The growing and undeniable value of investing with a gender lensMar 08, 2022
Gender lens investing plays a critical role in achieving gender balance. There are many benefits to investing with a gender lens, so why not incorporate the perspectives of 50% of the population? Let's use our money to empower women and advance gender equity, alongside achieving financial returns.
When it comes to investing ethically, there are a myriad of factors and considerations to take into account. Broadly, we can refer to these as environmental, social and governance (ESG) factors, that give us a framework to explore a company’s policies and practices. In doing so, it can assist to eliminate exposure to companies who are underperforming in their commitment to these ethical themes. We can also look to the Sustainable Development Goals (SDG’s) for a series of internationally agreed upon areas that the world must improve upon for ongoing sustainable development. One of the SDG’s that is becoming a powerful and necessary force to consider in ethical investing, is SDG 5, ‘Gender Equality’.
SDG 5 aims to improve gender equality by closing the gap between genders, worldwide. It looks to ensure equal opportunities, equal rights and equal access to resources, technology and financial services to empower women of all ages. It also seeks to eliminate discrimination, violence, harmful practices and exploitation that are rife for women all over the world.
Source: United Nations
By contributing to SDG 5 by addressing gender inequality, we are inherently supporting other SDGs given the flow-on effect of female empowerment to all facets of life, namely poverty, education, sustainability and economic growth.
A key method in eliminating unwelcome practices against women and girls is through our investment choices. Investing with consideration of a woman's right to equal treatment, can enhance and improve that which empowers and supports them. As organisations disclose more information about their company, culture, policies and ethics for the public to find, it has become easier to investigate how a company is performing through a gender lens.
When making the case to your client about the benefits of investing in support of women, there are four main benefits that can be referred to.
1. Ethical Benefits
Investing in support of 50% of the world’s population, simply makes good sense. It is fair and moral. Oftentimes the social justice consideration is more than enough to make a strong case for diversifying a portfolio to include investments selected with a gender lens.
2. Business Benefits
The main focus of gender lens investing to date, has been to assess companies in terms of boardroom and C-Suite positions held by women. The business benefits to a company prioritising women on their boards and in their higher management positions has been proven time and time again. It has been shown that women in leadership roles can increase a company’s profitability and productivity, and provide diversity that promotes creativity and improved outcomes in all areas. It also makes good business sense to consider half of the world’s population, and their perspectives, in the development of a company's goods or services.
"When women fuel finance, finance fuels women" - Domini
3. Investment Benefits
Companies with a gender-diverse company structure demonstrate lower risk and higher returns. There is alpha in gender diversity and equality, and the global public market for gender lens investing is growing.
4. Economic Benefits
Truly empowering women, boosts the overall economy. Gender inequality asymmetrically disadvantages half of the world’s population and a lack of education, healthcare and safety affects everyone. It keeps women disempowered, limit’s the life chances of their children and slows down economic growth. A United Nations Global Compact report estimates that advancing women’s rights can add $12 trillion to global growth.
So how do we look with a gender lens to invest better?
There are two primary strategies involved in investing with a gender lens.
- Gender Lens 1.0 Invest specifically into funds that apply a gender lens, such as funds that invest in companies with female founders and CEOs.
- Gender Lens 2.0 Invest into funds that prioritise businesses that support gender equity through organisational policies and practices.
Investing with a Gender Lens 1.0 means investing into funds that are actively promoting women to C-Suite roles. It means investing in female-founded companies and businesses. It includes researching how a company is ensuring adequate women in board positions and higher management roles. Gender Lens 1.0 is a great start for gender lens investing and is a positive step towards a sustainable future, and gender balance in leadership positions.
However, it is now generally accepted that to truly achieve gender equality, investors must delve further into a business and apply the evolving Gender Lens 2.0 strategy. This entails examining the organisation's policies and practices in order to identify and remedy any biases that may exist. Bias can be found not only in the culture and underlying framework of an organisation, but also among its employees and not just higher levels of management.
Gender Lens 2.0 investigates how a company supports its female employees on parental leave, whether it provides equal pay for equal work and how it develops products and marketing strategies that empower women (for example, clothes washing detergent and car oil marketed equally to men and women). This even goes as far as ensuring suppliers and collaborators with an organisation are performing to the same high standards and expectations.
Investing with a gender lens should be a standard practice within the realm of ethical investing and ultimately all investing. The benefit for the economy, the market and equality for women and girls everywhere is undeniable and growing at a promising and steady rate. A sustainable future demands that gender lens investing becomes a staple in your investment strategies, and over 50% of the world’s population deserve to feature prominently in a diversified and well balanced investment portfolio.
The Ethical Advice Accelerator covers investing with a gender lens and is the ideal program for financial advisers in Australia to get the skills and confidence to provide ethical investment advice, and proactively lead conversations with clients about sustainable investing.
If you would like to learn more about the Accelerator program, you can discover the 5 steps to ethical advice, and download the curriculum, here.
As we contemplate International Women's Day, it's a good time to take a breath - and critical to do so all year - to consider how far we've come and reaffirm our commitment to gender parity. Gender lens investing can play a critical role in achieving gender balance. Some organisations have already begun to lead the way, by incorporating the SDG’s and ethical considerations into their investment analysis and decision-making process.
What can you do to take a step towards supporting this area?
This information is issued by Ethical Invest Group (EIG) (ABN 29 238 432 149) in relation to the trend toward sustainability in financial advice.
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