Janet Yellen, Christine Lagarde and a handful of U.S. senators notwithstanding, women are still underrepresented in the world of finance.
So it was a reversal earlier this month to be one of the few men among nearly 100 women investors, wealth advisors, bankers and analysts gathered to reshape global financial markets through a “gender lens.”
Over the next decade, the entrance into the economic mainstream of a billion women worldwide will have a greater impact than the economic growth among the billion-plus populations of China and India, according to a report from Booz & Co.
The drum is beating ever-louder from economists, development experts and advocates who insist that women and girls are the key to nearly everything needed for a sustainable future, from global health to food security to economic growth. In business, mounting evidence shows women’s leadership correlates with long-term outperformance.
“If we knew how to value gender in finance, really, we’d be smarter investors, period,” says Joy Anderson, the head of Criterion Institute, who produced the “convergence” of gender-lens leaders earlier this month in Hartford, Conn.
Indeed, there’s an emerging consensus (with some dissenters) that companies with three or more women directors outperform those with no women on the board (Twitter, take note). The emerging wisdom in Silicon Valley is that women entrepreneurs are more likely to succeed (and use less capital) than male-led companies.
The Women Effect
Globally, the women-effect is already driving dramatic changes, in fertility rates, workforce participation and consumer spending, and is powering the doubling of the global middle class over the next two decades. A Goldman Sachs report, “The Power of the Purse,” contends education for girls is increasing women’s decision-making power, shifting household spending patterns toward food, healthcare, education,childcare, apparel, consumer durables and financial services, categories more important to women. In microfinance, it’s well-known that women clients are more likely to repay their loans.
“Our strategic vision is ‘An education and a job for 100 million women by 2036,’”said Calvin Clark of Gray Matters Capital, who was another one of the male early-adopters at the gender-lens gathering. “All of our impact investing is focused around achieving that goal.”
Gray Matters is part of the Atlanta-based social investment network of former real estate developer Bob Pattillo. His work in microfinance, Clark says, “has drawn us to the conclusion that the economic empowerment of women has a multiplier effect on improving society as a whole.”
That multiplier may be most apparent in smallholder agriculture, where supporting women farmers can boost family incomes as well as increase food security. Root Capital, which last year lent $121 million to more than 200 small and growing agriculture businesses, committed $60 million to a Women in Agriculture initiative to reach 100 businesses with women’s leadership, “gender inclusive” policies and sizeable women’s employment or membership.
In sub-Saharan Africa, women do 80 percent of the farm work but receive less than 10 percent of the credit available to smallholder farmers. The UN’s Food and Agriculture Organization estimates the equal access for women to such resources could boost farm output in developing countries by up to four percent, reducing the number of undernourished people worldwide by more than 100 million.
Likewise, women-led small businesses are seen as a key driver of job creation and economic growth. Goldman Sachs’ 10,000 Women initiative is a five-year, $100 million initiative to reach 10,000 women entrepreneurs. The International Finance Corp. this fall plans to issue the first global women’s bond to raise $250 million, which will be invested through banks into women-owned and women-controlled small businesses.
Gender Lens Investment Products
A smattering of financial products are becoming available for individual and institutional investors. The Parity Portfolio, part of Morgan Stanley’s wealth-advisor portfolio management program, screens public companies with at least three women on the board of directors, and then looks for specific evidence of outperformance. The portfolio has about 20 companies and will grow to 30. “We want these companies to be models in their industries,” says Eve Ellis of the Matterhorn Group, who co-developed the portfolio.
U.S. Trust, working with the Women’s Foundation of California, is developing quantitative gender-lens criteria for traditional asset classes such as U.S. equity and taxable corporate fixed income. The framework, called the Women and Girls Equality Strategy, orWAGES, mean “Institutional investors committed to positive social change for women will no longer have to sacrifice market-rate returns in their portfolio allocations to U.S. stocks and bonds,” U.S. Trust says in a statement.
“Our research shows women are one-third more likely to see their investment decisions as a way to express their values,” says Jackie VanderBrug, senior VP of U.S. Trust. “We’re very excited to offer products like WAGES to our clients.”
Several networks of angel investors focus on women-led startups. Golden Seeds LLC, a group of nearly 300 angel investors, has invested more than $55 million since 2005, with a mission of “delivering above market returns through the empowerment of women entrepreneurs and the people who invest in them.” Astia Angels looks for women-led startups in high tech, clean tech, life science, and health and wellness products. Pipeline Fellowships even offers a bootcamp for women angel investors as a way to accelerate the flow of capital to female entrepreneurs.
“We need 50 percent of the population who could be investing actively to bring their insights and their expertise to the table, and then we need 50 percent of the people coming up with the inspired solutions, who are not getting access to capital, to get access to capital,” says Suzanne Biegel, founder of the Clearly Social Angels network in the United Kingdom, whose membership is indeed half women. “It’s not an end in itself, it’s to solve the problems, in water, or agriculture, or poverty alleviation or education.”
For smaller investors, the Calvert Foundation’s Women Investing in Women Initiative (WIN-WIN) offers interest of 1 percent while investing in female entrepreneurs, community health centers serving women, childcare facilities, affordable assisted living and organizations seeking to expand capital to women. WIN-WIN has invested more $10 million in such organizations since it was launch in March of last year..
“The financial and impact returns from investing in women are so compelling that using a gender lens should not be considered a ‘niche’ approach appealing only to women,” write the wealth advisors at Veris Wealth Partners LLC, based in San Francisco, in a new guide to “Women, Wealth and Impact.”
At the Connecticut gathering, the (mostly) women financial experts worked on ways to reframe finance more broadly. “How could we design vehicles with a gender lens?” asked Anderson. “How do we design gender into tools of finance?”
Participants worked on a series of thought experiments:
- What are the risks and rewards for pharmaceuticals if new drugs are to be regularly tested for their effectiveness in women?
- How will women’s reproductive health, which correlates positively with GDP growth, be reflected in countries’ sovereign debt ratings?
- Are gender-rated municipal bonds a safer bet?
- How could an exchange-traded fund “go long” on women as the key drivers of consumer spending?
If the premise is true — women’s empowerment is a transformative change driving global opportunities that have not yet been priced into the market — then investors and wealth managers with an early gender lens should have an edge in a market that suffers from imperfect knowledge.
I’m not saying it’s a gender-based characteristic, but the women at the Connecticut gathering were eager to share knowledge with each other, and with men.
“Women are hot,” Anderson says. “We want to use this momentum to help create a world that works for all.”
(Editor’s note: A version of this story originally appeared on Bloomberg.com, as “A Billion Women Are About to Transform the Global Economy.”)