As investor demand for more environmental, social and corporate governance investing is expected to drive ESG assets to $45 trillion by year’s end, there is a segment that presents another growth opportunity: gender lens investing.
Gender lens investing is investing with an aim to earn financial returns and address gender disparities by focusing on investing in companies that advance and support women. There are many ways that can happen. For example, investing in companies that directly provide capital to women-owned or co-owned businesses. Robo-adviser Ellevest Impact Portfolios are a form of gender-lens investing.
GLI is a way to leverage the markets to support gender equality without sacrificing risk and return metrics. It’s based on the idea that investing for gender equity will expand — instead of limit — the return on investment, according to Vicky Lay, managing director, head of impact investing at Artesian Alternative Investments during the InvestmentNews Women Adviser Summit Monday.
“The important thing to note with clients about gender lens investing, and something that I absolutely advocate for, is that we are not sacrificing currency,” Lay said. “In the same way financial institutions have integrated ESG factors into their analysis in order to determine risk and opportunities, we are doing the exact same thing — but applying a focus on gender.”
Asset growth in GLI products totaled $3.4 billion as of June 30, 2019, an increase compared with a reported $2.4 billion invested a year prior, according to research by Veris Wealth Partners. Those products include investments in companies that are led by women or promote gender equity.
That type of growth has garnered attention from large firms like Goldman Sachs, which announced earlier this year it will refuse IPOs if all directors are white, straight men.
“[Investors] want to see diversity in order to see a peripheral understanding of the different risks that a company could face,” Lay said. “We also saw that gender lens investing has grown massively and that these funds had a track record of outperforming those funds that did not apply a gender lens in order to decrease risk and increase returns.”
Still, as industry players claim they’re having an impact on gender equality it’s important for advisers to ensure that the impact is real, according to Esther Pan, head of partnerships, policy and communications at the UN Capital Development Fund.
Women own 30% of all businesses in emerging markets, according to Pan. “And we know that only 7% of investments from venture capitalists reaches women-lead businesses.”
So for a wealth manager wanting to check if the investment product truly has a gender lens look at proceeds and if the product contributes to helping women grow businesses. “For investors, we would like to ask those questions to combat the gender-washing — or labeling of products and claiming they have impacts that really don’t,” Pan said.
Another step advisers can take to ensure that their investor clients are correctly investing in GLI products that truly make a difference for women is by checking on the supply chain, Lay said.
“How is the GLI product actually considering diversifying gender and also contributing to gender equality in their own supply chain?” she said. “What’s within policies to promote pathways for women and equal pay?”
An adviser can also look at a firm’s public commitment to gender equality. “For example, signing up to the global UN Women’s Empowerment Principles, or some other recognized gender equality commitment.”
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