How to Implement Gender Lens Investing Into Your Strategy

Gender Lens Investing (GLI) is a technique for creating a positive effect on the world by incorporating gender analysis into investment research

How to Implement Gender Lens Investing Into Your Strategy

Parker Timlin

12:29 PM

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Image credit: Gender Lens Investing from Utradea

A rising number of investors are looking for ways to grow their money while also selecting companies that align with their values, one efficient way to achieve this is through Gender Lens Investing (GLI).

There is no one-size-fits-all strategy to investing with a gender lens, there are a variety of approaches to incorporate progressive practices, including some that do not require a lot of resources. Investing with a gender lens is not an "all-or-nothing" proposition and should be used as additional investment criteria. With this in mind, our guide presents a variety of gender-based investment approaches.

What is Gender Lens Investing, and Why Does it Matter?

Gender Lens Investing (GLI) is a technique for creating a positive effect on the world by incorporating gender analysis into investment research and decision-making. Implementing GLI strategies to investing means investing in businesses that promote equal opportunities for women as leaders, employees, business owners, and or customers.

Gender equity is a growing component in the movement for Environmental, Social & Governance (ESG) investing. GLI aims to address the pay gap for women, as well as the lack of development in women's education, healthcare, and economic prospects, as well as unequal representation of women in corporate and political leadership roles. Applying a gender lens to your investment analysis can help spot market possibilities or hazards that others might overlook, while also addressing gender equality in a variety of ways.

Goals of Gender Lens Investing

The goals of gender lens investing are to:

  • Promote corporate diversity
  • Enhance women's access to high-quality employment opportunities.
  • Encourage women to advance in their careers.
  • Make products and services available to women that address significant impediments to their economic involvement and success.
  • Give investors a better knowledge of how gender and economics overlap.
  • Increase public awareness of the need for increased diversity in the financial sector and lay the groundwork for better investment decisions.

Benefits of Investing with a Gender Lens

Lack of gender equity has been a systemic issue in the corporate and investment community for as long as it has existed, but there is mounting evidence that pursuing gender equity as an investor can benefit your investment, businesses, and society.

Companies that promote the interests of women most often promote the interests of investors as well. Furthermore, these businesses are reported to have more favourable work conditions.

  • According to CNBC, research has proven that companies with more board diversity perform better and give a higher stock performance for investors.
  • A study conducted by Women Deliver found that addressing gender inequalities in the workforce could generate up to $28 trillion in yearly global gross domestic product (GDP) by 2025.
  • According to Morgan Stanley Research from 2019 on average gender-diverse companies are associated with higher average returns and have outperformed their less diverse peers by 3.1%
  • Research has shown companies with a mix of women and men on their boards have fewer financial reporting restatements and lower fraud rates than those with none or only one woman on their boards.
  • Wharton Social Impact Initiative's gender lens report “Project Sage 4.0” found that GLI supports a wide range of organizations and industries, including health care, agriculture, education, fintech, climate change, reusable packaging, deep technology, amongst many others.

How to Apply a Gender Lens to your Investments

There are various definitions of, and parameters used to address gender issues or promote gender equity, we've focused on the three major Lenses. 2X Challenge is a global industry body for gender lens investing; they've identified certain criteria to identify if a business is a gender forward.

Investing in women-owned or women-led enterprises

This means businesses that are majority-owned by women, directed by women, and/or have a sizeable female board of directors. According to the Organization 2X Challenge, you should be looking for these qualities to qualify a company as woman-owned or lead:

  • 51% of the entity is owned by one or more women; and/or At least 20% of the entity is owned by one or more women
  • The entity has at least 1 woman as CEO/COO (President/Vice President) or equivalent level
  • At least 30% of the Board of Directors are women where a formal Board exists.

Investing in enterprises that promote workplace equity

This refers to the number of women on a company's payroll and in leadership roles. It also takes into consideration the policies and practices that promote gender diversity across the human resources cycle, from recruiting and promotion through talent retention and workplace culture. The 2X Challenge recommends identifying these:

  • 30-50% of women in the workforce (sector dependent)
  • Do they have at least one “Quality” indicator beyond compliance?
  • This can include a stated mission or goal that promotes women's well-being and/or gender equality (gender transformational); and/or the company has an explicit strategy that targets women, girls, or gender equality.

Investing in businesses that provide products or services that significantly benefit women's and girls' lives

Businesses that promote gender equality and/or provide products or services related to women's health, labor-saving technologies or equipment, or learning resources to help women better their skills and capacities. The 2X Challenge recommends identifying the consumer needs by asking:

  • Does this company produce a product or service that specifically or disproportionately benefits women?
  • Are they designed for women's unique needs?
  • Do they address a problem that disproportionately impacts women?
  • Have a majority of female customers?

SPDA SSGA Gender Diversity Index ETF ($SHE) to Help Get Started

The State Street Global Advisors Gender Diversity Index is designed to track the performance of large-cap companies in the US that are leading their respective sectors in advancing women by encouraging gender diversity on their boards and in senior leadership positions.

Eligibility is determined based on gender diversity within each industry and ratio-based criteria derived from an independent third-party review of regulatory filings. These criteria fall under these three:

  1. The ratio of female executives and female members of the board of directors to all executives and board members.
  2. Female executive-to-all-executive ratio, and
  3. The ratio of female executives, excluding board of directors' members, to all executives, excluding board of directors' members.

This is the first index of its sort, and it's has been a huge turning point in the ESG world.

Closing Thoughts

Research shows, greater gender diversity is linked to superior stock performance, better risk management, and reduced fraud rates. Even from a macroeconomic standpoint, investing in women makes sense.

So, next time you're researching your next investment, include a gender lens to support your fellow woman and help bring equality to the workforce.