Gender Lens Investing 101
Written by: Hannah M. Lewis - Communications & Research Advisor
Edited by: Kim Kastorff - CEO/Founder
Beyond our moral and social responsibilities - why has investing in women become a smart investment strategy? Microfinance institutions often target women for microloans because they’re a proven lower credit risk and more likely to spend earned income on their family’s health and education. A recent study by EY and the Peterson Institute found companies in which women hold 30 percent or more of corporate leadership positions have the potential to increase their net margin by up to six percentage points. McKinsey Global Institute released a study that claims $12 trillion (yes, trillion with a “t”) could be added to global GDP by 2025, just by advancing women’s equality.
So, what does “gender lens investing” mean?
First, to clear up a common defense - gender lens investing is not a male versus female, zero-sum game. The use of the word gender (rather than women) in the term is intentional; the negative impacts of gender inequality in social and financial systems affect both women and men. We need to provide opportunities for both genders to break the status quo, so that when women are provided equal opportunities in society, everyone will benefit. Both men and women need to work together as entrepreneurs, leaders, and investors to move this field forward and increase gender equality...and to do this we need to also include men in the conversation.
The goal is greater inclusion for both men and women, all of whom can benefit from gender lens investing. By considering gender as a category of analysis in our investment decisions, we can achieve better outcomes for investors and for society as a whole. So, it doesn’t mean narrowing your investment options. On the contrary, it examines how focusing on gender can achieve both a social impact and financial return on your investments. Since power dynamics within systems and institutions tend to negatively affect females, gender lens investing focuses on the positive impacts from investing in women. Advocates claim that through understanding the way gender affects your investments and your investments affect gender, you can make more effective investment choices.
Investing with a gender lens is similar to looking at your investments through an environmental lens. You can positively impact the environment through your daily purchases (e.g. detergents, recyclable materials), or by selecting Certified B Corp companies for your services/products, or a more passive approach in an environmental or social impact fund. A gender lens works in the same way. Even if you choose not to analyze your investments with a gender lens, there are still impacts on women and girls from your investments. So the choice is yours - you can choose an active or a more passive approach to your daily decisions and actions; or you can ignore these decisions altogether. However, you may miss very important opportunities, risks, and biases in your investment portfolio...and the worst decision is to inadvertently create more harm and inequality towards women.
In order to fully understand how to create a positive impact, let’s look at some concrete examples of how to invest with a gender lens. Criterion Institute, a thought leader and pioneer in the gender lens investing field, points to three primary investment objectives:
1) Access to capital
One gender lens is to increase access to capital for women entrepreneurs. In 2014, less than 12% of venture capital funding globally went to women-led businesses. However, a 2009 study found that venture-backed companies led or co-founded by women had annual revenues that were 12% higher than companies run only by men. They also used an average of one-third less committed capital and had lower failure rates. This doesn’t mean that companies with women leaders are always the best bet when it comes to VC or private equity investment. However, through recognizing the biases in our access to capital, investors can recognize investment opportunities that offer strong returns and promote women’s equality.
2) Workplace equality
By working with a trusted financial advisor or impact investing fund manager, or by actively reviewing annual reports and company policies - you can better invest in companies (e.g. Certified B Corps) that promote gender equity in the workplace, including women in senior-level positions and on boards, as well as firms with policies to support women’s needs such as health care, maternity leave, etc. A 2011 study by Catalyst found that companies with three or more women board directors outperformed companies with no women on their board by an 84% on return on sales (ROS), a 60% on return on invested capital (ROIC), and a 46% on return on equity (ROE). It appears that investing in the diversity of leadership and working styles actually makes good business sense.
3) Products and services
A relatively easy, but often overlooked option, is to invest in companies that create products and services which benefit women and girls. These businesses do not need to be women-led. Examples include clean cook stoves, affordable feminine hygiene products, and services and products that improve maternal health or access to education. Not only do these products and services likely improve the lives of women and girls, they often address market failures and gaps, which can mean high-growth investment opportunities.
Want to learn more about the field of gender lens investing? Check out these resources:
Criterion Institute published a report called “State of the Field of Gender Lens Investing” in October 2015. Don’t be deterred by its length—this report provides a comprehensive overview of the field, including its history, a strategic roadmap for the future, and key players. You can also check out the “Revalue Gender” section on Criterion’s website for blog posts, videos, and information on upcoming workshops and events.
Women Effect, a new initiative started by Suzanne Biegel, is a global membership community that promotes deploying or managing investment capital with a positive women effect. Women Effect’s website also has resources to learn more about the field and how to become involved with their work.
Impact Alpha has a section on their website called “Gender Lenses” with articles and resources for those interested in the gender lens investing field.
Veris Wealth Partners released a report in early 2015 called “Women, Wealth & Impact: Investing with a Gender Lens 2.0.” It provides an overview of the field and key players; it also delves more deeply into investment options across asset classes with gender lenses.
Calvert Foundation’s Women Investing in Women Initiative (WIN-WIN) offers women-focused investments for everyday investors, as well as some resources for those looking to learn more.
Also, check out these articles on gender lens investing from the Stanford Social Innovation Review: “The Rise of Gender Capitalism” and “Belief-based Social Innovation: Gender-Lens’ Next Frontier.”
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Kim Kastorff has 15+ years of international finance experience and two Masters degrees - MBA and a Masters of Research in Impact Investing. Specific areas of expertise are in banking, financial and investment services, energy and sustainability, consulting, and financial education. Years ago, I told my students the purpose of business is to "Maximize shareholder returns." Today, it seems that stakeholders care about both "Maximizing financial + social impact." So, I am dedicated to helping impact investors and entrepreneurs adjust and remain competitive in this new environment. My goal is to promote impact investing and financial inclusion as we collectively strive for a more educated and financially sustainable global environment.