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Investing Through A Gender Lens

A growing body of research shows that companies with a more equal representation of women in management, C-level and corporate boards perform better over time.

Photo Courtesy Danielle Cerullo

Today, investors have a voice and the power to invest in companies that are effectively doing the right thing. This process is called “gender lens investing.” This is the “S” in environmental, social, and governance, or ESG, investing.

Gender lens investing focuses on generating market-level returns by investing in firms that promote equal opportunities for women in the workforce, as business owners, and as consumers. Retail investors can make their voice heard by investing in one or several of 26 gender lens global and regional equity funds. As of Sept. 30, 2021, these funds represented $3.6 billion in assets – a 35% growth so far in 2021, according to Gender Lens Investing Q3 2021 Review by Parallelle Finance.

“Over the last 15 years, a body of research has consistently demonstrated that companies with relatively stronger women-in-leadership (WIL) metrics deliver superior measurable performance in several areas, including higher returns on capital, better productivity, and higher stock price performance,” noted Parallelle Finance. “This evidence has led to the development of public and private gender lens investment vehicles.”

U.S. dollar-denominated equity funds include Pax Ellevate Global Women’s Leadership Fund (PXWEX), UBS Global Gender Equality UCITS ETF, SPDR SSGA Gender Diversity Index ETF (SHE), Fidelity Women’s Leadership Fund (FWOMX), Fidelity Women’s Leadership ETF (FDWM), Glenmede Women in Leadership U.S. Equity Portfolio (GWILX) and Impact Shares YWCA Women’s Empowerment ETF (WOMN). 

Gender lens equity funds screen for firms that have a higher percentage of women in leadership, pay equity, public disclosures, as well as policies that support the retention and promotion of women. In addition to the U.S., funds are also available for individual investors in Canada, Europe, South Korea, and Japan. 

Photo Courtesy Mimi Thian

Besides equities, gender lens fixed income amounted to $8.4 billion of assets as of Sept. 30, 2021, a 74% increase year to date. Investment instruments included U.S. and emerging markets funds, private financial institution bonds, U.S. notes, and certificates.

While retail investors are able to express their values by investing in such funds, asset managers have the power to put pressure on companies and their boards to affect major change.

Parallelle Finance analyzed gender equality and policies at the top 25 global asset managers.

Financial firms with the highest female board representation were BNP Paribas, Goldman Sachs, JP Morgan, BlackRock, and Bank of America. Those who lagged included Pimco, Northern Trust, and Invesco. 

“Within the workforce and leadership ranks in financial services, women have been on a slow march toward equality,” noted Marypat Thenell Smucker and Angela Atherton, authors of the Review. “Female board representation in financials improved from 18.7% in 2015 to 26.5% in 2021, the highest sector score for the year. Financial sector female CEOs was 6%, in keeping with broader market metrics. Management representation in the sector was only 21%.”

The analysis also found that among global asset management roles, women make up just 14% of fund managers – a number that hasn’t changed in two decades.

“Within institutional portfolio management, recent analysis shows that only 29% of portfolios from 150 leading asset managers have at least one woman on the management team,” the authors found. “However, for the 3-, 5-, and 7-year periods, the top-performing portfolios from the study had women on the team.”

Under increasing pressure from investors, more and more asset managers have announced that they will vote against non-diverse boards. However, among the top 25 firms, many guidelines that were put in place merely “encouraged” board diversity, with several having no targets, while others requiring only one to two female or other diverse board members, stated the authors.

“Advocating for 1-2 female board members places asset managers behind the curve instead of leading a charge toward board parity,” noted the authors. “Female board representation is progressing faster than C-suite gender diversity. Women CEOs are found at only 6% of S&P 500 constituents and 8% of the Fortune 500 companies. In keeping with broader data, only four of the top 25 asset managers have female CEOs: Fidelity, Amundi, Edward Jones, and Franklin Resources.”

The authors concluded: “Global asset managers have two areas of opportunity to boost corporate women in leadership. The first is within their own ranks. Second, they should use stewardship to lead the way forward to board gender parity and higher female C-suite representation.”


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