The ripple effects of the #MeToo movement are spilling over into investors’ portfolios. Are investors prepared to turn public awareness of gender bias into proactive investment strategies? In the past month, sexual harassment allegations against Steve Wynn and Paul Marciano led to nearly 20% declines in stock prices of the companies they founded. Private companies such as Uber and the Weinstein Company are confronting the financial risks of toxically sexist internal cultures (And yes, a majority-female investor group just purchased Weinstein Co.). Investors are waking up to implicit or explicit gender-related risks in their portfolios. This awakening might just be the tipping point pushing “gender lens investing” into the mainstream.
Gender lens investing considers investments’ social impact on women alongside financial returns. In the past several years, there has been tremendous growth in impact funds, exchange-traded funds, and mutual funds focused on gender-lens investing. Recent studies have indicated over $2 billion of assets focused on gender-lens investing. Traditionally, most gender-lens investors have been impact investors or development finance institutions with explicit mandates to address gender disparities through their investments. A small percentage of gender-lens investors have been convinced by the evidence of higher returns for businesses that are led by women.
Now, as more traditional private investors potentially become interested in gender-lens investing as part of their risk mitigation approach, there could be a large pool of funding available for gender-lens investment. If you are interested — whether for social goals, higher returns, or risk mitigation — the key question is often how to make a gender-lens strategy a reality?
Moving from the why to how
There are opportunities to apply a gender lens at four key inflection points: when defining the mandate for gender-lens investing, developing a strategy, due diligence, and when providing operational assistance to portfolio companies.
1. Define the mandate
The gender-lens investing movement began with a strong focus on women-led businesses. This focus remains critical as there are persistent, well-documented gender disparities in access to capital and as highlighted above, there is some evidence of higher returns for these businesses. Yet, investing in women-led businesses is only one of several gender-lens-related theses. Investors applying a gender lens can support gender-equitable workplaces, companies that produce products and services that serve women and companies that work on structural issues such as reshaping rigid gender norms and addressing violence. For example, InFaith Foundation recently announced a $10 million portfolio aimed at addressing causes of gender-based violence.
To develop the right approach, investors must be clear from the start on what they are looking to address. Investors reacting to the #MeToo movement may choose to focus on strengthening gender equality in the workplace or at least investing in companies with greater equality as a risk mitigation tool.
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