This week, I had my annual face-to-face meeting with my financial adviser. We converse throughout the year via emails and a rare phone call, but this was the have-a look-under-the-hood summit.
It was my chance to grill her on how my investments were doing, tweak my asset allocation to conform to my conservative growth strategy and discuss where I might redeploy, or add, funds.
What Gender-Based Investing Means
I had one more line item: Gender-based investing. My interest was sparked by reading the new book Gender Lens Investing: Uncovering Opportunities for Growth, Returns, and Impact by Jackie VanderBrug, a managing director at U.S. Trust/Bank of America Private Wealth Management and Joseph Quinlan, chief market strategist at U.S. Trust/Bank of America Private Wealth Management.
Women’s workplace issues matter deeply to me and I am always looking for companies to invest in that are making a difference. It’s called impact investing.
This is investing that is good for your portfolio and it’s also good for the planet
— Jackie VanderBrug, co-author Gender Lens Investing
The overarching concept of gender-based investing is that by finding, and putting money into, companies that support women, you can have a financial and a social impact. You can play a role in: helping women gain access to capital to start businesses, fostering workplace pay equity and supporting firms making products and offering services that advance the lives of women and girls.
As my adviser and I pored over my portfolio (mostly index funds), I realized there wasn’t a whole lot of wiggle room to directly apply my lofty values. But we both agreed that gender based investing was a compelling topic and certainly one that’s been gaining traction.
It’s Not Soft, Pink and Small
After she left, I couldn’t get the matter off my mind, so I called VanderBrug to learn more about gender-based investing and how I could do it without sacrificing my returns. As strongly as I feel about equality and diversity, investing is not charity work for me.
Here’s what I learned from our conversation.
“As soon as I say gender-based investing, people think soft, pink and small,” VanderBrug told me. “And this is not soft. It is adding rigorous analysis to your investment process. It is not pink. It is not only for women. It is definitely not small. You are seeing massive institutional investors dedicating parts of their portfolio in this direction.”
The reason? “There is a growing body of research that female leadership and gender diversity help the bottom line,” said VanderBrug. For example, a 2015 Peterson Institute analysis of nearly 22,000 public companies in 91 countries showed a significant correlation between women at the C-suite level and firm profitability.
The Payoffs for Investing in Firms That Support Women
And here’s some new research showing one reason for that: Women elected to corporate boards tend to broaden the type of knowledge and skills of them. According to findings of Daehyun Kim, assistant professor of accounting at the University of Toronto’s Rotman School of Management, women board members were likely to bring a half-dozen skills important to decision making that weren’t well represented: risk management, human resources, sustainability, politics or government, regulatory or compliance and corporate governance.
Better yet, a Morgan Stanley study found companies with greater gender diversity produced slightly higher returns and lower volatility over a five-year period ending in March, according to Investment News.
Gender-based investing, said VanderBrug, is “a process” for smart investors. And, she added, it’s not isolated to a particular investment sector such as health care. Rather, you should use it as a lens when investing in any sector.
The aim is to find public firms with women on their boards, a female founder, women in key decision making roles or products and services that promote women’s health and well-being.
“This is investing that is good for your portfolio and it’s also good for the planet,” said VanderBrug.
Wall Street Is Doing It
Wall Street agrees. Morgan Stanley, for example, is urging its nearly 16,000 financial advisers to embrace female-friendly investment strategies and to talk with clients about investing in companies that are supportive of women, according to a report in Investment News. Recently, the firm began sending advisers a primer on investing in businesses with women in top leadership roles or that provide products and services benefiting females, according to Lily Trager, director of investing with impact for Morgan Stanley’s wealth management unit. The firm started the initative, Investment News says, after hearing from brokers and clients that they were looking for ideas to invest in companies supportive of gender equality.
Morgan Stanley’s Parity Portfolio — a fund for ultra high-net-worth individuals — uses the number of women on boards of directors as an investment screen.
3 Steps to Begin Gender-Based Investing
But you don’t have to be uberwealthy to put a gender lens on your investment decisions. Here are three steps VanderBrug suggests:
1. Review your current portfolio. Ask your adviser or do your own research to determine how your investments benefit from the power of women. And start looking for ways you can up your gender-based positions.
2. Alter your investment goals. “Review your risk appetite and your time frame, as you would with any investment,” VanderBrug said. ”But give yourself the permission to say that some of my goals are beyond that benchmark. Some of my goals are about the world that I want to see, and I want to live in, that I want my kids and my grandkids to live in.”
3. Seek out female-friendly investments. For instance, the Calvert Foundation’s Community Investment Note pools your dollars together with other social investors to support organizations and projects that have met rigorous underwriting standards and social performance requirements. One of its holdings: the Women Investing in Women Initiative (WIN-WIN) which supports organizations that serve women and girls through their products or services.
You can choose a one-, three-, five-, 10- or 15-year investment term. The interest rate corresponds with the term, and currently ranges from 1 to 4 percent. You can invest directly online ($20 minimum) through the platform Vested.org or through a brokerage account or a financial adviser with a $1,000 minimum.
Or consider investing in one of the firms in the 2016 Bloomberg Financial Services Gender-Equality Index (BFGEI). The index includes 26 public companies (minimum market capitalization of $15 billion) that are leaders in the financial industry for providing opportunities for women. It lists 53 data points for each company, ranging from the number of women in the business and on its board to its length of parental leaves. Companies that made the cut include: American Express, Bank of America, Barclays, MasterCard, MetLife and Visa.
State Street Global Advisors offers an ETF that currently invests in 128 companies with notable numbers of women in senior leadership positions.
And there’s the Pax Ellevate Global Women’s Index Fund. Sallie Krawcheck, former president of the Global Wealth and Investment Management division of Bank of America teamed up with fund management company Pax World Management to offer this index fund of companies where women make up a large percentage of officers and directors. Her Ellevate Network firm lso has a robo-adviser service for women.
A Resource to Learn More
I want to also mention a good resource to learn more about gender-based investing: The State of the Field of Gender Lens Investing: A Road Map for the Field. It’s a report from the Criterion Institute, a think tank focused on reinventing the economy.
By investing this way, you are “reshaping the companies and industries in which you invest and using your beliefs to shape the world we live in,” said VanderBrug. That’s a pretty great idea.