Meet the newest investing buzzword on the block.
“Gender lens investing is investing for gender equality while seeking a positive financial return,” says Jackie VanderBrug, senior vice president and investment strategist at U.S. Trust.
In the Stanford Social Innovation Review’s “The Rise Of Gender Capitalism,” VanderBrug and her coauthor Sarah Kaplan point out that the International Finance Corporation (IFC) estimates a $US320 billion difference worldwide between the money women entrepreneurs and business owners are seeking and the funding they actually receive.
As such, there’s enormous potential for investors to close that gap.
While a person could choose to give money philanthropically to causes and businesses that support women around the world, VanderBrug says that an investor with a gender lens is looking to support women while making money of their own.
There’s no universal, prescriptive approach to investing with a gender lens, but in “The Rise Of Gender Capitalism,” the authors explore three potential methods: providing access to capital, promoting workplace equity, and “creating products and services that affect the lives of women and girls, from clean cook stoves in Africa to pharmaceuticals that have been tested on women and adjusted for them.”
While those methods may not seem directly related to investment returns, the authors write that it isn’t single steps that will benefit investors in the long run, but rather a reshaping of the companies and industries in which they invest. The authors write: “We must engage trillions of dollars of investment capital to capture the gains that come from paying attention to the systemic problem of devaluing women.”
The approach has already become somewhat common practice in certain fields, like microfinance and angel investing. The authors list a handful of lenders, venture capital firms, and nonprofits that have been investing with this lens, including Morgan Stanley’s Parity Portfolio and venture capital firm Illuminate Ventures. The IFC alone has committed about $US175 million to invest in women-owned businesses.
VanderBrug says that although the word “gender” tends to bring women to mind, gender lens investing isn’t a practice exclusive to women.
“Men play a huge role,” she says. In her experience, men recognise that women are becoming an economic force, and that — especially in the case of millennial men — they’re just as interested as women in workplaces that allow for diversity. “When I speak,” VanderBrug recalls, “men will come up and tell me about their amazing daughters and the world they want them to live in, and that they want them to have an equal shot.”
Lucky for investors, gender lens investing is becoming somewhat mainstream.
“The parallel is environmental investing, now called sustainable investing,” VanderBrug says. “A decade ago, if an individual went to their advisor and asked about the environmental impact of their investments, the advisor would say, ‘We can’t answer that, and even if we could, you couldn’t invest that way and make money.’ Now, we do know the impact of portfolios on our environment, and it’s possible to invest in a way that supports your environmental values. In terms of gender, you can say that you’d like to understand the impact of your portfolio on women and girls.”
“We’re not talking about ethically losing money,” VanderBrug continues. “We’re talking about aligning your values with your investments, and that’s a completely different situation.”
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