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Gender Lens Investing

In the United States and the United Kingdom, women are approaching a tipping point in their control over the money. More than half the millionaires in the UK are now female and more than half the wealth in the US controlled by women.  Women are also showing presence in philanthropy, as both donors and managers.  And, increasingly, female philanthropists and angel investors want to help other women.  These trends suggest the time may be right for a strategic offering of investments selected and rated for their “gender friendliness.”

I had a really exciting conversation last Friday with Joy Anderson, founder of Criterion Ventures and a leading light in the new field of “gender lens investing.”  Her “Women Effects Investments” initiative challenges us to imagine how we might move significant capital in ways that would benefit women and girls.

The idea here is to develop a system for valuing investments along gender dimensions, just as they are now assessed for environmental impact, political stability, and the like. The concept arises from the recognition that women have not historically sat at the “investment table,” so to speak, and so investors have not usually taken a view toward how moneys are deployed in the interest of gender equality.

Yet, today, many major organizations, including even the World Bank, the World Economic Forum, and the Organization for Economic Cooperation and Development, are accumulating data showing the important correlation between women’s empowerment and sustainable growth, developing indices for assessing countries on gender progress, and calling for businesses to begin focused efforts toward improving the participation of women–in order to help profitability and growth as much as to improve the social environment!

Yet, at the moment, investors and analysts still struggle to develop a robust portfolio on a gender lens basis.  There is clear demand for a metric.  Joy tells me something like US$100 million were allocated in the past year for gender investment, but the product against which these funds can be reliably placed is still not formulated.  So there was no home for these funds. This does not mean there are no gender friendly investments out there:  it means that the dimensions to be assessed, the means of measurement, the venue of reporting, have not yet been designed.

When you start thinking about what would need to be included in such measures, it becomes very interesting and exciting.  You can see that there is a lot of power in the concept.  Joy points out that it is relatively easy to screen for things like how many women are on the board, for instance.  And, in some cases, you can get a good sense of what percentage of a company’s work force is female.  If you want to click around a bit, you can figure out the representation of females at the top.

Yet, even within the corporations, there are still many data gaps.  The Corporate Gender Gap Report, issued by the World Economic Forum in 2010 found, for instance, that 72% of the top 100 employers in more than 30 countries did not track salary by gender. Managers surveyed were asked to make estimates of what percentage of women were found at every level of their company–from entry level to CEO.  It is frightening to see that, whether you are looking at India or Norway, the US or Italy, the numbers of women inexorably go down as you go up the corporate ranks.  So, measuring the women in what is increasingly called the “leaky pipeline” would probably be something to do.

Beyond that, though, there is also the question of compensation.  The annual Global Gender Gap Report issued by the World Economic Forum consistently reports that the managers they survey say women are paid much less for the same work, even in countries where it is illegal to discriminate.  And the “hard data” that simply compare earnings on a national level (though these are not adjusted for the difference in payscales in the proverbial pink ghetto industries) tend to corroborate the judgment. I have seen a good bit of discussion lately about needing to require corporates to disclose the number of women at each rank and how much they are paid, compared to men.  If we had that data, we would certainly want to reflect it in a gender lens strategy.

Even these are the easy parts.  Where my head starts to hurt is where you try to assess the impact of the products and services a company sells. It seems like it would be easy.But no.  For instance, in the West, the ultrasound machines produced by GE are a lifesaver for babies and a boon to mothers.  But in India, China, and other places where female infanticide is accepted, ultrasounds are now being used to identify the sex of fetuses–and abort the girls.  So how would you rate that product?

We might imagine that guns and cigarette would be easy to rate.  But these do not have a skewed gender effect–indeed, they still disproportionately harm men.  So, is it enough for a product to be generally harmful or must it have a clear gender impact, like faulty IUDs or something?

And what would we do about cosmetics?  And household cleaning products?  These goods are sold to women.  Their makers have been criticized often by feminists as contributing to the subordination of women by underscoring outdated stereotypes.  Yet the companies that make these products, precisely because they rely on women as consumers, often have better representation of women on boards, philanthropy projects focused on women, and so forth.  And, would we rate an autoparts manufacturer or a shipping company better because their products and services were gender-neutral?  I don’t know about that.

Certainly, we could give credit for efforts to reduce labor abuse in developing countries, as Nike has tried to do.  And for philanthropic programs, such as, again, Nike has led, with its Girl Effect.  And would we give credit for communications campaigns?  The Body Shop’s campaign against human trafficking certainly would deserve a few points here.  But what about the Dove Campaign for Real Beauty?

This is not to mention there will be inevitable objections that it is wrong to tip a “neutral” institution like the financial markets towards one gender.  As if the world economy were not set up in favor of men already.  And as if small groups do not already use financial means and shareholder meetings and the like to tip the balance of world opinion in their favor.  We can be sure when it is women doing the tipping, there will be outrage from some quarters.

But at some point, you gotta follow the money.  Joy says her group is having trouble finding the meeting point between people who understand finance and people who understand gender.  I imagine some of our finance faculty in the same room with a bunch of women’s studies people and I can totally understand what Joy is confronting.  In fact, I just don’t want to even picture that meeting in my mind.  It couldn’t be pretty.  Could it?

Maybe it could.  The world is changing fast.  There is serious recognition of the role women can play in the future of the world economy–indeed the role the women must play if we are to achieve global prosperity and eradicate poverty.  So this gender lens investing thing is an idea whose time has come.  It will be fun to think it through.


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