How to invest in gender equality in the workplace

 

I was living in New York when I first read Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg when the book came out in 2013.

Saying that this book on gender equality in the workplace had a high impact on me would be an understatement.

For the first time, someone had put words on many of the situations I had been experiencing since my late twenties.

And for a while now, it has been clear to me that more is needed.

And then, one day, I stumbled on yet another life-altering book: Gender Lens Investing: Uncovering Opportunities for Growth, Returns, and Impact by Jackie VanderBrug and Joseph Quinlan. 

This book just feels right from start to finish.

Because it explains how promoting gender equality has the potential of changing things not just for women, but for society at large and the planet in a big way.

 

What is gender lens investing?

First things first. What the hell is gender-lens investing?

According to the Global Impact Investing Network (GIIN), gender-lens investing means investing in a way that addresses gender issues and promotes gender equity.

Investing to promote gender equality in the workplace 

As you know, women remain underrepresented in the labor force. 

We are a minority on company boards and in senior management. Currently, women represent 27% of board seats of companies included in the S&P 500 index (which represents the 500 largest US companies that are listed on the stock exchange).

In 2018, a review of data provided by the US Census Bureau data showed that women in the United States earned, on average, 21% less than men in comparable jobs


When aggregated over several decades, that wage gap is estimated to cost college-educated American millennial women over $1 million in earnings.

More than one million! How crazy is that...

And there are many more issues that we have to deal with when it comes to the workforce.

... like being passed over for promotions 

... like the challenges of combining work and parenting.

And fortunately, investing with a gender lens allows us to direct our hard-earned savings to the companies that support women in the workplace.

To those companies that have a large share of women in senior management. And to those that have equal pay policies, for example.

Products or services that improve the lives of women and girls

Another way to invest with a gender lens is to invest in companies that develop services and products for women.

And I am not just talking about typical women products such as contraception and clothing. 

I am talking about products and services that ease household and caregiving responsibilities, for example. 

Or services that improve the safety, health, or education of women

It could also be products that reduce issues that disproportionately affect women. An excellent example of that is the availability of safe and affordable housing.

Companies that are at least partially owned by women

When it comes to investing in European tech start-ups, more than 90 percent of the money still goes to all-male entrepreneur teams.

Probably the best explanation for that is the fact that the vast majority of the investors in these start-ups are men

And it is just too easy for these men to be subject to all kinds of bias. 

Bias like how they believe a ‘successful entrepreneur’ should look like, speak, and behave

Or how they just want to invest in some kind of younger versions of themselves (also called the ‘mini-me’ bias).

Investing with a gender lens also means investing in start-ups with at least one female founder. 

For example, I invested in AVAtronics, an innovative Swiss start-up that is changing the game when it comes to noise cancellation technology. 

AVAtronics was co-founded and is led by a woman with tons of experience in the field: Jeyran Hezaveh.


Does it really make a difference?

Gender equality in the workplace and, by extension, gender-lens investing are both very close to my heart.

But there is far more to it than some kind of philosophical or moral justice.

When I read Jackie VanderBrug and Joseph Quinlan’s book, I learned something that most people, organizations, and governments still need to learn (and/or act on it).

… which is that promoting gender equality really makes sense financially, economically, environmentally, and socially.


Higher investment returns

Let’s start with the one million dollar question: does investing with a gender lens make sense from an investment return point of view?

The short answer is a loud resounding YES.

The research is overwhelming.

Greater gender diversity on company boards and having more women in senior positions increase investment returns while reducing risk.

For example, Credit Suisse published a report in 2016 that found the following in companies where women occupied 50% or more of the senior roles;

  • Sales increased faster
  • Profits rose
  • Investment returns were higher

Credit Suisse also found that companies where women hold 25 percent of decision-making jobs generate 4 percent higher cash flow than the overall MSCI All Country World Index (which represents 2,700 of the largest companies around the world).

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And companies where women represent half of the senior management pay 10 percent higher cash flows to investors on average!

And that’s not it.

The Boston Consulting Group and MassChallenge, a US-based global network of accelerators for start-ups reviewed the start-up data MassChallenge had accumulated over the years. 

And it turns out that start-ups founded or co-founded by women generate, on average, 10% more revenue than male-founded start-ups over five years.

And that even when they get less than half as much funding (when they get any funding at all!). 

