Deborah Adeyanju, CFA, Associate Planner & Impact Strategist
Is it just me, or are you tired of seeing Women’s History Month posts that are some version of “thanks to all the wonderful women in my life;” “look how far we’ve come; or “a salute to she-roes?”
There’s nothing wrong with those sentiments. But if you want to really impact women in ways that go beyond words, start directing your money to funds and investments that prioritize improving women’s well-being. It’s called gender-lens investing, and it aims to both boost gender equality and achieve investment returns.
What does “gender-lens investing” look like?
Investing through a gender-centric lens can mean financing women-owned businesses; buying stock in public companies with meaningful female representation at the executive team and Board levels; investing in targeted projects, initiatives, and businesses that will materially improve the lives of women and girls; or some combination of all of the above. The common denominator is centering the impact on women in your investment strategy, selection criteria, and funding decisions.
Gender-lens investing as a strategy is attracting more and more interest, both from individuals as well as institutions. The number, size, geographic coverage, and visibility of funds have exploded in just the past few years.
That’s not surprising. The business case is compelling. Speaking at a 2008 United Nations panel event on International Women’s Day, Rhonda Schaffler of Bloomberg Network shared, “ ‘Investing in women can make a world of difference — for women, their families, communities and whole nations,”... such investment yielded higher productivity and faster economic growth, reduced poverty and provided returns for decades…’ ”
That’s mainly because women are much more likely than men to pay it forward, by reinvesting in their families and in their wider communities.1 That creates positive and tangible ripple effects that extend well beyond the initial recipient of funding.
And investment strategies that center on gender impact achieve returns competitive with those of traditional investing. Think of it as a double bottom-line.
And that makes perfect sense.
Yet consider this. Across the world, women suffer from unequal access to capital. Female entrepreneurs:
- received less than 3% of all venture capital funding in 2020,2 with Black women and Latinx founders drawing in an even more dismal 0.6% per cent.3
Female entrepreneurs also have less access to credit. “There is a $285 billion credit gap for women-owned small and medium enterprises.”
This is true even though “women control the majority of global consumer spending,” making them well-placed to come up with and launch businesses that address real-world pain points and unmet needs.
Women also face barriers to fulfilling career opportunities, advancement, and pay equity despite the fact that:
- Gender-diverse teams, whether corporate and non-profit boards, investment managers, founders, or company leadership ones, achieve better results than male-only teams.4
- Women show more willingness to take on “social risk,” than men do. Denying them a seat at the table means “opportunities for a positive impact beyond mere financial success are missed.”
All of this takes a toll not just on individuals and women as a group, but on society. Studies from McKinsey, the IFC, and others estimate a negative economic impact from the underemployment of women and their unequal access to opportunity to the tune of $12 billion, yes billion! — a year.5
This is one reason we at GRID are committed to centering not only women, but women of color specifically, in our investment decision-making. That includes systematically directing investment to companies that tangibly support and elevate them.
3 ways to get started with gender-lens investing
Here are three things to do if you want to incorporate gender-centered investing into your wealth-building plans.
1. Pick one or two priority areas to focus on. Do you care most about elevating women in the workplace, funding education for girls, supporting female entrepreneurs working on products and services that improve women’s lives, or something else? Global Impact Investing Institute (GINN) and Gender-Smart Investing Initiative are good resources for learning more.
2. Decide how much you can devote to it. Your financial advisor can help you determine a dollar amount or a percentage of your investment portfolio that you feel comfortable with and that fits with your long-term goals.
3. Choose organizations making meaningful efforts. Now that there’s real momentum behind gender-lens investing, there’s no shortage of companies and managers making all the right noises but only delivering empty gestures.
Before you invest, review track records for any funds, projects, or institutions you’re considering investing in. You want to be sure they have clearly stated goals, quantifiable targets, and are measuring and communicating progress toward/performance against them.
Let’s certainly salute and publicly celebrate all things female during this Women’s History Month. But in addition to fêting women, let’s also fund them!
The future, everyone’s, is riding on it.
1. Grameen Bank, "The overall output of development is greater when loans are given to women...as women are more likely to use their earnings to improve their living situations and to educate their children.”
2. Harvard Business Review, "Women-Led Startups Received Just 2.3% of VC Funding in 2020," February 25, 2021.
3. Fortune, "The number of Black female founders who have raised more than $1 million has nearly tripled since 2018," December 2, 2020.
4. A Morningstar study of more than 11,000 firms’ investment performance from 2003-2017 “funds managed by teams of men or teams of women tended to outperform solo male managers in both equities and fixed income.”
If you want to learn more about our approach to gender-lens investing, including how it might fit with your long-term wealth-building goals, contact us here.
GRID 202 Partners is an African-American and woman-owned Registered Investment Adviser (RIA) specializing in fee-based, comprehensive financial and investment planning for individuals, couples, businesses and institutions. We serve successful, ambitious professionals and business owners, mission-driven organizations, and households that are committed both to creating wealth for themselves and future generations and to aligning their financial assets with their social impact objectives.