Are you considering gender lens investing but don’t know where to start? This piece discusses what gender lens investing is, how it works, and its benefits.
Gender diversity has been growing for a long time. But, female entrepreneurs are still underrepresented in the investment world.
For this reason, the need for gender-sensitive analytics, valuation tools, and investment funds is imperative. This will help solve gender inequalities by promoting greater gender diversity.
And to help close the gender gap, this last decade saw a new phenomenon in the market called gender lens investing. Through a more inclusive lens, gender issues now play an integral part in how investing works.
Gender lens investing harnesses unique, female-driven capital to tackle the toughest commerce challenges. It will help find more women entrepreneurs and assist them in scaling up their ventures.
Here is everything you need to know about gender lens investing, how it works, and its benefits. To start, let’s define gender lens investing.
What is Gender Lens Investing?
Gender lens investing is an investment practice in which companies are assessed on how they manage gender balance. Here, investors don’t just look at a company’s financial performance. Instead, they evaluate how the company balances female and male employees.
The gender lens framework enables investors to analyze and consider various factors of gender equality investing, such as;
- Risks
- Challenges
- Opportunities
Generally, gender lens investing focuses on companies that fulfill the following criteria:
- Have at least 40% of senior executive positions held by women,
- Or 30% of mid-level managers, such as financial officers or human resources professionals, are women.
These companies receive special treatment from investors who are gender equality conscious. Such treatment might include additional funding, where necessary. However, the companies’ diversity practices must first meet specific standards.
Gender Lens Investing Overview: How it Works
Gender lens investing involves making investments not just for financial returns but also for women’s benefits. This approach aims to secure social well-being and economic opportunities for women and is designed to have a positive social and environmental impact.
Investors go for companies and industries owned and led by women. It is a way to;
- Provide a voice for women and girls
- Raise their visibility through gender parity
- Create positive change in their communities
A women’s lens approach to investment is an integral part of the discussion around gender equality. Historically, women have been less likely than men to hold assets and invest in stocks and other securities. This has left a significant opportunity for gender-based financial inequality to continue.
Gender-based financial inequality can manifest in many ways. For example, women are likelier to own small businesses and become unpaid family caregivers than men. As a result, they have lower incomes and wealth.
Women are also less represented in companies or cause-related business organizations, which is where the majority of venture capital is invested (Watson 2006).
This means that women may not access the same diversity programs as their male counterparts, primarily when funding is applied to start-ups and other growing businesses.
The approach helps break down barriers that hinder women from getting top leadership positions in the business world. It is an investment-focused approach for women and girls, empowering them to control their financial futures.
History of Gender Lens Investing
Gender lens investing was initially popularized by the global financial crisis in 2008. The practice began to gain traction around 2009 and has since received immense support from individuals and governments.
Countering the trend of investors becoming more risk-averse, some gender-focused investors began taking on corporate governance issues. These include board diversity and women’s representation in executive teams.
Initiatives on gender lens investing have increased tremendously since 2012. Now, financial concerns arise much later. Female participation rates for fund managers have increased from 17% to almost 40%.
The practice has become increasingly popular and continues to evolve. According to Gerry Tattersall, a financial analyst and portfolio manager at Morgan Stanley, there is no story or timeline for how gender lens investing has evolved.
But, it may have begun with organizations developing strategies or practices to benefit women and girls.
Tattersall says gender lens investing can take many different forms. It might include investments in human rights and women’s representation in boardrooms.
Goals of Gender Lens Investing
The goals of gender lens investing are to:
- Provide a more inclusive perspective on investments
- Create more opportunities for women and girls
- Promote workplace equity
- Give investors a deeper understanding of the intersection of gender and economics
- Increase awareness about the need for greater diversity in the financial sector and build a foundation for more effective investment decisions.
- Make visible areas that usually go unnoticed by the investment world. These include health and education, family planning policies, workplace entitlements for women and girls, etc.
When a company’s organizational structure reflects those priorities (its belief system), it gives monetary rewards to stakeholders in the form of increased stock price value over time.
Gender Lens Investing Characteristics
The characteristics of gender lens investing include:
- It stresses the significance of considering gender issues in investment strategies, terms, and conditions.
- It aims to increase female participation in the sector and improve their performance.
- The practice also aims at mandatory measures to improve the ratio of females by the criteria cited:
- Providing opportunities for female participation in decision-making,
- Creating environment-friendly companies and encouraging women leaders to embrace change,
- Encouraging innovation and promoting creativity among female employees.
Gender lens investing is a new way to track and decide on stocks. It’s based on gender diversity in leadership roles, board seats, talent pipeline, and more. This investment strategy works for both men and women.
How Do You Know if a Company is “Gender-Sensitive?”
Gender lens investing means different things to different people. But we can generally describe it as considering gender issues when conducting investment research.
