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Investing in Women


Originally published in Stanford Social Innovation Review

I was thrilled to see the recent coverage of gender-lens investing in Paul Sillivan’s New York Times article, “With an Eye to Impact, Investing Through a ‘Gender Lens,’” and Laura Colby’s Bloomberg article, “Stock Tip: Try Betting on Companies Led by Women.” The practice of paying attention to where women sit within a company and how a particular company may benefit women is certainly gaining traction. Both authors did a fantastic job of shedding light on this underutilized, yet growing, investing practice. Colby highlighted the concept of “doing well by doing good,” and argued that a focus on management diversity is not only a popular, “feel good” way to choose one’s companies, but also smart investing.

Sullivan, however, made this type of investing seem like a new concept. It’s not. Pioneering women—including Joan Bavaria, my colleague Amy Domini, and others—have been bringing equity to our financial system for decades, on multiple levels. Bavaria, who passed away in 2008, pioneered just this sort of socially responsible investing when she founded Trillium Asset Management in 1982. And at Domini Social Investments (a primarily women-owned company with a women-led team), seeking out gender-equitable organizations, and voting down non-diverse boards has been common practice for years. While diversity for its own sake is good, research continues to show that the breadth of perspective is actually important in the corporate decision-making process and essential for good governance.

Sullivan did also mention women investors in his article, and I appreciate his words. Here, I’d like to build on them and emphasize how catalytic this role of the investor can be for creating change. Women are participating with investments; they also are leading this movement to transform the way we invest our money and the way we engage with Wall Street—bringing the values of diverse leadership, transparency, and inclusion to address gender equity issues and other critical issues, such as environmental sustainability and fair wages, as well.

We need more women (and men) to speak up for their values, and ask for what they would like to see their money accomplish in this world. The power to effect change is ours to harness. Having been involved in the conceptualization of the Women’s Initiative at Root Capital, I’ve experienced that influence first hand, and I would like to see more people do the same. In the case of Root Capital, we loved the work that the organization was already doing: providing mid-level loans to small farming businesses in developing nations. And yet we, as investors, wanted to know what percentage of these loans were being allocated to women. The directors at Root Capital didn’t know the answer to our question off hand, though within the scope of a few thoughtful conversations, they were willing to start a fund for us where 100 percent of the loans would go to women. The Women’s Initiative was born, and shortly thereafter became available to other lenders looking for a gender lens within their fixed income allocations.

Similarly, The Women’s Foundation of California wanted to see a public equities fund incorporate living wages as a criterion for measuring local poverty levels for women and girls. While the Federal Poverty Level (FPL) measure is used more often, the Women’s Foundation leaders found the FPL (developed in 1963) outdated and asked their portfolio managers at US Trust to use the Basic Economic Security Tables (BEST) metric in developing the investment product. Though unfamiliar with this alternative poverty measure, US Trust managers were willing to pursue the request. Subsequently, they adopted the metric for what is now the Women and Girls Equality Strategy (WAGES)—a public equities fund that is now available to others as well. While I wasn’t personally involved in this example, the active stance of the California Women’s Foundation illustrates my point well.

This type of investor activism (or “client demand” as it’s referred to by the big banks) is occurring increasingly in advisor offices around the country. Savvy investors are voicing their concerns, not only about their financial goals but about their values as well. With more investors feeling empowered to speak up, we will see change happening in product creation and portfolio construction one conversation at a time.

From the investors depicted in Sullivan’s article, it may seem as if this sort of investing is mostly reserved for a few high-net-worth investors, such as Oprah, and Melinda Gates. They appear to get the bulk of the headlines, after all. That’s actually not the case. Nor is adopting a gender len a practice that happens only “on the side.” Successful organizations like Community Action Fund for Women of Africa (CAFWA) and many other smart leaders are using the technique of investing in women and girls as a strategy to address pressing issues across communities.

And importantly, women aren't the only ones who benefit. Oprah has found that “dedicating resources to a single woman has a ripple effect on her entire community.” In fact, according to “Women, Wealth and Impact: Investing with a Gender Lens (2015),” a report put out by Veris Wealth Partners, the UN’s Food and Agriculture Organization estimates that if women received resources (credit, land, information, training, seeds, and fertilizer) on par with men, the additional yield could reduce the number of undernourished people by 100-150 million (12-17 percent). Incorporating a gender lens benefits all of us, from investors looking for positive financial returns, to the men and children who live in the same communities as the women receiving the investment capital.

At Nia Community (whose name is derived from the Swahili word for intention and purpose), we see inclusion and diversity in leadership as an important strategy to both achieving equity and innovation. Impact investors are looking to use the power of business to address and solve for real problems like agriculture, clean energy, and financial inclusion. Engaging women as a lens into this process will only enhance outcomes for us all. By supporting diverse teams and female leaders in their innovative solutions work, we are investing in the world we want to see.

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