The Benefits of Putting our Feminism into our Finances
(Above photo – Kristin speaking with Nia strategic advisors)
Investing with a Gender Lens is not new. Many of us have been at this for a while now. And yet 2023 is the year we stand to make significant progress in bringing more balance to both our finances and to corporate America and beyond. As a woman, I value efficiency, and as a female portfolio manager, I love the win-win that using a gender lens brings to our investment process.
What Do We Mean by Gender Lens?
Gender lens investing is an approach to investment due diligence that seeks to incorporate gender considerations into investment decision-making. This process can involve investing in companies that include products or services beneficial to women or girls, that prioritize gender equality and women’s empowerment, and/or that have women in leadership positions. Looking for gender balance can literally entail counting the women in the C-suite, or on a board of directors.
Investing with an eye for equality, as a way to enhance portfolio decisions, means incorporating women as important factors for running a company–both because these are important societal goals, and because diversity and inclusion can be de-risking factors.
Investing with a gender lens can be a source of alpha, bringing financial benefits to investors including:
Higher returns: Studies have shown that companies with greater gender diversity tend to outperform those with less. From higher stock prices, to return on equity, diversity can be an alpha driver. MSCI, for example, found that companies with strong female leadership had a return on equity (ROE) of 10.1% per year, compared to 7.4% for those without.
Lower risk: Companies with diversity in leadership are also found to be better at managing risks, such as reputational damage or legal issues related to workplace discrimination or harassment, working to protect investors from potential losses.
Greater innovation: In this age where many sectors and systems require disruption, gender diverse teams are more likely to foster innovation and creativity, which can lead to new products, services, and processes that can boost a company’s ROI and overall financial performance.
Improved corporate governance: Companies with more women on their boards tend to have stronger corporate governance practices, including more effective oversight of management and better risk management.
Increasing demand: The growing demand for investment products that consider gender equality and women’s empowerment, particularly among younger investors and women themselves sends a market signal which can actually help drive up the value of companies that prioritize diversity and equality.
The purpose of gender lens investing is not only to achieve financial returns. Investors can also create positive social impact by supporting gender equality and addressing gender-based disparities, serving to raise awareness of the importance of women’s voices being included and heard.
From the myriad celebrations of Women’s History Month to the growing body of research highlighting the business case for diverse leadership, those of us looking to change the face of finance have some strong winds in our sails. Let us continue to put our feminism into our finances to ensure that our money is having the impact we are hoping to see in the world. Now is the time to invest with a gender lens.
What Does it Mean to Invest with Feminist Values?
From our consumer activity to our investment portfolio, it is time to align our assets with our goals for gender equity. Each one of our dollars has an impact in the world, from our banking decisions to our bond and public equity holdings. For those just getting started, here are a few ways to ensure we are leveraging and aligning our portfolios with a gender lens:
- Do all of the companies in your portfolio include women in leadership? Research tells us there is a need for greater diversity at the board and executive leadership in all sizes of companies. Up until recently the onus has been on women to prove that inclusion is a good business proposition. Nowadays, instead of seeing women as a risk factor, the tide is turning toward viewing inclusion as a competitive advantage. Moving forward in this age of inclusion, I believe the burden will move toward men to justify an all-male leadership team. In the meantime, we can send a strong message by voting with our dollars. At Nia, we select only those companies that include women in leadership. We also use our platform and our investor voice to share the accumulating research on women in corporate leadership, encouraging some of our companies to increase their gender diversity numbers.
- Are your investments providing women access to capital? Financial inclusion is a significant part of how we will achieve gender equity. Currently, women receive only 4 percent of venture capital funding. As investors, we all need to check our biases to ensure we are directing capital to women, and not missing opportunities by inadvertently excluding this half of our population of startup businesses. Is your bank providing loans to women entrepreneurs? Are the lending companies in your portfolio on board to lend to women and women-owned businesses? Have you checked out Investibule? This innovative investment platform highlights crowdfunding investment opportunities for women entrepreneurs.
- Are the companies in your portfolio producing products and services beneficial to women and girls? It is said that companies with women in charge hire more women. This is a good thing. While leadership opportunities are essential for both a company’s financial bottom line as well as broader inclusion goals, as investors and advisors, it is also important to select companies that have women in mind. To transition to the next just, sustainable, and inclusive economy, those companies that are actively innovating on behalf of women and girls need our investment. From avoiding harmful companies to investing in solutions-focused companies such as those addressing renewable energy, affordable housing and health care solutions, we can use our investment portfolio to invest in a world that works for everyone.
- When evaluating companies in which to invest, company employment policies matter. Are you investing in companies with generous family leave, making it easier for women to excel at their career while also raising a family? Do the companies in your portfolio have diversity goals, as well as policies and practices in place to help them achieve their plans?
- When selecting wealth management services and investment funds, are you choosing female investment advisors and portfolio managers? To change the face of finance for future generations, we’ll need to bring a gender lens to all levels of our investment decisions. The good news: female managers have been shown to outperform their male counterparts.
- Are you using your investor voice for shareholder engagement? At Nia, we view proxy voting as both a shareholder right and a responsibility. Corporate engagement is part of our due diligence process. From diversity in board leadership, to CEO pay, to ending forced arbitration in employee contracts, to workplace equity we can all use our investor voice by voting proxy statements in alignment with fair and equitable corporate policies and procedures.
By bringing a gender lens to the investment process, women and men alike can use their assets to bring about more balance and work toward equality while also reaping the potential benefits of financial returns associated with inclusion.
Article by Kristin Hull, PhD, Founder and CEO of Nia Impact Capital (www.niaimpactcapital.com), a women-led Registered Investment Advisor investing at the intersection of environmental sustainability and social justice. Nia is leading the charge to change the face of finance by hiring and training women and people of color in sustainable and transformative investing. Kristin founded Nia to make it easier to invest at the intersection of environmental sustainability and social justice and has subsequently launched Nia’s Growth and Dividend portfolio and is currently building a US strategy to address racial equity.