Women are currently creating wealth at a faster rate than at any time in history—a trend seen continuing as they start and grow successful companies, advance their careers, or inherit more wealth.
This shift in financial power positions women to make meaningful societal change through investments. It is a movement already underway and among the reasons many believe much wealth will be directed toward socially responsible investments, ESG investing, women-led businesses, female entrepreneurs, and charitable causes specific to women and girls going forward.
According to a Boston Consulting Group study, in 2019 women controlled 32% of the world’s wealth, or $70 trillion—up from $57 trillion in 2016. BCG estimated women’s wealth could rise to $93 trillion, or 34% of the world’s wealth by 2023.
“A great wealth transfer is upon us and women have a much higher propensity to give more of their wealth and be very purposeful with it,” said Laura Coy, head of philanthropy strategy and ESG integration at William Blair. “Women are about finding purpose, using more assets—their human capital, their financial capital, their social capital—to make the world a better place.”
One movement gaining momentum in this space is gender-lens investing. It is an investment opportunity that seeks to channel capital to address gender disparities between women and men in order to increase returns and impact. It can apply to both public and private markets and across all asset classes.
Gender-lens investing can be defined in many ways but essentially it’s about financial inclusion for women; investing in women entrepreneurs; getting more women on corporate boards; improving working conditions for women; and more.
Among asset managers considering environmental, social, and governance (ESG) criteria in evaluating companies, gender equity is a small but growing focus among investors.
“More and more funds are including gender as an element in their evaluation criteria and portfolio goals,” reported Wharton business school in its annual gender-lens investing study. “The circle is getting larger: we are seeing an increase in the number of funds for which gender is one of many impact considerations. We are excited to see growth in the field, including the widening span of sectors and themes, and the addition of so many new fund managers.”
Wharton said the amount of capital raised by funds with a gender lens across private equity, venture capital, and private debt cleared $5.3 billion in 2020. That’s up from $1.1 billion in 2017, the first year of the study.
Investor Push for Greater Corporate Responsibility
As women gain purchasing power and cultural conversations are shifting around the status of women in society worldwide, the increasing interest in gender-lens investing comes from the fact that investors are realizing that women are among the world’s most underutilized assets, said William Blair’s Cara Ryadi, a director with private wealth management who advises teams on portfolio construction and investment policy.
“Study after study over the past two decades have consistently shown that companies with more women on their boards and in senior leadership positions have higher returns on capital, better productivity, and higher stock price performance,” Ryadi said. “You can look at gender-lens investing as celebrating those companies that recognize this fact and excluding those that neglect it.”
Today’s investors in general are pushing for greater corporate responsibility, she added. They are seeking not only social good, but also superior performance, accountability, and reduction of risk.
“We are already starting to see some broader shifts towards inclusivity in the investing world,” Ryadi said. “For example, last year the Nasdaq adopted a new rule that requires companies listed on its exchange to have at least two diverse board members or explain why they do not.”
Additionally, the State of California is leading the way by mandating publicly held companies headquartered in that state have at least one female board member, or more depending on the size of the board. Other states are in the process of implementing similar measures.
All Capital Has Impact
Women’s wealth also represents a new force in philanthropy, a trend reported in the 2018 U.S. Trust Study of High Net Worth Philanthropy. The study identified that women were more likely to give than men, and one in four wealthy women give to causes focused on women and girls.
Women Moving Millions is a great example of a new network of wealthy women empowering change. WMM is a group of 340 individuals who each make a minimum $1 million commitment to organizations and initiatives benefiting women and girls.
According to a study by Indiana University’s Women’s Philanthropy Institute, charitable giving to U.S. women’s and girls’ organizations surpassed $8 billion in 2018, up 15% from 2017. The study also noted philanthropist MacKenzie Scott (formerly Bezos), who is making groundbreaking pledges to women and girls and racial equity, partnered with Melissa French Gates in 2020 to create the Equality Can’t Wait Challenge aimed at expanding women’s power and influence in the U.S. by 2030.
“We are seeing more and more women wanting to make an impact in their communities, aligning their philanthropy and investments to their values,” Coy said. “This is happening day-to-day and is especially evident during times of crisis with women giving their time, talent, and treasure—activating their networks across all generations—to make a difference.”