THE PERSISTENT ISSUE OF GENDER INEQUALITY makes headlines on an almost daily basis. From all-male boardrooms to the disproportionate effects of the coronavirus on women-owned businesses, the inequalities that women face are motivating investors to seek positive change while continuing to pursue their investment goals. They’re doing so by incorporating gender factors into their overall investment approach, often called gender lens investing (GLI). GLI is a way to leverage the market to support progress toward gender equality — in the workplace, the supply chain, the consumer market and elsewhere — by giving companies a financial and ethical incentive to hire and promote with equality in mind. And simultaneously, it’s a way to identify areas of opportunity in the search for potential investment returns, sustainable growth and lower risk.

Investors and companies are responding

“We’re hearing more about gender lens investing today because there is clear data tying women’s economic progress to global growth and a growing interest among consumers and investors in supporting gender equality as a fundamental human right,” says Jackie VanderBrug, head of Sustainable and Impact Investment Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank. This support is reflected in increasing calls for equal pay for women, more diversity on boards and in upper management, the production of consumer products beneficial to women, and other areas. Consider the following:

• Research company McKinsey estimates that achieving global gender parity could boost global gross domestic product (GDP) by $12–$28 trillion.¹ This research indicates a growing trend.

 

• According to research firm Deloitte, millennials and Gen Z want to work for companies that ensure diversity and inclusion across the organization.²

 

• Research suggests that while performance results have varied over time, many companies with higher scores on board diversity and management diversity saw consistently higher future return on equities (ROEs) than counterparts with lower scores.³

Gender diversity can yield many benefits

Equally important, research indicates that a company’s gender diversity can be a fairly reliable indicator — along with traditional metrics such as return on equity and debt-free cash flow — of its potential for investment outperformance relative to the broader market. A study from McKinsey suggests that outperformance may derive, for example, from better decision-making by a more diverse group of directors — including those with a greater representation of women.⁴ Outperformance may also be tied to greater gender diversity among senior leadership and the rest of the workforce, which may in turn be correlated with reduced turnover and higher employee engagement.