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What’s Gender-Lens Investing and Why Is it Important?

By Sylvia Kwan

Gender-lens investing. Awkward term. Makes some people go, “Huh? Is that a thing? And … is it a thing we really need?”

Yes. We believe it is. And here’s why.

What’s Gender-Lens Investing and Why Is it Important?

What’s gender-lens investing?

Essentially, it means investing with an aim to earn financial returns and address gender disparities. It’s a subset of “impact investing,” which usually refers to any kind of investing that’s designed to have a positive social or environmental effect on the world (not necessarily just gender).

All the benefits need to be intentional and measurable, as the Global Impact Investing Network puts it.

Does gender-lens investing work?

That depends on what you mean by “does it work?” If you’re looking for an analysis of historical returns, that study’s in progress. But if you’re wondering whether the investment principles behind it are sound — not just for the warm-and-fuzzies, but to aim for returns — then the answer, we strongly believe, can be yes. It all depends on how a gender-lens investment portfolio is built.

How a “traditional” gender-lens portfolio is built

Traditionally, gender-lens investing primarily focused on investing in companies that have a higher representation of women on their boards or in senior management positions.

The thinking was (and is) that if you’re just investing in the broader market, you’re investing away from women, by default. Companies started by men, owned by men, and / or run by men … are almost all of them. (Zoom in on the fact that only 5% of Fortune 500 CEOs are women.) So gender-lens investing is, by definition, working toward leveling that playing field.

And that’s important for more reasons than just equality. Because while nothing’s guaranteed in investing, one thing that investors turn to for help is diversification. They invest in different asset classes, different industries, and different geographies. And that should extend to leadership as well: Studies show that companies with more diverse teams perform better.

How (and why) Ellevest takes it one step further

But you don’t have to stop at representation; that isn’t enough to level the playing field. There are other gender gaps we believe we can help close. Here at Ellevest, our approach to gender-lens investing also includes investments that get money directly into the hands of women, in companies that advance women, and in companies that make products that impact women’s lives or provide services that benefit women most.

That’s because it’s not just about leadership. It’s also about the fact that focusing on women helps everyone. In fact, McKinsey found 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. That’s partly because women, when they have financial control, are more likely to put their money back into their communities and families. And they donate more to charity, too.

So bottom line: We believe investing in women can be good for your portfolio’s diversification and potential returns, good for business, good for the economy, and good for everyone — children and adults, and people of all genders.

Building our gender-lens approach into Ellevest Impact Portfolios

Ellevest Impact Portfolios are a powerful form of gender-lens investing. Our impact investing strategy was built from the ground up to combine robust investment principles with investments designed to advance women, potentially offering both financial returns and social returns.

These investments include funds that invest in:

  • Companies that are highly rated for advancing and supporting women, especially in terms of environmental, social, and governance (ESG) criteria

  • Investments that provide capital directly to women-owned or -co-owned businesses

  • Investments in companies that provide services and / or products that help advance women or economically support underserved people, like a veterinary practice in New Mexico, childhood learning center in New York, and a wellness studio in Alabama.

We also have strict standards for the risk / return profiles of the investments we select for your portfolio if you invest with us — and that includes Ellevest Impact portfolios. These standards include asset class diversification, low fees, and high market liquidity.

For Ellevest Private Wealth clients, we have the ability to customize your portfolio to include public and private investments. You can choose to invest money in companies that meet our criteria for doing the right things by women — and redirect money away from companies with products, policies, and practices that may harm them. We’re also advocating to investment managers for the development of direct impact investment opportunities that combine their investment expertise with our criteria for impact with a gender focus.

And back to that “does it work?” question: In 2020, those who invest for impact with us — Ellevest members and Private Wealth Management clients — are investing to support:

  • Financing for the construction of permanent supportive housing units for the chronically homeless in the Los Angeles area

  • Single-family home mortgages for low-income women borrowers in Florida, Illinois, Kentucky, Minnesota, South Carolina, and Wisconsin

  • Small businesses owned by women, like a veterinary practice in New Mexico and a childhood learning center in New York

… and more.

In essence, we believe that the way we’ve incorporated gender-lens investing into Ellevest Impact Portfolios isn’t just the right thing to do — it’s also the smart thing to do. The fiduciary thing to do. Because we believe that investments designed to advance women, combined with our robust investment principles, can offer financial returns — not to mention a way to make positive change in the world.

Disclosures

© 2018 Ellevest, Inc. All Rights Reserved.

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.