What is Gender-Lens Investing, and How Is It Different Than Philanthropy?
One of the most common questions I receive is about gender-lens investing; what is it, and how is it different than philanthropy?
We know that women have been investing in the lives of other women for centuries, but over the last ten years, the field of “gender-lens investing” has emerged as a subset of the more popular “social impact investing” field, which usually refers to any kind of investing that’s designed to have a positive social or environmental effect on the world.
Simply put, gender lens investing is an investing approach that deliberately incorporates a desire to make a difference in the lives of women and girls while meeting the risk/return objectives for an investment portfolio.
Gender equity—along with other social equity themes that are core to creating a more equitable world, such as racial equity—may be a value that aligns with a donor or investors interests, making it a good strategy to deploy capital. In other words, gender-lens investing allows you to make a return on your investment while choosing investments that promote gender equity.
The value proposition is simple: If you are already investing your money for a financial return, why not try to align those investments with your values?
What Does Gender-Lens Investing Look Like?
The market favors companies that are mostly started, owned and led by men. So gender-lens investing is, by definition, working toward leveling that playing field. While every investment firm is different, they seem to agree on three primary pillars of gender lens investing:
1) Increased access to capital for women;
2) Workplace equity; and
3) The development of products and services that benefit women and girls.
These categories are not mutually exclusive, but different investment firms may focus on one more than others.
We know, for example, that greater gender diversity on boards is a predictor of long term value creation and lower stock price volatility and that firms with a larger share of women in senior positions have significantly higher returns. We also know that women-led businesses face limited access to capital—just 3% of venture capital funding was raised by female CEOs last year, and the number was even lower for women of color. Thus, the strategies for gender-lens investing tend to consider the share of the board, founders, or senior management team that is female or whether products disproportionately benefit women. The aim is to increase the number of women-led companies and to deploy capital to businesses that promote gender equity or benefit women through products and services.
As gender lens investing grows in popularity, those who now offer gender lens investing range from the fifth largest asset management firm worldwide (BNY Mellon Investment Management) to G7 development finance institutions, which have committed to collectively mobilizing $3 billion to improve women’s economic participation and access through employment, leadership opportunities and other services.
Gender-Lens Investing vs. Gender-Lens Philanthropy
Although the two concepts are sometimes conflated, they are not the same. They can go together nicely, though. Gender-lens investing is a way to generate a financial return by investing in businesses that in some way promote better gender equity practices. The ultimate goal of an investment portfolio is profit.
The goal of philanthropy, however, is about identifying a tough problem where your resources can make a real, tangible difference to people’s lives. Gender-lens philanthropy is about identifying persistent barriers that women and girls face around the world because of discrimination—access to education, access to health services, gender-based violence, etc.—and investing in strategies and programs that will make a real difference. The ultimate goal of gender-lens philanthropy is to shift resources to where they are most needed so that women and girls—and their communities--can have opportunities to live better lives.
Investing in the stock market is not the same as investing in specific strategies to improve the lives of women and girls, including driving policy and advocacy in order to create ripple effects of healthier families, healthier communities, and healthier nations. But the two strategies may go hand in hand. Gender lens investing may be a great vehicle to build the capital to be able to invest in those solutions.
For more on this, read: What’s Gender-Lens Investing and Why Is it Important? by Ellevest, and Social Equity Investing: Righting Institutional Wrongs.