Gender Lens Investing
In these challenging times of Covid-19 pandemics, the recent sustainable investment trends are proving resilient. They show the worth to have a look at the investments from the different angles. Socially responsible investments are winning the grounds since some years now and its small niche, gender lens investing, has all its potential to get into spotlight.
Gender lens investing is investing with the conviction that more gender diversity in the corporate world enhances the profitability of the companies and brings the performance to the portfolios. In the financial world, the benefits of diversification in the asset allocation has been embraced since many years and proved by many academic studies. The benefits of diversification – diversity - does work as well for the corporate world.
If thecompanies improve their diversity, and better serve their markets, the research shows that better diversity pays off. McKinsey* studied 1000 largest listed capitalization and found out, with statistical significance, that the companies scoring best in Gender Equality, reached in average 21% higher profitability and up to 27% higher value creation. From the investment point of view, still according McKinsey, reaching the gender equality could add up to 28 trillion USD in annual world GDP. That is the equivalent of putting the world's largest economies like US and Japan together.
…but still a way to go
The women represent a huge talent pool that is very often not used to its full potential. In the countries where the equal access to the education is now granted, there are actually more women than men graduating with the 3rd cycle diplomas, and yet, rare are the companies with the majority of women in top management. According to Harvard Business Review**, women make the most of consumer decisions: 94% of furniture, 92% of vacations, 91% of homes, 60% of cars and 51% of consumer electronics. The companies designing the most suitable products and helping with these spending decisions will be better off. By involving more women in the decision-making, the companies can re-design the unconscious biases that still exist in the numerous products and services, and that significantly under-serve the women population and their needs.
These biases were for the majority not created intentionally. As generations of women were not represented in the decision-making, they are simply generally just the results of "not thinking" about certain things. The lock-down brought again the discussions about unpaid work and mental charge. But there are other less known biases, such as where the not-gendered products are designed for the average male bodies - for example drugs or car safety standards. It is less known how some drugs really work in a female body or that a woman, as a result, has significant lower chance to survive in a car crash than a man. And maybe the most important work to be done is in the, now becoming the most powerful sector- technology and artificial intelligence developments.
Gender lens investing criteria
Gender lens investing is not about choosing a company with a female CEO or a company with a higher level of women in board. When evaluating a company for gender lens investing, it should be seen that its diversity and inclusion commitment is incorporated and embraced in the company vision. The investors are looking for the gender balance in the workforce, through the management, till the top executives and the board. Among the other assessed policies are equal opportunities in recruitment, promotion, pay gap, sexual harassment policies or work-life balance possibilities, such as parental leave, work from home.
Gender equality assessment and investment selection are in general reinforced by other “do no significant harm” socially responsible policies, such as sector or controversial companies exclusions. The passive portfolios, ETFs such as Lyxor Gender Equality, stops here in their portfolio construction. The active managers combine the approach with the financial analysis, valuation, business model sustainability and market positioning. A dedicated gender lens portfolio can be created or, as we are doing at Société Générale Private Banking, the strategy can be integrated with other responsible strategies.
United Nations included Gender Equality among its 17 Sustainable Development Goals to be reached by 2030. The current decade should be the one of action. The governments try to do their part by demanding the gender data disclosures such as pay gaps or a minimum requirement for women representation in boards. Investors can go beyond with rendering their conviction into action via gender lens investing. Not only it is an interesting investment opportunity, but by moving a corporate world towards more diversity and equality, it can be another way to make a further positive impact to a sustainable future.
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* Diversity Matters database, Average economic profit margin 2011–15 and average EBIT margin 2011–15
** HBR – 09/2009 The Female Economy, by Michael J. Silverstein and Kate Sayre
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