Public perception of gender equality issues follows a repetitive cycle. We have all seen it. A scandal erupts, or a study uncovers another damaging disparity. Think coins are written, hands are twisted, and companies promise to do better. Then the audience’s attention shifts until another cycle begins. Real change comes very slowly, if at all.
This is especially true in the world of investment and investment finance. These are predominantly male domains where inequalities are growing the higher you go. These are well-known issues, and many companies have declared their intention to tackle various forms of inequality, both in their behavior as employers and in their influence as investors. But again, change comes slowly.
So what’s the best way forward?
While hiring more women, especially in positions of real influence, is important, it is not enough. In finance and investment, the most powerful approach to achieving parity may be investing with a gender lens. There are many reasons why different companies and businesses might adopt a gender lens: for example, it can benefit people around the world, help develop new markets and neglected sectors, and improve the overall quality of life.
And then there’s the fundamental reason why any investor should support investing from a gender perspective: it’s a good investment.
What is Gender Lens Investing?
Investing with a gender lens is a form of impact investing. Such investments seek to create a beneficial social or environmental impact alongside the expected financial return. While green funds and other similar funds and investments have been around for a while, what sets investing apart from a gender perspective is that it represents the difference between an investment that arrive at to benefit women and girls and an investment that, from the beginningEast intended for benefit women and girls. Investing with a gender lens is therefore a framework in which investors can create real impact and do so in a substantial way.
Addressing equality and impact through investing with a gender lens means investing in:
- Businesses owned or led by women
- Companies that promote professional equality
- Companies whose production improves the lives and economic prospects of women and girls
Gender-lens investing has a wide range of goals, and individual efforts can focus on specific aspects, regions, and opportunities. But close the “gender gap” both in the beneficiary company and in the company of the investor is the main mission. Investing with a gender lens approaches diversity from the ground up. He tries to avoid “genderwashing”, or bringing in women for looks, and seeks to empower them on investment teams and place them in positions of real authority.
The benefits of investing with a gender lens
The business and investment world is discovering, albeit slowly, that diversity, gender parity, quality of life, etc. are not just buzzwords. They have a real impact on the bottom line. Studies have repeatedly shown that companies with various founders, especially when women are included from the start and have real influence as the company grows, perform better in the long term.
In reduced numbers, when these conditions are met, these companies outpace the market, get higher returns and make things better for women in the future. Parity investment teams beat expectations by 10% to 20%. The International Finance Corporation found that companies with gender parity on their leadership teams had ratings up to 25% higher than teams with low gender diversity.
This is all quite logical. Business is all about innovation, the next big idea. And no company will be innovative, creative and dynamic if business leaders have the same education, the same MBA, the same internships and the same perspectives as their colleagues. It’s not about abandoning this traditional path to business success. It’s about having different ideas that can build on each other and lead to something new. This diversity of thinking is at the heart of innovation at the corporate and board level, as shown in Blue Ocean Strategy And Governance reinvented.
Trends, opportunities and challenges
Considerable efforts are underway to ‘mainstream’ investing through a gender lens, to move it from a niche investment opportunity to a strategy comparable to any other. Although there is still a long way to go to achieve this, it is a growing field. Alternative investment strategies that focus on the gender perspective account for nearly $8 billion, up two-thirds from 2018. The G7 has pledged to raise an additional $15 billion. Things are moving in the right direction and opportunities abound.
The gender-lens investing mindset can find growth opportunities outside the scope of traditional investment firms. For example, African women only manage 6% of funds, often in the microfinance sub-sector. Women own 40% of African small and medium enterprises (SMEs), but only 20% have access to traditional financing channels. The gap here is over $40 billion, and investing with a gender lens can help close it.
India represents another opportunity where investing in a gender lens can make the difference between lip service and real change. Many business leaders in India expressed interest in increasing gender equality. But the goal remains elusive and in some respects we are losing ground. Between 2017 and 2019, the number of Indian start-ups with at least one female founder fell from 17% to 12%. And among start-up founders who receive seed and beyond venture capital funding, less than 1% are women. Investing with a gender lens directly addresses these issues.
This is especially important in the age of COVID-19. The pandemic has created a kind of global restoration in the progress made by women in business and in the workplace. Traditionalist gender roles have led women to once again take on a disproportionate share of domestic responsibilities. Systemic inequality has worsened.
GLI and GEM: a case study
Investing with a gender lens is not superficial. This is not a band-aid or a public relations strategy. It can help businesses and investment companies make a beneficial impact. A shining example is Mennonite Economic Development Associates (MEDA)an international economic development organization that fights poverty.
MEDA uses the Gender Mainstreaming Framework (GEM) to help their mission. The GEM Framework “is a practical manual and toolkit for assessing gender equality and identifying, implementing and measuring gender mainstreaming strategies within companies”. Good gender-lens investing takes a holistic approach, and GEM can help mainstream gender equality with other impact investing effortssuch as environment, social and governance (ESG).
MEDA’s GEM Self-Assessment is an excellent first step for companies with gender equality goals. Companies can use it to measure their internal and public behavior on gender equality, identify areas where they need to improve, and then assess the impact of any changes they implement.
GEM is designed to be scalable and can serve companies and funds of all sizes and specializations, from private equity firms to technology accelerators and NGOs.
“Never leave money on the table.”
Basically, this saying reminds us not to pass up the opportunities that come our way. It’s high time the world of investment and finance realizes that by excluding women in the first place and dragging their feet on their active inclusion, it has left a huge amount of money on the table . And he did for decades.
If women were to participate on an equal footing in the labor market, it could add $28 trillion to annual global GDP. The investment industry must seize this opportunity. As more and more companies realize how much gender inequality is costing us all, they won’t leave that money on the table for very long.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
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