Essentially, it’s an investing approach that helps you exercise your investing rights. Here, you purchase shares of companies with organizational priorities consistent with your goals.
But, just because a company fails to mention gender-sensitive issues on its website currently, it doesn’t mean it’s not gender-sensitive. Also, a company’s failure to address specific gender-related problems doesn’t mean it will never do so. Subsequently, thorough research is necessary before making your final decision.
Financial performance is comforting for people who want their money back at the end of each year. However, many investors are now looking beyond current operational goals. Instead, they want companies whose investment interests align with their personal beliefs.
Goldman Sachs, Apple, and Facebook are examples of companies that have embraced gender-lens investing in the US. They have been quite vocal about the need for gender diversity in their corporate boards.
Benefits of Gender Lens Investing
Gender lens investing has several potential benefits, such as:
- Gender diversity is a crucial component of success in the stock market. This approach allows investors to consider how different genders view investments and make decisions accordingly.
- Gender-sensitive analysis can identify undervalued companies that could benefit from increased female ownership or leadership.
- Gender lens investing is essential for socially responsible investors and those who intend to make money in the stock market. With the growth of women in the workforce, there is an increase in demand for investors making diverse investments with gender lens companies.
- Gender-sensitive investing can lead to better returns and eliminate gender gaps that typically exist within traditionally male industry sectors and markets (e.g., finance)
- Besides considering diversity-related corporate policies, one can identify investment opportunities that match their values.
- Lastly, businesses already integrated with female employees can be considered more sustainable and profitable if they seek ways to maximize women’s potential in business.
How to Start Gender Lens Investing
There is no definitive path through which an individual can start investing. But some great steps on how to start gender lens investing may include:
- Looking at investment opportunities across different sectors
- Ensuring that the company you are investing in is reputable
- Considering how well the company is performing against its competitor
- Identifying indices or investment vehicles that track specific gender categories. These can include women-owned businesses or startups focused on female empowerment.
- Researching companies with solid track records of inclusivity and transparency around their gender data reporting process.
- Building a personal list of portfolio companies reflects your values and influence areas.
- Learning more about gender investing principles and strategies.
Gender Lens Investing Online Platforms to Help Get Started
Since gender lens investing is growing, many platforms are available to help you get started. Some of the most popular include:
1. GenderFinance.org
This website offers a range of resources and tools to help you begin gender lens investing. These include a guide to creating your gender lens portfolio and information on raising awareness about women in finance
2. Investing in Women
This website also provides online tools and resources that help women successfully invest in their futures. It has a growing focus on gender lens investing, with several content areas covered, including:
- How to start an investment portfolio for women-owned businesses,
- Build diversity into your business plan (executive summary),
- Propose an initial grant dedicated to female entrepreneurs’ advancement and facilitate investor outreach efforts.
3. Signs of Success
Signs of Success is a website that offers information about risk tolerance strategies. Investors can evaluate their investment strategies in light of ‘male-standard’ metrics and find out how to secure funding.
See related: What is Social Equality? Definition & Key Examples
How to Invest in Gender-Based Portfolios
Investment portfolios should have a diversity of investments to consider different risk profiles of their investors. When including gender diversity in investment portfolios, it is essential to remember that investing differently for men and women can be advantageous.
Investment research has consistently shown that gender-targeted allocation outperforms conventional market indices by 3%-5%. Inherently, this means that diversification benefits are more significant when tailored to male and female investors.
You can invest focusing on gender in two ways – through mutual funds and brokerage accounts.
1. Mutual Funds
One way to invest in a gender-sensitive manner is to use mutual funds. Mutual funds can be created to mirror specific demographics, such as female-led businesses or millennial investors.
When picking gender lens funds, it is essential to do your due diligence and research the particular fund before investing. In some cases, the active share is low in venture and growth strategies.
The amount of money you invest should depend on how much risk you are comfortable with for your portfolio. Investing less than $500 can be an excellent way to start and align it to your overall financial goals.
2. Brokerage Accounts
Brokerage accounts are an investment opportunity that offers investors the ability to purchase securities through a broker. Brokerages typically allow investors to trade stocks, options, and other securities.
Some benefits of investing through a brokerage account include:
- Access to various types of securities,
- Diversification of investments,
- Potential for commission discounts
Some drawbacks of investing through a brokerage account include:
- The risk associated with individual stocks
- The potential for illiquidity in the market
See Related: Proven Ways to Start Investing in Apartment Complexes
Investment Brokerages With Gender Lens Investments
The best approach for gender lens investing may depend on several factors. These might include the individual investor’s risk appetite, financial situation, and other personal factors.
However, several investment brokers offer resources and guidance to help navigate the complex world of investments. They include:
1. Fidelity
Fidelity Investments is an excellent option for women who seek to invest in a way that supports their needs and goals. The platform has been supporting the community of people trying to better themselves over time by investing in gender-responsive strategies since 1979.
