By Jacki Zehner (April 2011)
Women are now over 50% of the US workforce, make the vast majority of consumer purchasing decisions, and buy trillions of dollars of investment product, yet, we are much more likely to be poor, are barely represented in most leadership roles, and according to the United Nations, one in three of us will be physically or sexually abused in our lifetime. In the United States women still earn approximately 80 cents to the male dollar, yet women globally control $20 trillion in investment dollars and are 9% of the world’s billionaires. *
Why the contrast? In large part, it’s dollars and sense. We haven’t brought our most powerful collective resource, our money, to bear on driving positive social change. Giving to non-profit groups that work on behalf of women and girls is certainly worthwhile, but what about the vast amounts of our for-profit investment dollars also at our disposal? Gender Lens Investing, a for-profit investment approach which seeks positive return alongside the advancement of women and girls, could vastly accelerate the movement to a more gender balanced and just world.
Non-profit dollars will never be enough to solve the complex issues and negative outcomes associated with gender inequality. By thinking about gender when investing, we can use the markets to narrow the gender gap which, as studies show, has the additional benefit of fostering economic growth and creating jobs. Moreover, many government, economic and business entities have showered us with research stating that, in addition to positive economic and social implications, increased political stability is also highly correlated to the status of women and girls. In other words, greater gender equality results in greater economic and human security which in turn is good capital markets.
Increasing numbers of development agencies and progressive philanthropists understand these benefits and are allocating a greater percentage of their resources to women led solutions. But it will never be enough. Responsible and ethical capitalism needs to help solve this highly complex and interconnected problem. We need to put to work much bigger pools of capital. We must expand our thinking about the role money plays in our lives and how it can be fully utilized to not only provide for our life choices, but for those who have few choices at all.
What is your hope as an investment advisor or as an investor? Most likely, to earn a long term, positive, risk adjusted financial return on your financial assets, or those of your client. In this new world of impact investing, many people layer on a values lens, saying they want their money to reflect their commitment to the social good as well. Though socially responsible and impact investing are not new, investor demand has expanded dramatically, prompting J.P. Morgan to call it “an emerging asset class” in a comprehensive, recently released report. As a result, new investment vehicles are emerging at a fast clip.
Care about providing those in need with clean water? You can invest in fund vehicles that provide capital to companies that have created clean water technologies. Care about a low carbon footprint? Lots of funds do clean tech. Want to invest in alignment with your religious values? There are products for that. Care about something as core to human existence as gender equality and where do you go? There are relatively few options and these managers and opportunities are often hard to find and their collective asset size is relatively small. (I hope to write about a few of them in a subsequent piece and feel free to post a response with opportunities you know of.)
When women hold so much economic power, why do we not use it more fully to drive positive change for our own sex and thereby for the world in general? Why, when we make 80% of the consumer purchase decisions, do we not seem to care that the products we use are often made by companies that have no women on their boards of directors or in leadership roles? Why, when we own control trillions of the financial assets in this country, are we not supporting and asking for financial products that provide capital for other women, who too often undergo “capital punishment” just because they are a women? Why are we not embracing the wealth of research that suggests that women fund managers may well be more “risk measured,” leading to better potential returns? Why don’t we look for a wider range of for-profit investment funds or companies that have technologies that can, for example, reduce maternal mortality in the developing world? Why aren’t enough wealth advisors asking what issues we care about then finding or creating financial products to match?
I don’t have all the answers, but I’ve got a few educated guesses drawing from my many years as a finance professional, an investor, and a philanthropic funder of women and girls. The first that we (you, me, the media, and the financial and philanthropic community in general) really don’t see gender inequality as that big of a deal. We have gotten so used to hearing the horrible statistics about women and girls that we have become desensitized to them. Nicholas Kristof recently said that gender inequality is the greatest human crisis we face today. I agree. Examine the evidence and come to your own conclusion. (see the resource list below to get you started)
The second is that we have not framed the issue and opportunity such that people are willing to change their financial behavior. Goldman Sachs has been a leader in producing a number of quality research reports on the economics of women but they have yet to aggressively position it as a full out investment thesis. Others are trying to. Criterion Ventures, which “seeks to shape the social capital markets to maximize their impact on women and girls” is working to map the space and generate deep interest. We need more people talking about this Gender Lens Investing framework, investment gatherings that incorporate a gender overlay, and a lot of media focus to help drive behavior change.
