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Engendering Social Change: Gender-Lens Investing Helps All

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July 1, 2015
Empowering women in investing

Some call it a movement. Others call it an evolution when they describe the call to empower more women with investing and finance—whether it’s the investment idea or the investor herself. Whatever its moniker, gender-lens investing isn’t new, but it’s gaining ground as more women join—and in some cases are heavily recruited—into the still mostly male-dominated world of investing.

“Once we start thinking about the world through the viewfinder of a gender lens, we see new, more profitable, higher-impact opportunities,” argues Joy Anderson, president and founder of the Criterion Institute, a think tank that links investors to social good. “Because when you invest in women, you invest in their communities and you make the world a better place.”

The roots of gender-lens investing, including Criterion, are traced to churches and other religious organizations looking for ways to improve the lives of women. Anderson, who once taught in the New York public school system, is referred to by peers as a “leader at the intersection of business and social change.”

But gender-lens investing’s meaning has broadened substantially in recent years to embrace not just the moral aspects but also the economic ones, including those who support women-owned enterprises.

“The investment thesis emerges from both the moral imperative to support women and the evidence that investment in these types of companies realizes outsized returns,” Stephanie Marton, a management consultant at Boston Consulting Group, wrote in a Forbes piece.

The “social-cause-first” approach has promoted gender-lens investing mostly by encouraging individuals to put their money into programs that can help disadvantaged women across the world.

But the economic course—capitalizing women-led businesses and products as well as gender diversity in a workplace—could well be its lifeline. That’s particularly true as women-led enterprises continue to explode. According to a report issued by American Express last year, women are starting an estimated 1,288 companies every day. That’s compared to just 602 in 2011–12. Women are being heavily recruited in brokerage houses across the U.S., and women-focused investment vehicles are popping up as well.

How to Analyze Gender-Lens Investing

There are three lenses—or points of view to analyze—for gender investing opportunities. They include access to capital, workplace equity, and products and services, according to Jackie VanderBrug, who was once a managing director at Criterion Ventures, the group’s investing arm, but is now an investment strategist at U.S. Trust.

“Women entrepreneurs represent great investments,” she said in the Stanford Social Innovation Review. “Yet they are often capital constrained,” she added, noting that only 60% of microfinance loans—and they’re not for a whole lot of capital—are made to women, not 90% as is commonly assumed. Yet women-run companies backed by venture capital typically turn in 12% higher revenues than those run by men, according to a white paper produced by Illuminate Ventures, which funds B2B, enterprise cloud, and mobile computing companies.

As for workplace equity and products and services, VanderBrug repeats studies that underscore how women’s leadership and team participation positively affect financials, organizational performance, and better decision-making. Because women make 80% of all purchasing decisions in and outside the home—a long-held fact that many companies have embraced as they design, redesign, and market products—it’s important to invest in those products as well.

Some Dos and Don’ts to Consider

The Calvert Foundation, which also brings social-good investments to the table, is among those that have kicked off women-focused programs. The Women Investing in Women Initiative, or WIN-WIN, focuses on connecting women in developing countries to clean technology. But the foundation’s list of 10 dos and don’ts of gender-lens investing are a good template to use with all three of VanderBrug’s lenses. Here’s the boiled-down version:

DO:

Research—do your homework. Focus on a sector and its gender dynamics. Seek gender-related data that both has an impact and brings financial benefits. Focus on your best investment area and vertical—don’t try to boil the ocean. Partner with others. Share what you learn with collaborators, and keep up the momentum.

DON’T:

Don’t think of “women” as a sector—they aren’t. Don’t focus too narrowly on women-led enterprises—male-dominated areas need the benefits of female influence, too. Don’t overwhelm the end borrower with excruciating detail: a tiered approach seems to work better. Don’t focus exclusively on impact; incorporate gender criteria into your due diligence.


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