another challenge is that some investors still believe that a gender-focused strategy will lead to lower returns, even though there is some data to suggest otherwise.
Some investors also believe that gender-lens investment must involve negative screening, limiting opportunities. However, as Glenmede’s executive director of client development, Laura LaRosa, told Impactivate last year, “You can do this without using a negative screen. You can invest saying, ‘OK, I want to participate in the market, but I want to reward the companies that do the best work.'”

5. Where Is It Going Next?

Gender-lens investment products within the public markets have amounted to over $2.4 billion—but they could grow to $30 billion in the next five years, with the potential to expand to more than 10 times that amount, Veris Wealth Partners CEO Patricia Farrar-Rivas told Euromoney.

Broader investment trends point to the growing prominence of diversity and inclusion in investment analysis, a cause that appears poised to expand as resources grow, gender equality continues to occupy public discourse, and more women begin to take control of capital. Already, more than 80% of women have full or joint responsibility for overseeing the family investment portfolio.

Gender-lens investing leader Suzanne Biegel told the Wharton Social Impact Initiative that she’s excited to see more detailed strategies enter the space, where investors can target specific gender-related issues and needs as the proliferation of data providers tracking gender-specific criteria grows. “We have an opportunity to get more and more refined about enabling people to match the investment structures and strategies with the problems they really want to solve or the market opportunities they really want to see. . . And I think we have both a need and an opportunity to help people see that.”

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