Gender lens investing has continued to be a powerful strategy for impact-driven family offices, combining the goals of empowering women and advancing sustainability.
According to the Criterion Institute, a social-justice-oriented think tank, gender lens investing involves "incorporating a gender analysis into financial analysis to achieve better outcomes."
And while ESG (environmental, social and governance) — an investing principle similar in concept to gender lens — has been a political flashpoint, particularly over the past year, gender lens investing continues to grow in the shadows of the broader and more controversial ESG scope.
Financial Planning reported in June that gender lens investing funds saw 9.5% quarterly growth in assets under management, and that publicly-traded gender lens investing funds had $4.6 billion in AUM as of March 31.
Supporting this approach, a 2021 study of 5 million Fidelity Investments customers found that women, on average, outperformed men by 0.4% in investment returns. Research further highlights that women tend to live longer, invest more conservatively and are more inclined to support companies with positive environmental impacts.
“Family offices can say we’re going to use 50% women as asset managers, and they can make an incredible difference because we do look at the economy differently. It’s a significant way to diversify a portfolio,” said Kristin Hull, founder and CEO of Nia Impact Capital. “We think about how diversity is good for investing, and yet we haven’t taken into account who’s the investment manager. That’s one way family offices can really be game changers.”
Gender lens investing can be particularly effective with issues like climate change. “We’re very climate-focused, and we see gender as a way to get to a better climate,” Hull said. “There’s some research and stereotypes about women being long-term thinkers, and climate is a long-term issue.
“We can’t solve that in a quarter. So if men are making short-term decisions, and women are making longer-term, it’s nice to have that combination working together.”
‘Things are just better’
Another aspect to gender lens investing is helping elevate women in leadership roles and board positions.
“We won’t invest in a company that doesn’t have at least two women on the board in our core SRII strategies,” said Blaine Townsend, director of the Sustainable, Responsible and Impact Investing group at the Bay Area-based wealth management firm Bailard. “But it’s important to note we’re not looking for all-women boards, either. We want board diversity.”
Said Hull: “When we’re looking at products and services designed by companies, when women are involved in those decisions, the products are better because they’re including that 50% of the population. That’s true for clinical trials for medical testing, automobile development and city planning. It really does span quite large aspects of our economy. When using a gender lens, things are just better.”
Women entrepreneurs generally are able to secure early-stage investors, with one recent example being an $11.2 million round of Series A funding for Female Invest to grow its personal finance app for female investors. Yet the wealth advisory firm Align Impact emphasizes its gender lens approach to extend past early-stage funding.
“If you look at it through the lens of asset class, there are way more venture firms and companies raising early-stage activity that are led by women than there are real asset firms, private debt strategies or private equity strategies,” said Ali Motroni, client experience director at Align Impact. “There are some sectors I think are really ripe to invest specifically in women founders — areas where women have primarily played an outsized role, like in caring for aging populations, in child care.”
Challenges in tech
“Finance and tech are traditionally very male-dominated,” said Nisa Amoils, managing partner at A100x Ventures, who invests in early-stage blockchain and AI companies. “I think a lot of women are afraid to go into it and maybe haven’t been treated so well so they get out of it.
“It’s impossible to do a gender lens fund, I think, in AI and blockchain. You just wouldn’t have any deal flow really, not enough.
“I’ve never subscribed to cutting out half your deal flow as a venture investor.”
Amoils, who wrote the 2019 book WTF Is Happening: Women Tech Founders on the Rise, sees how diminished funding opportunities affect women as entrepreneurs and investors.
“I just think [women are] more prudent on the spending and the runway from what I’ve seen [after] investing in women and men,” she said. “The capital they raised lasts longer because they know it has to, they’re not going to get a second chance like a man. So they’re very prudent in their decisions, and it usually works out well.”
Representation by women in the tech industry has been especially challenging, with two industry groups, Girls in Tech and Women Who Code, both closing down this year after each had been active for over a decade. The media conglomerate Cox Enterprises, which operates the Cox Family Office, continues to sponsor an educational program for Girls Who Code. In addition, Sixth Street, a private equity firm with $75 billion in assets under management, similarly sponsors the Girls Who Invest nonprofit, which aims for women to manage 30% of the world’s investable capital by 2030.
The ESG, DEI issue
The pursuit of gender lens investing comes as fund managers and U.S. policymakers have grown increasingly critical of ESG. The debate around its merits has spilled beyond politics and onto the screen, where ESG is a plot in the new season of HBO’s "Industry" series, debuting in August.
Some backlash against DEI (diversity, equity, and inclusion) has also heightened following last year’s U.S. Supreme Court decision to end race-based affirmative action in college admissions. Corporations such as Microsoft, Zoom, Meta and Alphabet Inc.’s Google have recently made significant cuts to their DEI programs, but real trailblazers won’t only look to appease government regulations.
“We probably are entering a period where the backdrop for how these issues are treated from a regulatory standpoint is very much in flux,” Townsend said. “We look for companies’ own internal engine for how they handle these things, companies that lead on these issues and aren’t just driven by what government regulations demand of them.
“Companies that are transparent on their policies and programs on gender issues, we would value highly.”