This might surprise you, but today all investors are “gender-lens investors,” even if they’ve never heard the phrase. It’s just not usually the gender you think.
Gender-lens investing. What is it? Is that really a thing? And … does it really matter?
Yes. We believe it is and it does. And here’s why.
What is gender-lens investing?
Essentially, it means intentionally investing while considering gender data, analysis, and impact to uncover risks and opportunities. It means asking how an investment might impact gender, whether it supports, advances, or worsens gender balance, diversity, and inclusivity — and then using the findings in making investment decisions.
Traditionally, the impact of gender in investing isn’t considered, and at best, it’s been limited to investing in companies with higher representation of women on the board and on leadership teams. That’s a great start, but since only 8% of S&P 500 company CEOs are women, the gender impact is limited.
Not fully recognizing the multi-faceted impacts of gender can lead to unexpected risks, as well as overlooked opportunities. Investing with a gender lens doesn’t just mean unilaterally investing where there are more women. It means carefully considering and understanding how gender balance (or more often the lack of it) impacts a company’s business and future financial performance. Along with exposing blind spots, gender-lens investing can potentially uncover new opportunities for both financial returns and positive social returns.
Why gender-lens investing matters
In other industries, ignoring gender can have critical, even life-or-death consequences. For example, women are 47% more likely to be injured and 17% more likely to die when they get in a car accident because most vehicle crash tests are implemented with crash test dummies that are male-sized with male features. In health care, many drugs aren’t tested on women, which means women may be taking medications that don’t work for them or cause different side effects.
While we don’t encounter such serious consequences in investing, considering how gender is impacted (or excluded) when investing can help investors manage and uncover hidden risks. For example, when you invest in a company, you are by default supporting its products and services, as well as its governing policies. If that company makes products that don’t meet the needs of women, its market opportunity won’t be as expansive as a competitor that does. Or if a company has employee policies that don’t support women, like parental leave and pay equity, eventually its women employees will seek employment elsewhere. And that means an exodus of talent and diversity — which can lead to underperformance.
The data shows that companies with more women leaders and diverse teams outperform their peers. A report from Credit Suisse showed strong correlations between boardroom diversity and share price outperformance as well as higher cash flow returns with less risk for companies with more senior women managers. We know the importance of diversification when investing. And that should extend to the workplace as well: Studies show that companies with more diverse teams perform better.
The business case for gender-lens investing
The data shows that numerous gender biases and gaps still exist — not only when it comes to deploying capital, but even within the financial industry itself.
2% of venture funding goes to women-led start-ups
99% of assets under management in the industry are owned and led by white men
73% of women entrepreneurs cited lack of capital as their top business challenge
Women’s health accounts for only 4% of the overall funding for research and development for health care products and services
Yet, the research shows that …
Women fund managers outperform men
Start-ups with at least one woman founder perform 63% better than all-male founder teams
Women are half the population and make 80% of all health care decisions
The economic burden for women’s diseases is more than $500 billion
What we’ve found at Ellevest is that gaps — whether they are gender gaps, racial gaps, or economic gaps — often represent areas of great opportunity. That’s because unmet needs create demand that can help drive not only investment returns but overall economic growth.
McKinsey estimates that the global economy could be $28 trillion larger if gender employment and pay gaps were closed. Women’s health issues are woefully underfunded. Studies show that in nearly three-quarters of cases where a disease primarily affects one gender, “men's diseases” are overfunded, while “women's diseases” are significantly underfunded. Cardiovascular disease, for example, is the number-one killer of women in the United States, but only about a third of participants in clinical trials for new treatments for cardiovascular disease are women.
By underfunding women's health issues, we aren't only doing women a disservice, but we're potentially missing out on a significant economic opportunity.
How big? A recent study looked at what might happen if the funding for women’s diseases doubled. The analysis showed that if the budget for coronary disease in women doubled and resulted in just a slight improvement of 0.01% in health outcomes, there would be a return on that investment of 9,500%.
There’s a common misperception that investing in women is at the expense of men or other groups. The reality is that the economic pie isn’t fixed; it can grow. And the beauty and potential benefit of closing gaps is that the whole pie gets larger — and that’s a win for everyone.
How (and why) Ellevest takes gender-lens investing one step further
Representation on the board and on leadership teams is only one of many gender gaps we believe we can address through investing. Here at Ellevest, we want to go further. We take an expanded and holistic approach to gender-lens investing by considering gender more holistically. We favor investments in companies with policies and practices that potentially benefit women (like gender pay equity), companies that make products that positively impact women’s lives, and those that provide services that benefit women most. We also make investments that get money directly into the hands of women business owners, entrepreneurs, and asset managers.
So bottom line: We believe investing with a gender lens can be a way to use your financial power for good. It’s good for your portfolio’s diversification and potential returns, good for business, good for the economy, and good for everyone — children and adults, and people of all genders.
Building our gender-lens investing approach into Ellevest Impact Portfolios
You can invest with a gender lens through Ellevest Impact Portfolios (our digital offering) or the Ellevest Intentional Impact Strategy (our Private Wealth offering). Our impact investing strategy was built from the ground up to combine robust investment principles with investments designed to support and advance women, potentially offering both financial returns and social returns.
These investments include funds that invest in:
Companies that are highly rated for advancing and supporting women, especially in terms of environmental, social, and governance (ESG) criteria
Provide capital directly to women-owned or -co-owned businesses
Companies that provide services and / or products that help advance women or economically support underserved people
We also have strict standards for the risk / return profiles of the investments we select for our clients’ portfolios, including Ellevest Impact Portfolios. These standards include asset class diversification, low fees, and high market liquidity.
But there are a limited number of funds that meet our criteria for both return potential and social impact. So for Ellevest Private Wealth portfolios (which, by their nature, are more customized), we’re also collaborating with some of the best investment managers in the industry to develop investment opportunities that combine their investment expertise with our criteria for impact with a gender focus.
And back to that “does it matter?” question: This year, Ellevest clients —across both our digital and Private Wealth services —are investing to support:
-
Companies developing health care diagnostics and treatments focused on diseases and health issues that primarily impact women
-
Women founders and women-owned enterprises creating innovative products and services that address environmental and social needs
-
Single-family home mortgages for low to moderate income women borrowers in Michigan, Mississippi, and Rhode Island
-
Small businesses owned by women
… and more.
In essence, we believe that the way we’ve incorporated gender-lens investing into Ellevest Impact Portfolios isn’t just the right thing to do — it’s also the smart thing to do.
Investing to help close gender gaps reaps not only social benefits but economic ones as well.
Who’s on board? Join Ellevest to start investing for impact. Become a client today.
