Gender lens (equity) investing is on the rise but what are some of the challenges?

  
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“For women taking control of their financial future”

-Jana Hlistova


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In this week’s newsletter, we focus on gender lens (equity) investing: what is it and what are some of the challenges?

Listen (again) to interviews with Jessica Espinoza and Rebecca Chesworth on The Purse Podcast about gender lens investing and ESG ETFs.

You can review the news in brief so you stay on top of global financial, economic and investing trends.

I hope you enjoy this week’s newsletter.

Until next week,

Jana


Gender lens (equity) investing is on the rise

What is gender lens investing and what are some of the challenges?


According to Parallelle Finance, there are 27 gender lens global and regional equity funds available to individual investors. And the total assets under management (AUM) is $3.47bn (approximately £2.54bn) as of 30 June 2021, which represents a 32% increase during the first half of 2021 (as reported by City AM).

What is gender lens investing?

Jessica Espinoza, VP at DEG/KfW and Chair of the 2X Challenge, shared this definition on The Purse Podcast:

‘Gender lens investing means that you incorporate a gender analysis into financial analysis to get better outcomes, both in terms of impact and return.

And there is a lot of momentum in the market because there is a strong impact case as well as a strong business case for gender lens investing.

Investments in women are associated with important ripple effects at the micro level, but also at the meso and macro level.

That means that these types of investments create value, not only for women and their families, but also for communities, for companies for the private sector, more broadly, as well as for the macro economy.

And as a SDG five, gender equality is not only an extremely important goal in and of itself, but also as a critical pre-requisite to achieve all the other sustainable development goals…’

The opportunity: diverse leadership outpeforms

A report by the International Finance Corporation (2019) revealed that gender balanced leadership teams in private equity generate a 20% higher net IRR (internal rate of return). And for portfolio companies with gender balanced leadership, the outperformance was even greater ie 25% increase in valuations.

And yet only 15% of senior investment teams have gender balance.

A 2015 study by McKinsey found that if women were to play an equal role in labour markets to men, 26% of global GDP could be added by 2025-a total of $28tn.

Which is why the women's market is sometimes referred to as the largest emerging market.

Jessica Espinoza goes on to say:

And we also know that women invest 90% of the income back into their family and community, especially in education, health, and nutrition, creating again, ripple effects way beyond the initial investment..

It's also the smart thing to do. ..And that's why gender lens investing resonates not only with impact driven investors, but also with commercial mainstream investors’.

What are the challenges?

Progress for women in corporate leadership roles remains slow.

And women have been disproportionately affected by the pandemic which has meant that many have exited the workplace.

In order to accelerate the pace of change, government mandates, regulatory actions, and stock exchange listing rules combined with stakeholder activism have a role to play.

According to analysis by Capital Monitor of 2,500 gender lens funds, the average ‘gender’ score has declined by 9% in 2021. And overall, they argue that gender lens funds appear to be neither strongly under or outperforming their peers.

However, as long as gender inequality exists at the company level, arguably it may be difficult to establish the benefits equality can offer (for now).

Marypat Smucker, the founder of Parallelle Finance has this to say (as per Capital Monitor):

‘The companies that make up the gender lens funds in question are the best of a bad bunch, as the current levels of women in leadership is ‘bleak’….There are no sectors that are really scoring well on gender diversity – that’s one of the things these funds are up against.’

In other words, we may simply be early.

What next?

  • Listen to the interview with Jessica Espinoza on The Purse Podcast about gender lens investing and the 2X Challenge.

  • Listen to the interview with Rebecca Chesworth on The Purse Podcast about ESG ETFs and gender lens investing.

  • Read more on Impact Shares YWCA Women's Empowerment ETF (US) and SPDR SSGA Gender Diversity Index ETF.

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