If you’re feeling a bit of FOMO around gender-lens investing, ImpactAlpha can help you catch up.
The gender tidal wave transforming global finance is still in its early stages. The early-mover advantage is still available for capital that shifts the playing field toward that future of gender equality and justice. There is still impact alpha that is not yet priced into the market – gender alpha, if you will.
But what if you haven’t been paying close attention to a shift as profound as, say, the rise of China, or the digital revolution? Say you haven’t been part of the huge lift by early gender lens advocates that has established markers and metrics and methods for talking about gender? Where are you going to find some of that gender alpha? How do you get started?
ImpactAlpha’s Agents of Impact Call No. 5 will help you start to get gender-smart about the new funds, investment products and initiatives that are driving impact alpha with gender-lens investing. Catalyst at Large Suzanne Biegel, co-producer of this month’s Gender-Smart Investing Summit in London, will join ImpactAlpha’s David Bank and a roster of special guests on Tuesday, Nov. 20th at 9:00 am PT / 12:00 pm ET / 5:00 pm GMT. RSVP for The Call.
“Pay attention to where women are core to the business model, or core players in the value chain,” Biegel advises. “That’s where we’re going to spot a market opportunity or a talent opportunity.”
There’s not just a single gender lens. Investments in financial services, for example, can focus on increasing women’s access to capital. Investments in public or private enterprises can select for companies that have more than one woman in senior management and on boards of directors. And all investors can look for opportunities to better serve the needs of women and girls. Women control an estimated $15 trillion in global consumer spending, more than half of which is in developing countries.
“Powering Potential,” a report earlier this year from BNY Mellon and the U.N. Foundation found that bringing women’s access to financial services to parity with men’s could generate $40 billion a year in new revenues. Women-run small and growing businesses make up 30% of registered global businesses yet only one in 10 have access to the credit they need, suggesting a $285 billion opportunity.
The presence of women on corporate boards and in senior management can reflect more inclusive and diverse leadership, and a variety of studies have found a correlation to long-term outperformance. But more in-depth research suggests that it takes higher representation to make a difference. The Thirty Percent Coalition is on a mission to see women hold 30% of board seats at public companies.
For all the talk of trillions, the intentional public and private capital remains in the low single-digit billions. That said, it’s doubling year over year. Nearly three dozen publicly traded gender-lens securities now hold $2.4 billion in investor capital, up 85% over last year, according to Veris Wealth Partners’ report on public gender-lens investment products.
Project Sage, an initiative of Wharton Social Impact and gender-lens advocate Suzanne Biegel tracked 87 gender-lens funds that have have raised $2.25 billion and backed 828 companies. Women venture partners “have decided, given the attention and energy in the marketplace, to just do it,” says Biegel.
Big banks and wealth managers are both salivating and scared s**tless. Already, women investors generate about $120 billion of the $415 billion in annual revenues of global investment industry and are growing their assets 6% faster than men each year.
“That’s a big focus of why the banks are paying attention,” Biegel told me. “They know, ‘If we are not getting it about what women want and what women need, we are going to see them walking out the door.’”
We were surprised when we tested a cool new online tool and discovered that several “gender-lens” mutual funds and ETFs got low scores… for gender equality.
We asked State Street why its SHE exchange-traded fund scored poorly on gender balance in As You Sow’s new Gender Equality Funds assessment tool. The largest public “gender lens” fund, State Street Global Advisor’s SHE ETF, with $353.2 million in assets, received mediocre scores across a dozen indicators of gender diversity and gender balance. State Street’s Jennifer Bender told ImpactAlpha the vehicle rewards the most diverse companies in each sector, helping the fund track the entire universe of large U.S. stocks.
“One could argue that the reason we have lower gender criteria than other products is because we have made a conscious decision to make the product more investable and fit for purpose in institutional portfolios,” Bender said.
How large public pension funds assess the gender alpha, then, becomes a critical question. The California State Teachers’ Retirement System, or CalSTRS, seeded State Street’s SHE ETF with $250 million. The Ontario Municipal Employees Retirement System seeded RBC Global Asset Management’s RBC Vision Women’s Leadership ETF with $100 million in January. The RBC fund seeks companies with at least 30% representation on boards or senior leadership.
“Too many of these investors are applying gender-lens strategies that are too narrow or shallow, leaving potential impact and financial gains on the table,” say MEDA’s Carolyn Burns and Devon Krainer. MEDA’s Gender Equality Mainstreaming framework helps investors and companies go beyond typical gender screens to surface opportunities for women as suppliers, employees, leaders and consumers at any company.
If fund managers truly want to tap the gender alpha, of course, they’ll have to dig much deeper into the operations, supply chains, product strategy and leadership. If that generates “alpha,” such investments will be made. If such transformation is reflected as a drag on growth or a cost, it will be resisted.
Early adopters have taken lessons learned from gender-lens investing initiatives and applied them across their portfolios. Root Capital, the Small Enterprises Assistance Fund and Alphamundi are examples of lenders and investors that have integrated gender lenses into their product lines, instead of creating separate funds or initiatives.
For investors, the interest in women and girls of development-finance institutions and philanthropic donors can attract co-investors and help de-risk investments. A half-dozen development-finance institutions from the U.S., Canada, the U.K., France, Italy, Japan and Germany have endorsed the “2X Challenge,” a plan to mobilize $3 billion for investments in developing countries that advance women’s leadership, employment and access to capital.
French President Emmanuel Macron is making gender a hallmark of his leadership of the G7 next year.