Looking at Gender Lens Investing

August 28, 2019  | by Michael Rowland

Investment Strategy | Responsible Investing

Michael Rowland is the Commonfund Institute Summer Intern.  He is a rising senior at Case Western Reserve University. He is majoring in Finance and Accounting. 

What is Gender Lens Investing?

Gender lens investing has garnered significant traction in the last decade. Broadly speaking, gender lens investing aims to achieve financial returns and benefit women.  Given the breadth of the definition, gender lens investing can consist of a myriad of different activities. Global Impact Investing Network (GIIN), a key player in the rise of impact investing, outlines these activities as investing in women-owned or led-enterprises, investing in enterprises that promote workplace equity, and investing in enterprises that offer products and services that substantially improve the lives of women and girls.[1]

Why is Gender Lens Investing Important?

Gender lens investing is seen as a crucial step in the fight for women’s equality. It is an important tactic for balancing the gender gap in finance, redistributing capital to women, and promoting women’s issues.

Out of all industries, the field of finance is particularly male-dominated. An abundance of data illustrates this inequality. According to Catalyst Research, females comprise 54.5% of the U.S. financial services industry.[2]  However, this figure decreases dramatically as you ascend the corporate pyramid. At the board level, women only occupy 27% of all S&P 500 seats.[3] Many organizations that engage in gender lens investing aim to close that gap by contributing to organizations that support women in positions of leadership, with the end goal of balancing the gender representation disparity in the corporate world.

Gender lens investing is also important because of the disproportionately low allocation of capital to women. According to Josh Lerner, Harvard professor and author of the 2018 Diverse Asset Management Firm Assessment, women-owned firms represent 9.9% of mutual funds, but only comprise 0.8% of the total industry’s assets under management (AUM).[4] It is worth noting that the 9.9% is the highest allocation to women portfolio managers across investment strategies tracked by Lerner. This disproportion persists among other investment structures such as hedge funds, private equity, and real estate. This imbalance perpetuates the gender gap, creating barriers to entry for women, discouraging women from creating businesses and assuming leadership positions. Gender lens investing aims to rebalance capital contributions and transfer more funds into the hands of women. This further enables women to succeed in the investment management industry and increases diversity of thought and access to new ideas and opportunities.

Lastly, gender lens investing includes investing in organizations that support women and women’s issues. Examples of these include investing in female oriented products, companies that improve health and education for women, and organizations that mitigate problems effecting women.[5]

What is the Future of Gender Lens Investing?

Gender lens investing is experiencing an upward trend. According to Stanford Social Innovation Review, “assets under management with a gender lens mandate grew 85% in the 12 months prior to July 2018, as global investors added more than $1 billion to a range of gender-smart strategies.”[6]

This upward trend is expected to continue. An even larger increase in gender lens investing is likely in the coming years as more private wealth is transferred to the hands of women. According to Boston Consulting Group, between 2010 and 2015, private wealth held by women grew from $34 trillion to $51 trillion. This trend is expected to continue, with women holding $72 trillion in private wealth by 2020.[7]

Many firms are beginning to recognize the importance of gender equality and are rolling out their own programs to contribute. Commonfund, for example, partners with Girls Who Invest and 100 Women in Finance to create pipelines and support for women interested and already working in the financial services industry.

Gender lens investing is projected to increase in prominence, especially as movements such as #metoo and #whyistayed dominate headlines. It is not without its challenges. Instilling more women in leadership positions, rebalancing the capital disparity, and redistributing funding to women-friendly organizations requires sustained effort. Nonetheless, gender lens investing is considered another step toward achieving gender equality.

[1] Overview, www.thegiin.org

[2] Quick Take: Women in Financial Services, www.catalyst.org

[3] There is Now a Woman Board Member at Every S&P 500 Company, www.cnbc.com

[4] 2018 Diverse Asset Management Firm Assessment, https://knight.app.box.com, Josh Lerner

[5] Gender Lens Investing: Impact Opportunities Through Gender Equity, www.cambridgeassociates.com

[6] Gender-Lens Investing Strategies for 2019, https://ssir.org, Emilie Cortes

[7] Investment by Women, and in them, is Growing, www.economist.com

 

Authors

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Michael is the Commonfund Institute Summer Intern. He is a rising senior at Case Western Reserve University, majoring in Finance and Accounting.
Michael Rowland
Intern, Commonfund Institute
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Disclaimer

Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.