How to Integrate Gender Themes Into Your Investment Portfolio
More and more, investors are looking for ways to grow their wealth while also selecting companies that reflect their values. One impactful way to do this is through gender lens investing, where individuals invest in companies that actively work to benefit women, whether it be their female employees, customers, or stakeholders.
Gender lens investing is just one form of ESG investing, which focuses on environmental, social, and governance practices of companies. This type of investing involves owning the securities of companies that are socially and environmentally, as well as financially, responsible.
What Is Gender Lens Investing?
Gender lens investing, sometimes referred to as GLI, is an approach that aims to earn financial returns while also backing companies that advance the interests of women. There are generally three distinct ways to apply a gender lens to a portfolio, by investing in companies that:
- Have a large number of women in executive positions or on the board.
- Institute pro-woman policies such as pay equity, anti-sexual harassment, and strong family-leave programs.
- Offer products or services that better the lives of women.
“Gender lens investing, simply put, is when you focus your investments in a company with a strong female presence—whether that be women-owned companies, companies with boards or senior positions composed mostly of women, or companies that place a strong emphasis on gender equity in the workplace,” Mindy Yu, director of investments at the investing platform Stash, told The Balance by email.
“In a broader sense, gender lens investing is a form of impact investing, as it ultimately works to bring a positive social impact to the world,” Yu said.
The concept of gender lens investing dates back to 2009, when the think tank Criterion Institute coined the term.
Then, in 2014, Pax World Funds launched Pax Ellevate Global Women’s Index Fund, the first mutual fund dedicated to investing in companies with track records of advancing women.
According to a 2020 analysis by Veris Wealth Partners, asset growth in gender lens investing products had grown to a total of $3.4 billion as of June 30, 2019, up from $2.4 billion invested in such products in the prior year. Furthermore, Veris said there are now more than 50 publicly available gender lens investing products, a 300% increase since 2015.
Why Should I Consider Gender Lens Investing?
When it comes to investing, most people start with the goal of growing wealth and financially preparing for the future. The good news is that data consistently shows that investing in women can benefit everyone: the investor, the women being invested in, and society overall.
Research has consistently shown that promoting women in the workforce pays off for companies. A few notable statistics from a 2019 S&P Global study include:
- Firms with female chief financial officers (CFOs) are more profitable.
- Companies led by female CEOs and CFOs deliver better stock price performance in the long run.
- Companies with more gender-diverse boards were more profitable than those with low board gender diversity.
In other words, companies that advance the best interests of women often also advance the best interests of investors. On top of that, these companies are also found to be more positive work environments.
“Diverse workforces also appear to be more conducive to female progress: Where women are outnumbered by men in the workplace, they report higher rates of gender discrimination than those in more balanced professional environments,” said Jay Lipman, president of the sustainable asset manager Ethic in an email interview.
“This reported discrimination may impact their ability to get ahead, affecting the recruitment and hiring processes, as well as their ability to secure promotions and climb the career ladder,” Lipman said.
In addition, the #MeToo movement has added urgency to shareholder efforts to increase corporate transparency regarding sexual harassment in the workplace, another aspect of gender lens investing.
And when people invest in women—whether through asset investment or other methods—it’s not just women who benefit. Data from the World Bank and Council on Foreign Relations found that when women earn money, they reinvest up to 90% of it back into their families and communities, much more than men do.
Investing in women also makes sense from a macroeconomic perspective. A study by Women Deliver, an organization that champions gender equality, found that fully closing gender gaps in the workforce could add up to $28 trillion in annual global gross domestic product (GDP) by the year 2025.
And while there are measurable benefits to investing in companies that promote and empower women, some investors may have concerns about limiting themselves only to those types of companies.
A study by Harvard Business Review examined gender diversity and the stock prices of more than 1,600 publicly traded companies. It found that, in general, shares declined for two years after a woman was appointed to the board. But more than anything, this dip was found to be the result of investor bias. In other words, investor fears that gender lens investing will hurt their portfolios can become something of a self-fulfilling prophecy, with those doubts ultimately leading to weaker stock performance that they feared.
How Can I Participate in Gender Lens Investing?
Gender lens investing may sound hard to engage in. After all, it’s difficult for an individual investor to know what companies advance the interests of women, either through the products they sell, the people they hire, or the policies they enact.
As this type of impact investing becomes more popular, there are more funds and options available to get started.
“Investors might want to start by reviewing their existing portfolio holdings and examining the gender makeup of companies' management teams,” Lipman said. “They can then help shift capital away from companies with inadequate female representation, instead channeling it toward funds and enterprises that promote female leadership. Investors can also target projects and companies that provide products and services for women, especially those in underserved markets.”
A great place to start is your employer’s retirement plan. Because many people launch their investing experience with their company’s 401(k) plan, if you have access to one, you might consider sitting down with an HR or retirement plan representative to find out where the plan’s funds, and your own holdings, are currently invested. Ask if the plan offers options for gender lens investing. If so, you can consider applying a gender lens to just one asset class, or to your overall portfolio.
One resource you can look at to find opportunities for gender-based investing is Gender Equality Funds, a search platform compiled by shareholder advocacy nonprofit As You Sow.
On that platform, investors can look up particular exchange-traded funds (ETFs) and mutual funds and learn whether the companies that comprise them promote the interests of women.
The platform scores funds’ holdings based on 19 criteria, including the gender balance in companies’ workforce and leadership, whether a company has equal pay and other pro-woman policies, and whether it has made a commitment to women’s empowerment in the workforce.
The Bottom Line
Gender lens investing is a way of growing wealth while investing in companies that advance the best interests of women, whether it be their female employees, customers, other women affected by the company’s business, or women in general. Data has consistently shown that gender lens investing goes beyond benefiting just the companies that prioritize such policies. Companies that actively promote women’s empowerment also tend to perform better, which can help your portfolio.
And thanks to increasing fintech options and a growing push for female empowerment, it’s easier than ever to find ways to get started with gender lens investing.