Future Returns: Investing With a Gender Lens

Gender lens investing strategies have boomed in recent years, fueled by the #MeToo movement, increased awareness about how women often are treated, and a recognition that companies benefit when diversity and inclusion is fostered.

Last fall, Veris Wealth Partners reported assets under management in specified gender lens strategies in the public markets climbed to $2.4 billion from $100 million in just four years.

Yet the true amount of gender lens investing is likely in the trillions when investments from funds with broader impact strategies are included as well as private equity and debt, venture capital, and commitments made by development finance institutions.

But what does gender lens investing mean? To Veris, a U.S. wealth management firm tracking the sector since 2016, it means “deliberately incorporating a gender analysis into a financial analysis in order to get better outcomes.”

That often leads to a focus on companies with female board members and women in decision-making corporate roles, although investment managers also look deeper at company policies to examine the paths women have for promotion, for example, or to what family leave options are available.

A Gender Lens Investing Approach

At Nia Impact Capital, a 6-year-old Oakland, Calif., impact investing manager catering to wealthy individuals and families, gender diversity and inclusion informs everything it does.

The firm’s core product is a $100 million separately managed account—Nia Global Solutions Equity Portfolio—that invests only in publicly traded companies with women in leadership roles. That criteria alone eliminates more than 50% of those it researches, according to the firm’s website.

But the basis of Nia’s approach is to look at publicly traded companies across the globe that are offering products and solutions in six areas, “all of which are beneficial to women—that’s where we start,” says Kristin Hull, Nia’s founder and CEO, and the former president and board chair of her family’s foundation.

“We need to invest into the future we want, into the world that we want to live in,” Hull says.

Nia’s overarching “product and solutions” themes are: sustainable planet; health care; natural and organic foods; sustainable and affordable transportation; education, communications, and financial services; and affordable housing.

Resona Holdings in Tokyo, Japan—a nation where women rarely have corporate leadership roles—is an example under the financial services theme. Resona is a bank that not only has women in management, down to the branch-manager level, it also allows women to take out loans—a rare financial service available in Japan. Now women can get loans to advance their education, or start a business, Hull says.

“By designing products for women you are taking advantage of markets that maybe weren’t there,” she says. “So you are grabbing market share and finding ‘alpha,’ [an additional return on investment], by using a gender lens.”

The portfolio, which launched in December 2015, returned 14.04% for the three years through March 31 compared with a 38.06% return for the MSCI All Country World Index and 13.52% for the S&P 500.

Why Leadership Matters

While Nia’s focus is on products that serve “people and planet,” the firm also pays attention to leadership, noting in one recent report to clients that “women are still severely under-represented,” filling only 4.8% of the CEO slots at Fortune 500 companies.

That’s apparent even at Nia Global Solutions, where only 10% of the 47 companies in the portfolio have women as CEOs. IBM, led by Ginny Rometty, is one of these. Under Rometty’s watch, IBM extended its parental leave policy to 20 weeks for new mothers, and to 12 weeks for fathers, partners, and adoptive parents, Nia said in the report. IBM has also “strategically focused on advancing women’s career development in the tech industry,” Nia said.

Engaging in Advocacy Too

Hull encourages investors to pay attention to shareholder resolutions for the companies they own as a way to advocate for women in board of director roles. Hull works with As You Sow, a nonprofit shareholder advocacy firm, that can vote on behalf of clients on environmental, social, and governance issues.

For investors whose advisers don’t tap As You Sow, Hull advises that “no matter what you hold, vote your proxies with a gender lens.”

Hull’s advocacy doesn’t stop at shareholder resolutions. Nia also pushes companies it owns to do better when it comes to diversity and inclusion. “We’re big advocators,” she says. “We take companies where they are, headed in a great direction, and then say: We want to see more leadership.”

Hull even stepped outside the investment realm last year to actively support controversial legislation in California that mandates all companies to have at least one woman on the board. The bill was signed into law by Gov. Jerry Brown last September, and goes into effect at the end of this year.

Companies can simply add a female member under the law, meaning no men will be pushed out. Skechers, based in Manhattan Beach, Calif., took advantage of this by adding a woman to its board for the first time earlier this month, lawyer Katherine Blair.

How to Invest With a Gender Lens

Investors who don’t want to invest in a gender lens fund or separately managed account, per se, can ask their investment advisor to look at their holdings through a gender lens (a service Nia can provide). As You Sow also has a new tool for examining the portfolio holdings of mutual funds.

The minimum investment in Nia Global Solutions through most broker platforms is $100,000, although it’s also available at Folio Institutional for a minimum of $10,000 as a model portfolio. To Hull, Nia’s approach brings investing back to a value-based approach instead of just risk and return. That strategy has led most investors to passive index investing, which provides diversification but little connection to the company.

In its quarterly reports, Nia provides a short snapshot of the companies in its fund (never more than 50) so that over time, investors will learn about all companies in the portfolio. That’s a stark contrast to knowing 1,000 ticker symbols in an index fund.

“That hasn't been successful for women and it's not the economy that we need,” Hull says. “We're trying to move things into where they make sense for women.”

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