Welcome to our #92 weekly newsletter.
“For women taking control of their financial future”
-Jana Hlistova
From The Purse
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.
News in Brief
Financial news
Wall Street equities complete longest run of closing highs since 1997, with market sentiment ‘propped up’ by strong corporate earnings and big central banks affirming their relaxed monetary policies (ie money printing and keeping interest rates low/not raising interest rates). The S&P 500 has now closed at a record high 65 times this year.
The US Federal Reserve ramps up balance sheet expansion ahead of tapering. Total assets rose by $88.2bn past week, most since September to hit fresh ATH at $8.7tn. The Fed balance sheet now equals 37.4% of US's GDP vs Bank of England’s (BoE) 41% and the European Central Bank’s (ECB) 80.5%.
US inflation jumped 6.2% in October year-on-year, the highest jump since 1990. Americans are paying more for cars, clothes, food and energy. Core inflation jumped 4.6%, the most since 1991. Pressure on the Fed to raise interest rates has intensified.
On Thursday, the FTSE 100 recorded a 20 month high. It is still shy of the levels in January 2020, and around 6.5% below the record high set in May 2018.
UK recovery is lagging behind the rest of the G7, as growth slows to 1.3% in the third quarter (down from 5.5% in the second quarter). Economists believe that significant staff and supply shortages have limited activity.
UK grocery inflation hits a 14 month high at 2.1% at end of October. Overall, inflation is expected to hit 5% by April 2022.
Billionaire investor Ray Dalio warns inflation is driving down real wealth: ‘Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded.’
Crypto: bitcoin, ethereum & DeFi
The crypto market reached $3tn in market cap (Tuesday) as bitcoin and ether reach record highs. In November 2020, the market cap was around $500bn. BTC broke through a record high of more than $68,000 and ETH soared to $4,837. See the bitcoin and ether price today.
Bitcoin biggest upgrade in four years has just been activated and it’s called Taproot. The Taproot update means greater transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts.
Miami’s mayor says that residents will receive a bitcoin dividend in a MiamiCoin wallet. MiamiCoin is the city's token derived from the CityCoins protocol, a Stacks-based protocol that allows residents to hold and trade their city's token.
The CEO of Apple, Tim Cook, has revealed that he owns crypto: ‘I think it’s reasonable to own it as part of a diversified portfolio,’ he said at the DealBook Online Summit.
Rolling Stone mints first ever NFTs with Bored Ape Yacht Club. The NFT sale makes Rolling Stone the latest legacy print publication to enter the Web 3 space. The Economist sold one of its covers as an NFT for $419,000 just two weeks ago.
Coffee Break? Read This
Women who stay away from office, risk their careers, BoE committee says
‘World designed by men has destroyed many things’, COP26 warned.
We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
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Gender lens (equity) investing is on the rise but what are some of the challenges?