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Moving the dial on gender lens investment: inclusive investments that drive economic prosperity

Cathy Moscardini

Gender lens investment is the practice of investing for financial return whilst considering the benefits to women. Investors are beginning to consider the practice not just because of the moral imperative, but also due to increased economic prosperity and better investment performance linked to female oriented investments.

Many people might assume that gender lens investing is subset of impact investing or ESG investing. Instead, it is a way to look at an investment portfolio by incorporating gender as a criterion in the financial analysis. There are different ways that investors can set out to increase benefits to women whilst increasing their return on investment:

  • Access to capital – With many women entrepreneurs facing a lack of access to capital, providing women with the means to access finance can help female owned businesses to grow. Currently, 70% of women-owned small-and-medium enterprises in developing countries are not served by financial institutions, representing a credit gap of $285 billion.
  • Workplace equity – Investing in companies that demonstrate gender equality/parity across the business through policies, practices and culture is crucial to advancing gender equality in the workplace. Companies with more women in senior leadership positions and on boards have been shown to outperform those that do not.
  • Products and services –Women make the majority of purchasing decisions in the household. That equates to more than 90% of consumer products purchases and, contrary to popular belief, 60% of automotive purchases. This means that women are disproportionally affected by high prices of products that are essential to families. There is an opportunity to invest in businesses that offer products and services that positively impact on women and girls, or that work to dismantle structural gender inequality.

Gender lens investing has struggled for a number of reasons to become mainstream. It is partly due to worries that it appears ‘soft’ or not return-focused. It is also due to a lack of data upon which indexes and investment products can be analysed.

But times are changing.

The business case for investing in women in the workplace and economy has been proven time and time again. Research from Credit Suisse shows that companies with greater board diversity exhibit higher returns on equity, higher valuations and a higher pay-out ratio. Whilst a report by McKinsey shows that achieving gender equality could add $12 trillion to world GDP. So investors that consider gender in their investments should expect to see a higher return on investment.

In December, at the UKSIF Women Work event, a room of investors were presented with the business case for investing in women, and for the first time given options on how they can translate the theories into their portfolios. Many investors claimed they want to support gender lens investing, but there just aren’t the investment products out there.

So how do they go about it?

The crucial data required to build gender lens portfolios is slowly being uncovered and assembled into indexes and investment products. Whilst many are still only trading modest amounts, investors have the power to build momentum quickly. At the UKSIF event, founder of Catalyst at Large, Suzanne Biegel, gave examples of products, indexes, tools that investors can use to expand their gender portfolio:

  • Using sustainability information provided to RobecoSAM in the annual DJSI submission, RobecoSAM already has access to a range of key labour and gender-related internal data, which companies do not usually disclose publicly. The RobecoSAM Global Gender Equality Impact Equities Strategy has constructed a portfolio of between 40 and 80 companies that score highly in gender and diversity measures. Such measures might include board nomination processes, retention of female talent, equality of remuneration, health and safety and work-life balance policies.
  • Community Capital Management’s CRA Qualified Investment Fund Gender Lens Mandate targets bonds that improve the lives of women and girls. For example, finance affordable housing, job creation, education, childcare, and neighbourhood revitalization projects.
  • In March 2017 social venture, Equileap, will launch a Gender Impact Index to support investors to deploy their assets with a gender lens. It will feature a data set and ranking that assesses the progress of publicly listed companies on gender balance and equity in the workplace.

The case is strong. The will is apparent. And the data is now being compiled. Next we need investors to take action to drive demand for gender lens investing. This will in turn spur companies to make changes that contribute to accelerating progress on gender equality in the workplace, economy and society.

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