As a result, the return generated by female-founded start-ups surpassed that generated by male-founded start-ups by no less than 2.5 times!


Improved economic performance

Here is the thing that governments and companies the world over seem to struggle to comprehend:

Raising and enhancing the participation of women in the workforce at all levels is an economic ‘must.’ 

Because it is how countries and companies can face many of the challenging trends impacting our economies.

Trends like aging populations and a shrinking labor force.

According to a 2015 study by McKinsey, getting to total gender equality in the labor force could boost the global annual GDP by $28 trillion by 2025.

More concretely, the Economic Report of the President in 2015 disclosed that nearly all the income gains that the middle class has experienced since 1970 in the US are due to….. the rise in women’s earnings!

And this is because when women work, they invest 90% of their income back into their families and communities. Compared with just 35% for men (and if you are a mother reading this, chances are that this is not exactly shocking news for you...). 


Addressing climate change and more

And here is the cherry on the cake.

Including women in leadership means improved results of climate-related projects and regulations (ditto the United Nations).

In other words, female leaders care far more about environmental issues than male leaders do. 

And their more inclusive and conciliatory management style helps them gain consensus and get things done with positive social and environmental impact. 

 

Growing interest across the board

By now, you might become as interested as I am about gender-lens investing.

And fortunately, we are not the only ones!


More money is flowing towards gender lens investments

All that research is starting to resonate with large investors.

More and more wealthy individuals and institutional investors (think pension funds, insurance companies, and the likes) are either:

  • moving their money into gender-lens investments; and/or
  • applying gender-based criteria in their general investment analysis.

As a result, the amount of money that is invested explicitly in gender-lens investments has jumped from $100 million in 2014 to $2.4 billion in 2018.

And that is just the beginning.

More gender data is available

Another thing that has changed in the last couple of years is the availability of data. 

Equileap, for example, is a data provider focusing on researching some 3,000 companies in 23 developed economies and rating them based on 19 gender equality criteria.

Other mainstream data providers, such as Reuters Thompson and Bloomberg, have also beefed up their offerings with a large amount of gender equality data.

This means that it is now easier to identify the companies that do well in terms of gender equality

And also to flag those that still have A LOT of room for improvement (and surely there is no shortage of such companies!).

A growing number of investment alternatives

As a result of the availability of data and increasing investor demand, financial companies are starting to realize the business opportunity.

And that’s why they have started to create gender lens investment products available to large investors, like pension funds, and also to smaller investors, like you and me.

For example, there are introducing a rising number of gender equality investments linked to the stock market, like Exchange Traded Funds (ETFs), actively managed funds, or dedicated investment portfolios.

In total, there were more than 35 such investment products in 2018, compared to just eight in 2014. 


And next to that, there were 87 venture capital and private equity funds with a gender lens investment strategy according to a 2018 report by Suzanne Biegel, Sandra Hung, and Sherryl Kuhlmann.

These funds raise capital from wealthy private individuals and institutions to invest jointly in female-founded or female-beneficial companies that are still small and not listed on the stock exchange.

 

How to invest in gender equality in the workplace?

And now, I hear you. If there are so many new investment alternatives available, how can I choose the right one?

Well, this might be a lot easier than you think.

Because regulations the world over limit what’s available to everyday people.

But fortunately, we still have a couple of good alternatives!

Invest directly through a robo advisor

One of the easiest ways to invest in gender equality is with an online robo advisor.

Robo advisors are companies that use automated software to build and manage a low-cost and well-diversified investment portfolio for you. 

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Here in Europe, the only robo advisor that offers a gender lens portfolio at this time is Yova Yellow

Yova is a robo advisor that specializes in sustainability investing. They look at all the companies listed on the stock market in Europe and in North America.

Then they select about 40 companies that meet high standards in terms of gender equality.


Yova is a bit of a special place out there:

  1. Yova is quite different from the other online robo advisor, which typically invest in ETFs. That means that putting some of your money there is also good for diversification.

  2. Yova is also more expensive than the typical robo advisor out there. Their fees range from 0.6% - 1.2% depending on how much you invest.

And this is primarily because investing in shares, even in a ‘passive’ manner, is a lot more work than just investing in sustainable ETFs. 

(... and actually, 0.6% is a pretty good deal, given that there is no additional cost for underlying ETFs… but to get this rate, you will need to invest a minimum of CHF 600,000...)

