By Jem Hudson, CEO of Caldy Group
“As a society, we own and shape the social constructs and financial systems that govern our lives. We make the rules. We assign the value. Yet we can feel removed from these processes and our power to bend the arc of our institutions.”
– Veris Wealth Partners
In celebration of International Women’s Day on March 8th, we came across a myriad of thoughtful articles, studies, and other discussions focusing on women’s issues. One of the resources that especially caught our eye is a study by Veris Wealth Partners, a boutique wealth management firm that has been leading the way in sustainable and impact investing.
Titled “Women, Wealth & Impact: Investing with a Gender Lens 2.0,” this highly informative study aims to shed light on the latest developments in gender lens investing and outlines some of the more commonly seen investment strategies used today. It also offers commentary on the importance of gender lens investing and its growing popularity.
What is gender lens investing? It is an investment approach that aims to encourage greater gender inclusion in our communities, our workplaces, and our boardrooms. It is important to note that gender lens investing is not one-sided. It does not focus solely on women’s issues, to the exclusion of other considerations. Quite the opposite! The Veris study explains:
“Gender lens investing is about making the world better for everyone through our investment choices. Investing in all of us, by all of us, has to be the ultimate goal.” (p. 1)
Gender lens investing typically looks at companies, funds, and other investment opportunities with an eye for how these investments align with the following criteria:
- Women’s leadership
- Women’s access to capital
- Products and services beneficial to women and girls
- Workplace equity
- Related shareholder engagement and policy work
Some investors target investments that explicitly focus on these issues, while others choose to invest in funds and portfolios that integrate these considerations into a broader set of factors or address these issues through stakeholder engagement. This is fairly consistent with what we see in the broader sustainable investing space, where some investment solutions deliver targeted impact, while others cast a wider net and deliver impact a bit more indirectly.
Gender lens investing is often categorized as a sustainable investment strategy because of its focus on non-financial considerations. As we discussed last week, many investors still have questions about the financial viability of sustainable investing, and there is a sense that focusing on non-financial considerations will have a negative impact on financial performance. However, we agree with the Veris study in noticing that those investors who have studied the sustainable investing space in some detail increasingly “realize [that] they can generate both financial gains and positive social and environmental impact.” (p. 2)
In particular, if we look a bit more closely at some of the most recent research in the space, we will uncover mounting evidence that gender lens investing can deliver strong, if not superior, financial returns, as well as meaningful impact toward greater diversity and inclusion. This superior financial performance starts at the board level; studies find that Fortune 500 companies with three of more women on their boards of directors outperform those with no women directors by 84% on return on sales. In addition, according to a recent study by Gopal Krishnan and Linda Parsons, companies with greater gender diversity among senior executives tend to deliver stronger financial results than their less diverse peers. Lastly, women-led companies in Silicon Valley generate 12% higher revenues than similar venture-backed companies run by men. They are also run more efficiently and have lower failure rates than their male-led peers.
Despite all this evidence, women are still underrepresented on boards of directors, in executive suites, and among venture-backed entrepreneurs. It’s clear that more work needs to be done to achieve greater gender inclusion, and much has been said on this topic. But it’s important to remember that, as the Veris study so astutely notes “[a]s a society, we own and shape the social constructs and financial systems that govern our lives.” (p. 7) While it may be easier to simply discuss issues of gender inclusion, we can play a much more constructive role by leveraging our capital in a way that supports and encourages solutions that work.
To help in identifying solutions that work and funds that support them, the Veris study offers a list of investment funds that have demonstrated a strong commitment to gender lens investing, including Golden Seeds (private equity), PAX Ellevate (public equity), and Breckinridge (fixed income). There are several other funds that one can choose, and we are confident that many more funds will launch moving forward.
Regardless of which investment solution one selects, it’s important to remember that gender lens investing is not merely a niche strategy, but something we should aspire to for all of our investments. At the end of the day, we want to see a world where gender inclusion doesn’t need to be discussed in a white paper, but is simply a natural state of things.
Jem Hudson is Founder and CEO of Caldy Group, where this post was first published.