What is Gender Lens Investing?
Gender Lens Investing is a relatively new strategy that has started to gain traction over the last decade. It is just one of the many types of impact investing, also known as socially responsible investing. As one of the most rapidly growing strategies, it aims to integrate gender-based factors into investment decisions. The purpose of this line of investing is to couple economic returns with advancements in gender equity. It already affects the investment decisions for over USD $132 billion in money manager assets and USD $397 billion in institutional investor assets, according to the 2018 Common Fund for Commodities Annual Report. Aside from institutional investors, even average retail investors are applying a gender lens to their investment decisions. While the change in social investing isn’t immediate, an increased amount of impact investors are slowly aligning with a sustainable development agenda.
Broad categories of gender lens investing
As highlighted by the Common Fund for Commodities, there are two broad categories of gender lens investing:
- Investing with a specific focus to address gender inequities or to promote gender equity
- Investing that incorporates gender into investment decisions
A detailed look inside of these two broad categories can be found on the Global Impact Investing Network’s (GIIN) website.
Investing with a specific focus to address gender inequities or to promote gender equity includes investments in women-owned or women-led firms, firms that elevate gender equity, and firms that offer goods or services that substantially improve women’s lives.
The second category of gender lens investing focuses on a process that identifies gender advancements within a company, specifically those that promote workplace equity. Whether that be in the aspects of staffing and hiring policies, the executive management or along the company’s supply chains. This includes pre-investment activities such as researching and analysing, as well as post-investment activities by monitoring and evaluating the company consistently. To learn more about the various factors investors should be examining prior to making a decision, readers are encouraged to check out Gender lens impact investing: a catalyst for change in commodity value chains.
Why should impact investors be adopting a gender lens strategy?
There are a variety of reasons why we should apply a gender lens to our investment decisions, which includes addressing social inequities.
It has been proven multiple times over that gender diversity improves investment outcomes, especially in executive management. As McKinsey & Company demonstrated in their Women in the Workplace 2020, increasing women’s participation in firms leads to increased productivity and innovation, better decision-making, higher employee satisfaction, and lower employee turnover. Global companies have researched these aspects and how they have factored into a company’s performance and value. In general, gender diversity in executive management leads to more effective businesses compared to companies that only have predominately men in executive management, as mentioned by the Harvard Business Review.
Women tend to outperform men, especially when it comes to leading an organization as the CEO, or simply in the C-suite. In one of the most comprehensive reports to date, the S&P Global Market Intelligence Quantamental Research Team has performed a study on the performance output and capabilities when firms have appointed female CEOs and CFOs.
Some of the highlights of this report are listed below.
- Firms that have appointed women as the CEO and CFO have experienced a superior stock price relative to the market. Within 24 months of the appointment of a woman in the C-Suite, firms saw an increase in stock price momentum by 20%, 6% increase in profitability and 8% increase in stock returns. These results are said to be economically and statistically significant.
- Firms with a higher percentage of gender diversity among their board of directors were more profitable and larger than firms with boards that have low gender diversity.
Overall, gender lens investing is quickly becoming a popular method of investing, as it proves to be beneficial to both advancing gender equity as well as increasing the return on your portfolio.
Adele Berrizbeitia is an RBC Career Launch Associate working with YWCA Canada’s Public Policy & Strategic Communications Team from September to December 2020. Adele is a finance graduate of Concordia University’s Bachelor of Commerce program.