Fidelity continues its commitment today. And, it has launched new products specifically for customers starting a family. These include;
- Caregiving accounts designed especially for parents
- Financial peace-building accounts for parents who want to make financial strides
As a member, you can go online or call your local Fidelity Financial Sales Advisor. This helps you to choose the investment options that work best with your situation.
2. Vanguard Group
There are several ways to invest using a gender lens approach. Popular options include investing in mutual funds, exchange-traded funds (“ETFs”), and individual stocks.
Gender lens investing through Vanguard Group is a great place to start if you want to invest using a gender lens. They offer a mutual fund that invests in gender-diverse companies and an ETF (Exchange Traded Fund), which invests in those same types of stocks.
Vanguard summarizes the evidence available on each stock included as part of the gender lens investment portfolio options. This is different from some platforms that use an all-or-none approach.
To choose this option, they use three significant factors:
- Gender Equity Ratio – How barriers to women’s advancement have been successfully cleared by applying this investing lens.
- Income Diversity – How the company’s revenue is divided based on gender, race, ethnicity, nationality, education level privilege, and seniority role.
- Employee Diversity – The availability of women in the executive or supervisory roles compared to men.
3. TD Ameritrade
TD Ameritrade is a company that provides online and mobile trading platforms. It also offers investing services and asset management to individual and institutional investors.
TD Ameritrade’s investments give people of all backgrounds the opportunity to invest. And, you’ll invest in products that align with your personal financial goals.
For example, TD Ameritrade offers gender-focused investment options such as:
- Women’s Investing Program, which helps women build their retirement savings
- Focused Equity Strategy for a green-based investment. This targets companies interested in supporting diversity and sustainability issues.
Some TD Ameritrade investments have gender lens designations, such as the Women’s Investing Program. But, this also depends on how they define gender equity.
For example, their ETF brand allows you to invest in “gender-specific” or “woman-friendly” investing strategies. Here, you choose from various options with specific guidelines touting environmental responsibility, equal pay for women, etc.
Why is Gender Lens Investing not Mainstream
There are many reasons why gender lens investment is not mainstream. Primarily, gender lens investing requires a level of analysis and understanding that is not always readily available. Particularly not to the average investor.
Also, there is a lack of institutional infrastructure and awareness around the concept of gender lens investing. This means that it is difficult for investors to find quality products that fall within this category.
Finally, there is a general perception among many people that gender lens investing is only applicable in a particular set of circumstances.
Gender Lens Investing in Sub-Saharan Africa
Gender lens investing is quite prevalent in Sub-Saharan Africa. Firstly, it is because most of the population there is female. Secondly, women are disproportionately affected by poverty and inequality.
Research shows women account for around two-thirds of the global poor, and they experience higher poverty levels than men. Gender inequality also affects women’s access to economic resources, such as education and land ownership.
Consequently, investing in Sub-Saharan Africa through a gender lens approach brings about the opportunity to invest in companies interested in or already impacting women’s lives.
Wharton Report on Gender Lens Investing
The Gender Lens Investing Report is a research paper by professor Anita Balakrishnan and her colleagues at Wharton. It investigates the factors that are most important to women when investing.
The report finds that the two crucial factors affecting entrepreneurial women are risk tolerance and access to capital. While women tend to have lower risk tolerance than men, they also face fewer barriers to raising capital.
That’s why the Annual Benchmarking Report on Women-Owned Companies (formed by seven Fortune 500 multinationals) recommends a “three-prong” approach. It suggests that investments in any company should be evaluated in terms of;
- Asset management (alternatives managers)
- Government relations
- Board representation
The Wharton authors also recommend three main areas of intervention for gender equity in female-owned businesses. These include:
- Enhancing women’s financial literacy
- Increasing access to capital and benefits in the workplace
- Assessing for gender bias in the corporate policy environment
The main objective of their research is to supplement and conduct further systematic studies among female-owned businesses.
Wharton has issued a report identifying two key factors which drive successful investments for women. First is the risk tolerance approach based on the life cycle perspective. And, the second strategy aims at increasing the availability of capital, both human resource and financial.
What is the Future of Gender Lens Investing
The future of gender lens investing looks promising. This field, which invests in companies and industries that understand gender impacts on business, is growing.
The practice ensures that the products and services that companies provide are accessible and relevant to women and other marginalized groups. Today, many gender lens investor networks exist, such as;
- Catalyst’s Women-Led FinTech Initiative
- San Francisco Girls’ Coalition.
This investing approach has the potential to be a powerful tool in any investor’s portfolio. That’s because investors may make more informed decisions on investment opportunities. This will be based on their personal and professional goals, values, and audience-specific needs.
