Investors and Asset Managers Sharpen Their Focus on Gender-Lens Investing

Part 3 in a series on the ESG risks and opportunities associated with the transition to a more sustainable economy.

Supported by Impax Asset Management


Although gender-lens investing has only been around as a speciality for a few years, it’s already attracted a couple billion dollars from impact-oriented investors. With big asset managers like State Street Global Advisors, UBS and RBC Global Asset Management now offering gender lens-focused products, experts say the space is likely to continue to grow.

“We believe the research is overwhelming that companies that have more women represented on boards and in senior management perform better,” says Joseph Keefe, president and CEO of Pax World Funds and CEO of Pax Ellevate Management, one of the pioneers in the space. “It just makes eminent sense to incorporate gender lens into portfolio construction.”

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Gender-lens investing, or GLI, generally means investing in companies that are particularly strong on women’s issues, such as having above-average numbers of women in senior management, in the C-suite or on the board of directors. It can also encompass companies that take proactive steps toward gender equality, like paying women equal to men or providing better family leave policies.

The theory — borne out by experience, proponents say — is that investing in such companies will deliver better investment returns, while also supporting the advancement of women.

“We see strong research highlighting the investment opportunity – from our own analysis of the lower earnings volatility of companies with higher gender diversity, to the assessment of market potential for products that are inclusive in their design,” says Jackie Vanderbrug, head of sustainable and impact investing for Merrill Lynch and U.S. Trust.

That’s sparking more and more attention from investors, Vanderbrug adds. “The interest is shared by younger professionals making their first investments, high-net-worth families looking to leave a legacy, and institutions seeking ways to make their investments work more effectively,” she says. “Some of that is driven by values, some by risk and some by the potential impact.”

One early adopter of GLI is the $400 million Infaith Community Foundation, which has incorporated impact investing into its investments for a decade. President and executive director Chris Andersen says the foundation recently carved out part of its portfolio to investing in companies that make women less vulnerable to gender-based violence. The strategy includes private equity investments and, on the public equity side, shareholder engagement on gender issues.

Anderson says there are many many more off-the-shelf GLI products available today compared to 10 years ago. He sees that as continuing to grow, though the product set remains less-developed than other types of impact investments.

Indeed, the past few years has seen an increase in both GLI products and GLI assets, according to new research from Veris Wealth Partners. In 2014, there were just eight GLI investment strategies on the market; today, Veris counts 35. “GLI-mandated investments into public market strategies alone have grown from $100 million to $2.4 billion in just four years,” the firm says in a recent report.

The report says: “A boom in innovative new investing vehicles is taking place across all asset classes, and in both public and private markets. Institutional support is surging as foundations, pension funds, academics, governments, NGOs and research organizations see the opportunities in GLI.”

That’s been the experience of the Pax Ellevate Global Women’s Leadership Fund, a GLI strategy that tracks the Pax Global Women’s Leadership index, the first broad-market index of companies that work to advance women’s leadership roles. The fund is run by Pax Ellevate Management, which is a partnership between Impax Asset Management LLC and Ellevate Asset Management, the firm founded by former Smith Barney CEO Sallie Krawcheck.

The fund is about “investing in companies that have more women in leadership,” Keefe says. Its top holding as of Oct. 31 is Microsoft, followed by Procter & Gamble, American Water Works and Ulta Beauty.

Other top holdings in the fund include IBM, whose chair, president and CEO is Virginia Rometty; women also hold 32% of senior leadership positions at IBM, according to the fund. At KeyCorp, another top holding, women comprise 33% of the board of directors. Four of Key Corp’s 15 executive are women, including chair and CEO Beth Mooney.

The Pax Ellevate fund also has a stake in Accenture, where women sit in about a third of board seats. Accenture has also set has a goal of having a “gender-balanced workforce” by 2025, and intends to have 25% of its managing directors be women by that same year.