And I am now opening an account with them to invest in gender equality and climate change.

For now, Yova is only available in Switzerland. But the word on the street is that they are expanding soon to Germany and beyond.

A couple of online robo advisors based in the US also offer gender lens portfolio alternatives.

A big favorite of mine is Ellevest.

Ellevest is a robo advisor founded and run by Sallie Krawcheck to meet the needs of a female clientele. 

Ellevest’s robo advisor costs 0.25% in annual fees, plus ETF fees ranging from 0.13% to 0.19% per year.

Their services also include personalized advice at an extra cost if you invest at least $50,000. And a premium service for wealthy individuals investing north of $1 million. 


Other than Ellevest, US residents can also choose OpenInvest, Newday, and Motif to invest with a gender lens.

These Americans providers are not available to us here in Europe (and actually from an estate tax point of view, it’s probably better this way, but that’s another topic).

Invest directly through ETFs

Another way to invest in gender equality is to invest directly in gender-equal Exchange Traded Funds (ETFs) by yourself. 

For example, there are now no less than nine exchange-traded funds (ETFs) to do just that, as per an insightful report published Veris in 2018.

My two favorites are the UBS ETF (IE) Global Gender Equality UCITS ETF (GENDER) and the Lyxor Global Gender Equality (DR) UCITS ETF (ELLE).

I have invested in the UBS one, and I am also planning to invest in the Lyxor one at some point.

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Both include shares of companies in the developed world that score highly for gender equality according to the 19 criteria defined by Equileap.

Except for the number of companies that they track, both of them seem fairly comparable. They also cost the same (0.20% in annual fees). 

To invest in these ETFs, you will need to have an online brokerage account.

 

My current favorite is Degiro, which is based in the Netherland but serves clients across Europe, including Switzerland.

Once your account is open, you will have to log in and manually place a transaction every time you want to invest your (new) money.

And every time you place these transactions, you will pay transaction costs. And you really need to watch out for these costs because many banks and trading platforms are just soooo expensive.

I really like Degiro as they are one of the cheapest (and most user-friendly) platforms out there. 


Side note: investing in ETFs on a trading platform is totally doable. But it is definitely less ‘easy peasy’ than doing it with a robo advisor.

There are a few more gender equality ETFs available out there. For example, you could invest in the Gender Diversity Index ETF (SHE), which invests in large US companies. Or in the Future World Gender in Leadership UK Index Fund (GIRL), which invests in UK companies.

Other ways to invest in gender equality

There are a couple of other ways to invest in support of gender equality.

For example, if you are an American resident, you could make a loan to a female-owned company through CNote.

CNote lends your money to small businesses, and especially women-led companies, and also for affordable housing, and community development in low-income areas. 

Then they pay you an interest rate of up to 2.75%.

Another thing you could do is to become an Activator for SheEO, although it’s not exactly an investment but more of a donation. 

SheEO is a global community of women who are giving USD 1,100 per year in support of women-led businesses. And then the activators/donators use their buying power, networks, and expertise to help these companies flourish.

And of course, if you have a lot of money to invest, then you have many more options.

Like venture capital funds that invest in start-ups founded or co-founded by women (most of these will require a minimum investment of at least USD 1 million).  

Or you could also look at angel investing to invest in women-founded start-ups directly (just like I did with my CHF 10,000 investment in AVAtronics). Just remember that this is a lot riskier!


How NOT to invest in gender equality

As more and more people and banks become aware of the financial benefits of investing with a gender lens, traditional institutions are starting to offer such a portfolio as well.

But pleeeaaaaase be really careful with this!!!!!

Because these financial institutions do (and will likely continue to) charge horrendous fees for that service, both published and hidden fees.

And paying high fees means that your money cannot grow much over time.

Now that you are warned, please don’t fall for that trap ;-)

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Just do it!

I hope my plaidoyer for gender-lens investing got you interested in this amazing topic (and hopefully inspired you to take action too!).

Because it is a great way to improve gender equality in the workplace.

And at least as importantly, it just makes ethical, economic, financial, and investment sense.

Not just for women; but for E-V-E-R-Y-B-O-D-Y.

Like American sociologist, Michael Kimmel told the Financial Times in 2015: “Gender equality may be the best thing that ever happened to men.” (and women!).

So don’t wait!

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