Magazine

The Power of Ellevest Impact Portfolios

By Sylvia Kwan

At Ellevest, we’re here to help you achieve your financial goals. That’s why our investing platform is different, because it’s built for women, by women, with women — recognizing our longer lifespans and salaries that peak sooner than men’s. You’re also telling us you have other goals: That you want to change the world. So we've started evolving the platform to do that.

Now, with Ellevest Impact Investing, you can invest toward your goals by investing in other women. We think an investing strategy that combines robust investment principles with investments designed to advance women may offer financial returns and social returns.

Today, we’ll unpack exactly how we do that by looking at:

  • What’s in the digital Ellevest Impact Portfolios

  • The economic power of women

  • What “environment, social, and governance” investments mean, and how that impacts women

  • How Ellevest Impact investments drive change for everyone

What’s Inside Your Digital Ellevest Impact Portfolios

At Ellevest, our impact investments are specifically designed to generate measurable, positive social and/or environmental outcomes — with a focus on advancing women. Through these funds, we actively support businesses that work to improve the environment, support and advance women, and enhance lives around the world.

Examples of investments in the digital Ellevest Impact Portfolio include:

  • Funds that support growing small businesses owned by women and other underrepresented populations.

  • Funds that invest in companies that care about sustainability, value transparency and good governance, and promote social responsibility (ESG).

The Economic Power of Investing in Women

The global economy could be up to $28 trillion larger if more women were employed at the same rate, in the same roles, with the same pay as men.

Say you’re investing in a fund that provides loans to women-owned businesses in your community. This fund offers you the opportunity to earn financial returns — and it can also be a way for these businesses to grow. (In fact, sometimes, funds like these are the only way for women-owned businesses to grow, because women are denied small business loans more often than men, as are people of color.)

When those businesses grow, they generally create new jobs and more profits, leading to increased employment, financial growth, and a more robust economy. And studies show that women reinvest 90% of their income into their families and communities, more than twice the percentage men do.

In fact, management consulting firm McKinsey finds that the global economy could be between $12 trillion and $28 trillion larger in 2025 if women were employed at the same rate, in the same roles, with the same pay as men. $28 trillion??? That’s bigger than the gross domestic product of any single country on this planet, including the United States and China.

In other words, investing in women is good for business, good for the economy, and good for people of all gender identities.

What Environmental, Social and Governance Investing Means …

Our impact investments look at companies not just for their earnings potential, but also by how well their environmental, social, and governance (ESG) practices stack up.

  • High environmental standards: How a company uses energy and natural resources and manages waste and environmental risks. Companies with high environmental standards are conscious about their energy usage and work to reduce their carbon footprint and waste. A common theme for environmentally conscious investors is to invest in companies that are fossil free or focused on renewable energy.

  • High social standards: Companies that meet these standards tend to have strong, respectful relationships with their customers, employees, vendors, and community. This means working conditions, policies, and a culture that attracts and retains great employees, fair practices that build long-term relationships with business partners, and strong engagement with the community.

  • High governance standards: Transparent financial reporting, a culture of compliance with laws and regulations, and ethical business practices. Companies with high governance standards operate with integrity and accountability in business operations, board structure and procedures, shareholder rights, and board and executive diversity — and have no record of misconduct including corruption, bribery, and fraud.

… and Why That Matters for Women

Investing in companies with an ESG lens helps advance women and close some of the gender gaps in work and society that women face today. That’s because all of those factors — environment and climate change, poor governance and corruption, unequal pay, and the lack of gender diversity — all have a disproportionate effect on women.

  • Climate change particularly impacts women in developing countries, where women farmers currently account for 45-80% of all food production, and the responsibility of collecting and managing wood and water falls to women and girls.

  • Unfair social practices also impact women disproportionately — we’re all too familiar with the gender pay gap and the challenges women face advancing in their careers.

  • Poor governance — corruption, dishonest behavior, and abuse of trust by people in power — particularly affects women in poverty. Even basic public services may be out of their reach if they do not have funds to pay off corrupt officials. (And with story after story of sexual harassment and abuse of women in the workplace by people in power, it’s clear that corruption and poor social standards are a significant barrier to gender equality in the United States, too.)

Driving Change for Everyone

By investing in enterprises with high ESG standards, we’re helping to advance women around the world. And that’s worthwhile all by itself, of course. But at Ellevest, we believe even more strongly that the impact of doing so drives positive social and economic change for everyone — all while offering the opportunity to earn competitive returns for investors.

After all, this is not a zero-sum game. It’s not the advancement of one group at the expense of another. It’s about significantly increasing the participation of half the world in the global economy, expanding the economic pie, and enriching the lives of everyone. Our Ellevest Impact Portfolios and investing strategies are purposefully designed to help accomplish these goals.

Disclosures

© 2018 Ellevest, Inc. All Rights Reserved.

Information was obtained from third party sources, which we believe to be reliable but not guaranteed for accuracy or completeness. While past studies of SRI or impact investments demonstrate investment return, there is no guarantee that the characteristics of these investments that led to the achievement of market returns with lower risk will lead to similar results in the future, or that the Ellevest impact Portfolios will have the same factors that led to the results from the studies.

Forecasts or projections of investment outcomes are estimates only, based upon numerous assumptions about future capital markets returns and economic factors. As estimates, they are imprecise and hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

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Sylvia Kwan

Sylvia is the Chief Investment Officer of Ellevest. She researches and oversees Ellevest portfolios, and develops the algorithms behind Ellevest’s investment recommendations.