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4 ways to invest in women’s progress

Be part of helping to change the status quo — and pursue growth — through gender lens investing

 

MUCH PROGRESS HAS BEEN MADE on the women’s equality front. But as long as the wage gap and unequal representation of women in management and government persist, there’s more to be done. The good news is that investors are playing a role in leveling the playing field for women.

 

A growing number of people are coming to realize that investing in companies that support women’s full inclusion may benefit their portfolios as well as society.

A growing number of people are coming to realize that investing in companies that support women’s full inclusion may benefit their portfolios as well as society. In fact, research from the Wharton School indicates that public market assets under management invested in support of gender equality — called “gender lens investing” — surpassed $4.8 billion in 2019, more than doubling the amount from the previous year. 1

 

So what is gender lens investing? “It’s not small, soft and pink,” says Jackie VanderBrug, head of Sustainable and Impact Investment Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank. “It’s the deliberate integration of gender-based data into financial analysis, with the expectation of finding additional opportunities and uncovering and mitigating potential risks.”

Let’s break that down. From a practical perspective, it means investing in:

 

1. Businesses founded, run or funded by women. VanderBrug notes that while more women are starting businesses, the share of funding they receive remains low. According to Crunchbase, only 2.3% of venture capital funding went to women-led startups, while 89% went to male-led teams (and the remainder to male-female teams). 2

 

2. Companies whose policies encourage equal pay and opportunity. More and more companies are taking steps to support full inclusion of all employees. For instance, a company might choose to drop sexist stereotypes from its advertising, provide family leave, review promotion processes or offer STEM (science, technology, engineering, mathematics) tuition reimbursements, knowing that women receive a premium for working in STEM (salaries are 105% higher than those for women in non-STEM fields) but are more likely than men to work in the “STEM periphery” — roles in which they can apply STEM skills and expertise but are lower-paying than traditional STEM occupations. 3

 

Gender-diverse companies are more likely to outperform their peers, a distinction even more pronounced for ethnically diverse companies. 4

3. Companies that make gender equality — from top management to the ground floor — a priority. According to VanderBrug, companies that exhibit greater gender diversity not only among senior leadership but also in the rest of the workforce may experience better performance, reduced turnover and higher employee engagement, all predictors of higher earnings. She points to data from McKinsey showing that gender-diverse companies are more likely to outperform their peers, a distinction even more pronounced for ethnically diverse companies. 4

 

4. Companies that produce products or services that are heavily weighted toward benefiting women. VanderBrug points to women’s health and the care economy as places of innovation, but also to areas such as computer science, including the efforts of one company to create software that is free of gender biases. She also notes that women’s accumulated financial assets are rising faster than men’s and could reach $93 trillion by 2023. 5

 

Gender lens investing, according to VanderBrug, is “a way to identify areas of opportunity in the search for enhanced investment returns.” 6 If you’re interested in exploring it further, she recommends meeting with your advisor and asking how you might increase your portfolio’s exposure to the growing economic power of women.

 

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1 The Wharton School, “Project Sage 3.0: Key Insights from the Latest Gender Lens Investing Report,” 2020

2 Crunchbase, “Global VC Funding to Female Founders Dropped Dramatically This Year,” December 21, 2020

3 Drew M. Anderson, Matthew D. Baird and Robert Bozick, “Who Gets Counted as Part of America’s STEM Workforce? The Implications of Different Classification Approaches for Understanding the Gender Gap in STEM,” RAND Corporation, October 2018: p. 17-19

4 McKinsey, “Diversity Wins: How Inclusion Matters,” 2020

5 Boston Consulting Group, “Managing the Next Decade of Women’s Wealth,” April 9, 2020

6 Past performance is no guarantee of future results.

 

Opinions are as of the date of this article (10/19/2021) and are subject to change.

 

Investing involves risk including possible loss of principal. Past performance is no guarantee of future results.

 

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.

 

Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

 

Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.

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