Impact investing is quickly becoming mainstream1. Women, in particular, report that it is important to them that their money supports their values. In 2017, some 84% of women said they would like to learn more about impact investing2.
But gender lens investing—that is, investing for returns but also to advance women? Well … not so much. In fact, I often hear that the concept of “gender lens investing” feels sort of weird. (And let’s face it: That name—gender lens investing—isn’t doing it any favors.)
So, let me ask you:
Should you put most of your money into a single stock?
The answer is “No.” We learn in Investing 101 that “diversification” is a key tenet of prudent investing: In other words, don’t put all your eggs in one basket.
Should you put most of your money into a single asset class, like US “large cap” stocks?
For the same reason, the answer is “No.”
Should you put most of your money into a single region of the world?
Again, the answer is “No.”
Should you put most of your money into a single gender?
The answer usually is, “Um, what? Keep talking.”
Well, should you put most of your money into the equity of companies run mostly by men, into the debt of companies run mostly by men, into loans made mostly to men, into mutual funds that are run mostly by men, with those investments made through investing in companies that are run mostly by men?
While there are no guarantees in investing, why shouldn’t the power of diversification extend to gender?
The answer to these questions is usually “Oops.”
What if I further told you that companies with greater gender diversity in their leadership teams tend to post better results3 than companies with less diversity; that women are more likely to repay their loans than men are4; that women money managers are more likely to outperform men5 when it comes to earning higher returns?
Oh, and also that when the women you invest in build wealth, they are more likely to put it back into their communities and families6, and they donate a larger percentage of their money7 to nonprofits.
“Gender lens investing” doesn’t seem as weird now, does it?
That’s why in 2014 we created the first mutual fund that invests in the highest-rated companies in the world for advancing women’s leadership — the Pax Ellevate Global Women’s Leadership Fund (PXWEX). Ninety-nine percent of the companies in the fund have at least two women on their board, and 91 percent have three or more women on their board.8
If investors were to collectively choose to invest into women just a fraction of the money that is now defaulted into investing in men … well, that could be hundreds of billions of dollars of investments, supporting women.
This article was adapted from “We’re Defaulting to Investing in Men. Why?” from the August 2018 edition of Ellevest’s What the Elle newsletter.
Diversification does not eliminate the risk of experiencing investment loss.
RISKS: Equity investments are subject to market fluctuations, the Fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The Fund does not take defensive positions in declining markets. The Fund’s performance would likely be adversely affected by a decline in the Index. Investments in emerging markets and non-U.S. securities are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation, intervention and political developments. There is no guarantee that the objective will be met and diversification does not eliminate risk.