Why are there such inequalities?
Before we look at the benefit of more female investors, let’s look at what has caused this disparity.
1) A commitment problem: According to a study conducted by JP Morgan, 64% of women do not feel confident investing and consider the process complicated.
2) Income problem: Women tend to believe that they need more money than they actually have in order to invest, so there is an urgent need to clarify this myth.
3) The risk issue: According to a study by BNY Mellon, almost half of women (45%) feel that investing their money in the stock market is too risky for them.
Women in impact investing
Socially Responsible Investment (SRI) consists of excluding sectors considered harmful to society or the planet and is often linked to the investor’s ethics. This is how “negative screening” was born, this term allows to limit the damage without acting in favour of the causes. Therefore, in order to respond to major global concerns, it is essential to integrate a third dimension into asset allocation decisions, in addition to return and risk: impact.
Impact investing is therefore defined as: “Investments made with the intention of generating a positive and measurable social and environmental impact, as well as a financial return” (GIIN). Impact investing is above all a paradigm shift that considers investment as a real vector of change for society and the environment.
Women play a key role in this trend. Indeed, the number of wealthy and ultra-wealthy women has never been so high. According to J. Vanhoenacker (2020), partner at Lombard International, women manage $72 trillion, the equivalent of one-third of the world’s wealth, an increase of 41% since 2015. The latter is more favourable to investing in new or innovative alternative assets and making impact investments. According to JP Morgan’s study, 77% of women believe impact investing can make a real difference.
In fact, according to the BNY Mellon study, more than half of women (55%) would invest if the impact of the investment matched their own beliefs. Similarly, 69% of women under 30 and 61% of women between 30 and 40 choose their investments based on their social or environmental impact.
Thus, the BNY Mellon study concludes that if women invested at the same rate as men, there would be at least $3,220 billion more in assets under management, but more importantly, there would potentially be $1,870 billion more dedicated to responsible investment.
The place of women in sustainable development
Gender equality is the fifth sustainable development goal, which aims to eliminate all forms of discrimination and violence against women and girls worldwide. The SDG advocates for legislation to address persistent disparities and calls for affirmative action for women. For example, one of the targets of this SDG is “to undertake reforms to give women equal rights to economic resources, as well as access to and control over land and other property, financial services, inheritance and natural resources, consistent with domestic law.” The themes for investment with respect to SDG 5 are as follows:
- Products and services for women
- Policy for the inclusion of women in business
- Leadership and women’s capital
However, providing the tools to make investment more accessible is not enough; everyone should be given the information, skills, and incentives to enter this sector. It’s about promoting a massive cultural shift.
What are the solutions?
Seek expert guidance
In order to invest in line with one’s values, it is essential to be advised by experts who have access to a large deal flow of impact opportunities and the ability to structure an impact investment thesis. The latter by taking into account Sustainable Development Goals and other extra-financial parameters such as gender-lens investing, which consists of taking gender-related factors into account throughout the investment process in order to advance gender equality and better inform investment decisions.
Your difference is a strength
Femininity can be a strength in investing. Because investing is not only about transferring money, it is also about accompanying entrepreneurs, challenging them, bringing a different vision, and listening. Women gather around groups of business angels or specialized funds. A multi-family office helps connect individuals with similar interests and bring them together around impactful projects.
Measuring impact
Finally, the definition of impact investing includes a notion of measurability: without data, one cannot prove that an investment or action has had the desired effect. This is why the support of financial investment advisors specialized in impact investing is essential to be able to measure impact, communicate it and inspire others to direct their capital to high impact projects.
Women have an important role to play in impact investing, yet unequal access to this sector limits not only their financial opportunities but also their social and environmental impact. With the right guidance, this can be remedied and the trend can even be reversed.