The Pax Ellevate fund’s assets have grown from $48 million in 2014 to over $260 million today, reflecting the growth across the GLI space. “Its inflows have gone up every year,” Keefe says, essentially doubling annually: the fund saw about $20 million in inflows in 2016, $40 million last year, and is on track for $80 million to $90 million in net inflows this year, he says.

“More than half of our clients are using this fund as part of a larger impact strategy,” adds Kelly Coyne, VP, Global Women’s Strategies at Pax Ellevate.“That’s what’s attractive. Yes, it’s strong-performing, but it also can move the needle.”

Wells Fargo Private Bank is also seeing growing interest in gender lens investing from its clients, says Lloyd Kurtz, head of social impact investing. Such sophisticated investors “understand that greater diversity and human capital management has strong relevance to [business] fundamentals,” Kurtz says.

In fact, GLI “may provide a unique road toward higher financial returns and greater social impact,” consultant Cambridge Associates says in a recent report. “Research has shown time and again that diversity of thought and perspective leads to better investment returns, better business strategies and stronger organizations as a whole,” says Deborah Christie, a Cambridge managing director and author of the report.

Among the benefits of gender lens investing, as noted by recent reports and cited by Cambridge: Several fundamental performance factors — including sales growth, growth of earnings per share, and return on assets — are higher in companies that have women in 50% or more of their leadership positions; female-founded startups generate 10% more revenue than those started by men; and VC funds that have a higher ratio of investments in female-led firms have improved performance.

There are, of course, challenges to gender-lens investing. A major one, Coyne says, is simply tracking down the data. Finding out the percentage of women on a publicly traded company’s board is easy enough, but learning the number of women in senior management positions at a company can be difficult, depending on the company. Different companies have different management structures, and there’s no requirement that gender percentages be disclosed.

The same goes for issues like pay equality, family leave, or other factors. “Some report family leave policies and pay equity. Some don’t, and they’re not required to,” Coyne says. “We would love to have more transparency around gender issues.”

That transparency is likely to improve as more assets, and more investment products, come to the GLI space. “There ‘s more demand than solutions that are available today that focus specifically on gender lens investing,” says Casey Clark, director of sustainable and impact investing at Glenmede, a family office with $40 billion in assets. He expects that once investors can see how gender lens investing works across an entire business cycle of three to five years, interest will grow even stronger, if performance holds up and they can measure the positive outcomes of these investments.

Those assets will come thanks to a “growing awareness by institutional investors of the benefits” of GLI, Clark says, as well as an increased interest in empowering women around the globe. He points out that within Glenmede’s impact investing platform, “diversity and inclusion” is the most requested investment theme.

Investors and asset managers are also placing increasing pressure on companies they own to get them to pay more attention to gender issues. “Shareholder engagement is one of the most important levers we have as investors to help perpetuate change,” he says. “It’s being used at an increasing rate to engage with companies on issues of diversity and inclusion.”

Pax Ellevate’s Coyne says education and awareness are key for gender-lens investing to continue to grow. If an investor hasn’t heard about GLI, they won’t be looking for such an investment strategy. But, Coyne says, “Once they get it, it becomes pretty straight-forward to invest.”


To learn more about this trend, register for our webinar on Wednesday, January 9th, 2019 at 2PM Eastern Time, Investors Sharpen Their Focus on Gender-Lens Investing

Our webinar will delve into how investors are adding a gender lens to their investment strategies to generate both higher financial returns and tangible social impact. It will also uncover the types of data being collected on outcomes, emerging engagement strategies, and the evolution of gender lens products, including the Pax Ellevate Global Women’s Leadership Fund.

Our expert panelists include Julie Gorte, Senior Vice President for Sustainable Investing, Pax World Funds and Impax Asset Management LLC, Rebecca Carland, Senior Investment Director, Cambridge Associates and Jackie Vanderbrug, Managing Director, Chief Investment Office, Bank of America Merrill Lynch.


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