Surprisingly even for donors who give boldly philanthropically for the advancement of women and girls, I have encountered relatively few that invest even a part of their portfolio with that intention in mind. Foundations are willing to share their missions and lists of grantee partners, but perhaps it is time to start asking them to share their investment portfolios as well? This was driven home to me when I attended an event featuring a leading woman philanthropist who had given millions to women and girls’ organizations and whose foundation had a very large investment corpus. Her passion for gender equality was enormous, particularly in the area of women’s leadership. I asked her if and how she was using her for-profit investment dollars towards the same social mission, and she responded that she had never thought about it. It had never occurred to her. Yet, buying the stock of companies that have horrible diversity records was clearly running counter to her non-profit objectives. It is like buying the stock of a tobacco company, while supporting the search for a cure for lung cancer with philanthropic dollars.
The third reason this behavior shift has not yet occurred may be because we think that our financial assets are supposed to earn the greatest potential return, and we fear that investing with women might compromise this goal. There will be good women managers and bad ones, as is true for men, but it is my personal experience both men and women investors are more likely to give male managers money simply because they are men. I have found no evidence to support the assumption that women are not as good at managing money or companies, and in fact, there is lots of evidence I have found to the contrary. Investing in women entrepreneurs and women managers might in fact offer superior returns. Over the period of 2000 to May 2009 according to Hedge Fund Research, women-owned funds delivered on average an annual return of 9.06% compared to only 5.82% among a broader composite of hedge funds. This could well be a rare win/win situation where you could enjoy superior returns and promote equal opportunity and access.
Perhaps there is also some part of us, as women, that believes that this kind of pro-woman behavior is really not necessary, that we should be able to ‘make it’ without any special focus. How often have you heard a woman say there is no such thing as a glass ceiling, or in this context, financial discrimination? Sadly, it is often muttered by a woman who has “made it” and perhaps feels that by acknowledging that discrimination is alive and well, it might somehow suggest that her personal achievement was not based solely on merit. In 1996 I was the youngest woman and first female trader to be made partner of Goldman Sachs. Though my success might clearly indicate that I did not suffer from gender discrimination, my promotion was the exception and not the rule. Goldman, like all other large financial organizations, struggled with the challenges of gender bias which is why they developed such a robust internal diversity effort. Gender bias in finance exists, so can we now please just turn our collective attention on how to eliminate it?
Finally, the investment community does not make it easy for those who want to employ a Gender Lens Approach to know what to do. Let me give you a few ideas to get you started.
1. Choose investment services and products from companies that are more diverse (in terms of their boards, their leadership, and portfolio managers) or consider supporting a woman owned investment firm. If this information is not readily available on their web-site, ask for it.
2. Look and ask for products that apply a gender lens to their strategies. As an example consider the PAX Global Women’s Equality Fund which “invests in companies that are leaders in promoting gender equality in the work place and beyond.”
3. If you own stocks vote your proxy or ask your investment manager to on your behalf and say “No to all Male Corporate Boards.”
4. Consider Socially Responsible Investment products that provide capital to those underserved by traditional financial institutions.
5. Join an angel investing group like Golden Seeds which funds women entrepreneurs.
While we should celebrate the progress of women over the last 50 years, we should be outraged by the lack of progress in the past ten, especially in light of the seismic shift that has occurred with respect to women’s economic clout. Though the sheer force of this financial shift will drive positive change, before us is an incredible opportunity to accelerate it. For a minute consider if, instead of women, it were men that were only 3% of corporate CEOS, or only 17% of the members of the House of Representatives, and yet had the financial power that women in America have today. Do you think men would not be strategizing on how they could use all the tools in their toolbox, especially their financial power tools, to change things?
Having a gender lens to your investing is not a constraint; it is an opportunity. Not only might you earn superior investment returns but your collective behavior to narrow the financial gender gap could positively contribute to economic growth and social justice. We have so much unused economic potential. At a time when our country is so rocked by the negative consequences of excessive financial leverage, this is our opportunity to employ positive financial leverage. Chances are you give money based on your values, so why not invest in support of them as well? As investors and advisors we have so much power. “Power unused is power useless” (Gloria Feldt), so let’s use it.
Jacki Zehner – Co-Chair of Women Moving Millions, a philanthropic community of women who have made million dollar gifts to organizations and initiatives that work for the advancement of women and girls. Former Partner, Goldman Sachs. (www.jackizehner.com)
• Wealth statistics taken from a presentation Given at the 48th AFP International Conference on Fundraising.
• Most other facts on women taken from the White House Project’s Benchmarking report.
Criterion Ventures – Women Effect Investments
Goldman Sachs – Research Reports on Women
J.P. Morgan Impact Investments – An Emerging Asset Class
National Council for Research on Women’s White Paper – “Women in Fund Management: A Road Map for Achieving Critical Mass – and Why it Matters”
PAX Global Women’s Equality Fund:
“Power unused is power useless” Quote:
Saying "No" to All-Male Corporate Boards:
Socially Responsible Investment Facts
The Shriver Report – A Woman’s Nation Changes Everything
The White House Project – Benchmarking Women’s Leadership
World Economic Forum – Global Gender Gap Report