Gender lens investing – which aims to tackle UN Sustainable Development Goal five: gender equality – is reportedly growing gangbusters, with investment into companies leading the way on gender action up 85 per cent in the past year alone.
This is according to analysis by Veris Wealth Partners, which at the world’s first ever gender investing summit – held in London this month – reported that the amount of money being publicly traded in gender strategies reached a record $2.4 billion (£1.9 billion) in the 12 months to the end of June 2018.
Similarly, a recent study by Wharton Business School and Catalyst at Large shows huge growth in the private investment market, with the money in private equity, venture capital and debt funds that invest in companies actively working toward gender equality up 73 per cent this year to $2.2 billion (£1.7 billion).
The majority of this activity is going on the US, with America accounting for around 40 per cent of all targeted gender-lens investment. In the UK, however, just three funds and two ETFs that specialise in the area are currently on the market.
These are AXA World Funds Framlington Women Empowerment, RobecoSAM Global Gender Equality Impact Equities, Legal & General Future World Gender in Leadership UK Index, UBS Global Gender Equality UCITS ETF and the Lyxor Global Gender Equality (DR) UCITS ETF.
Again however, numbers seem to be growing fast, with UBS’s offering launched less than a year ago in December 2017, while the L&G fund was only launched in May.
Racing off the block
What is perhaps more exciting, though, is that every single one of these funds is – so far – a top performer in its sector.
While main markets have tanked over the past year, these funds have held their own, with AXA and Robecco’s offerings returning close to 5 per cent in the 12 months to 26 November as the average fund in their sectors have lost -0.9 per cent and -0.2 per cent respectively. (Source: FE Analytics)
Much like sustainable investment as a whole, co-manager of AXA’s fund Anne Tolmunen puts this down to the progressive characteristics of gender lens investing, which targets only the most forward thinking companies that are flowing with the tide of change, rather than against it.
She says: “It seems to be becoming clear that better corporate governance leads to better risk adjusted returns over time, and good governance includes strong gender policies.
“It is a financial risk for a company if they have inadequate policies for boosting the participation of women in the business, or if they are caught actively discriminating against women. This is both in terms of internal business performance, as well as external share price movement.
She adds: “Effectively we are looking for companies with leading employee policies in place – and research suggests these are the ones that perform well in business over the long-term.”
But what is it?
Gender investing might, to some, sound a bit woo-woo; however it really is quite simple.
AXA’s process, for example, starts with two screens, filtering out any company that doesn’t have at least 20 per cent female board members and executives (less for emerging markets) and/or including those that have signed the UN’s Women’s Empowerment Principles.
The manager says that these two screens alone filter out 70 per cent of companies across the world – showing how much work there is to be done in this space. Some of the big-dogs that do make the grade include Microsoft, Facebook and Nike – all among the top five investments in the fund.
As well as applying screens to mainstream corporates, though, Tolmunen and her co-manager Amanda O’Toole also seek out companies whose businesses are concerned with actively improving gender equality.
In the emerging market space, for example, the team invests in companies that are helping poorer women to access finance, or providing employment training, as well as healthcare providers specialising in women’s diseases and organisations helping to provide childcare so women can go to work.
As careful readers may have observed, the AXA fund is also run by two women – and it is worth underling just how rare that is. According to Citywire’s recent Alpha Female report, only 0.4 per cent of investment funds across the world (or 95 of nearly 25,300) have a female only team.
Tolmunen says that while she doesn’t think this is necessarily essential for a fund investing in women, it might help:
“The most important thing for any fund – or business – is diversity of perspectives and I don’t think a woman necessarily has an edge here. But yes, of course I feel passionately about the strategy because as a woman I really relate to it, as I do as a mother of three girls.
“My hope going forward is that people think of this as a global strategy and realise that it is pretty critical to look at corporate culture; and a key way to do that is to look at how companies treat women,” the manager says.
Tolmunen says that the fund – which has nearly doubled in size since its launch in February last year – is attracting keen interest from investors across the board, from large workplace pension schemes to private individuals.
Globally, gender initiatives are also growing and include the ‘G7 2X Challenge’, a commitment from the world’s seven biggest economies to mobilise $3 billion towards women by 2020; as well as the ‘Billion Dollar Fund for Women’, a global fund dedicated to providing $1 billion for female entrepreneurs by 2028.
Gender equality, then, is becoming a priority for governments, businesses and investors – and the rewards seem manifold.