Gender lens investing is among the latest trends in impact investing. This approach to investing advocates gender equality for cis and trans girls and women. Recently, a client asked about our approach here at Centered Wealth. Our initial conversation with clients always begins with clarifying specific impact targets that would most fulfill the client’s passion and intentions and, as Stuart would say, from there the real fun begins in designing the investment mix that best aligns with that vision while meeting investment goals. There are a few ways we work with gender lens investing. First is to use activist investment funds that impact corporate decision-making. Second, we look for investment funds that are female-run. And our third strategy is to invest in securities that directly transform women’s lives.
Centered Wealth utilizes activist funds that have been at the forefront of gender, LGBTQ and racial diversity shareholder advocacy since the late 1980s. These funds influence corporate decision-making by submitting shareholder resolutions to influence corporate decisions in the areas of Environment, Social Responsibility and Governance. These issues are increasingly being considered by all shareholders. This is an important shift in shareholder philosophy. Traditionally, corporations viewed returns and dividends as a shareholder’s primary concern. Corporate boards have taken notice and are taking Corporate Social Responsibility
By combining top-down policy changes with bottom-up shareholder resolutions to influence corporate behavior, large multinational corporations have a leadership role to play in issues of gender and racial equality. As investors, pushing them to “do better” impacts not only their employees but also the smaller companies that comprise their supply chains. Doing better, however, doesn’t just mean adding a woman to the board of directors or measuring pay equity within a company. Although these issues are important, they tend to increase the equity of white women of privilege and thus perpetuate racial disparities. In a Wall Street Journal Op-Ed, (10/10/17), Facebook COO Sheryl Sandberg points out, “More companies prioritize gender diversity than racial diversity, perhaps hoping that focusing on gender alone will be sufficient to support all women. But women of color face bias both for being women and for being people of color, and this double discrimination leads to a complex set of constraints and barriers.” Doing better means doing better for all women, especially for women of color and trans women. This requires engaging companies around global gender issues such as human trafficking, gender-based violence and access to education and healthcare in addition to demanding change in corporate practices such as hiring discrimination and family leave policy (or lack thereof).
Centered Wealth’s second strategy is to actively seek out investment funds that are managed by women. We offer (depending on client suitability) a number of innovative direct placement social impact products founded and managed by women. Research consistently shows that women fund managers outperform their male counterparts and yet they are underpaid. According to one study published by the Warwick School of Business (6/28/2018), female investment advisors outperform male advisors by 1.8% and also tend to outperform market indexes. The study notes that these trends could be because female managers are less impulsive and more inclined to think in the long-term while male advisors tend to narrowly prioritize monetary goals and overestimate their skills leading to more frequent trading and riskier choices. Thoughtfully adding these investment options that are managed or founded by women to a portfolio can help address gender inequity and simultaneously increase investor returns.
Our third approach is to seek out investments that directly benefit women. There are a few funds in this category that are open to the public, but many of these investment options are private and may be combined with other qualifiers such as “women of color” or “women in developing nations”. These options range from stock ownership in a company that makes medical devices for women to investment in a start-up that empowers female farmers. Steadily gaining in popularity, we see microlending, enterprise finance and opportunity zone funds as mechanisms to place investments directly with women-led businesses.
Additionally, because the problem of climate change will disportionately hurt vulnerable communities (and is already), we see solving environmental problems as integral to improving both racial and gender equity issues and continue to advocate for the environment in our gender-lens portfolios. According to studies conducted by the United Nations and published on un.org/womenwatch, 80% of people displaced by climate change are women. And, as primary caregivers, global warming makes women more vulnerable when flooding and drought occur. It has also been documented that response efforts following natural disasters frequently inadequately address the immediate needs of women and mothers, further endangering lives already in tumultuous circumstances. These issues must be viewed as interwoven if we are to enact meaningful change from within our portfolios.
By employing these tactics at Centered Wealth, we assert our belief that one of the primary ways to improve global gender equity is through large scale corporate activism. As former UN Secretary General Kofi Annan said (04/30/98), “Gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development and building good governance.” Because the footprint of international companies is so large, changing their behavior is critical in the lives of the majority of people on the planet. Direct investment in women-led businesses is vital as well, but we see that too often impact investing focuses on smaller solutions rather than the more frustrating and longer-term problem of a systemic approach. Long-term systems change through corporate activism serves, over time, to embed a culture of gender equality within global multinational corporations and their international supply chains thus benefiting women globally and reducing global wage disparities which in turn drives positive economic growth.
If you would like to learn more about our approach to gender equality and discuss specific ways to achieve these strategies in your own portfolio, please reach out.
Nothing in this blog should be construed as a recommendation to buy or sell any security. Such recommendations can only be made after personal consultation. Past performance is not necessarily indicative of future results. While some studies suggest that socially responsible investing may perform as well or better than conventional investing, some other studies suggest that by reducing available investment choices, socially responsible investing strategies may entail higher risks or lower returns than comparable non-SRI investing strategies.
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