Zoom in on gender-lens investing

It pays to invest in women. And now, you can orient clients’ portfolios toward companies that do just that.

“Gender-lens investing reflects the values of today’s investors,” says Vicki Saunders, senior advisor at MaRS Discovery District in Toronto. She is also a serial entrepreneur who creates businesses that tackle major societal challenges.

Socially responsible investments have traditionally excluded companies that produce tobacco and weapons or use sweatshop labour, for instance.

But now, investors are looking to reward proactive companies that do good—such as aiding women and girls around the world to develop economically.

There are three ways to invest with a gender lens. You can invest in businesses that:

• Are started or owned by women, or with women in senior leadership roles;
• Promote workplace equity and that have women on their boards; and/or
• Produce products and services that benefit women and girls.

Investing in these companies provides important social returns that clients can be proud of, but the firms have also outperformed their peers.

Women helped french companies survive

The only large French company to record a share price gain in 2008 was Hermès. Its management is 55% women, the second-highest among French blue chips. Companies with a management of at least 38% women suffered less than the CAC 40 benchmark index in 2008.

By contrast, the largest declines were recorded by companies with at least 75% male management.

Source: Prof. Michel Ferrary, “Why women managers shine in a downturn”

Catalyst has demonstrated Fortune 500 companies with three or more women directors gain significant performance advantages over those with the fewest: 112% higher return on invested capital, and 73% higher return on sales.

Similarly, McKinsey finds companies with a high proportion of women on boards have 41% higher return on equity than those with all-male boards.

With this win-win scenario, it’s not surprising investors want to get involved. “We’re seeing a few significant players in the market starting to pay attention,” says Saunders. In May, U.S. Trust, the private-wealth-management arm of Bank of America unveiled a fund called the Socially Innovative Investment Portfolio. It was created to help wealthy investors (you need at least $3 million to invest) reach companies aiding women and girls around the world.

U.S. Trust combs the S&P 500, performing what it calls “social due diligence” (examining 400 data points) to discover which companies implement strong pro-women policies.Those companies receive proportionally higher investment.

In Canada, this type of investing is nascent. In January 2012, RBC announced it’s committing $20 million to its new Impact Fund, which will “finance projects by organizations and entrepreneurs tackling social and environmental challenges.”

Change is slow, partially because interested parties sometimes hit roadblocks. “A lot of the existing gender-lens products are smaller alternatives, so they’re not on major platforms,” says Saunders. “Out of 250 or so SRI mutual funds, there’s only one with a gender-lens focus. It’s a $35-million fund out of a $200-billion space. We talked to [a major investment bank] and it’s actually illegal for it to connect its clients to something not on its list.”

If your client is interested, ask what goals she wants to achieve.

“If it’s a woman entrepreneur, she’s often more interested in investing in [fellow] women entrepreneurs,” she says. “We’re working with someone with about $20 million who has been doing a lot of philanthropy around women and girls. She now [also wants her] investment portfolio to improve the lives of women and girls.”

And what investments should clients choose? “Water; healthcare; sanitation; agriculture: these are all areas that have very strong impact on women. It’s not about pink laptops; it’s about blended issues. We see over and over the intersection of healthcare and energy. Maternal mortality rates are high because there’s no electricity in the clinics where women are giving birth.”

Investing in an angel investment fund, such as New York-headquartered Golden Seeds, the fourth largest in the U.S., is the most risky form of gender-lens investing.

Martha Porado is an editorial intern at Advisor Group.