How you can support equality with your financial investment
Investments in companies that actively live and promote diversity and equality are increasing. Just a hype, or a good opportunity? How do such systems work and what you should know about them?
On March 8 was International Women's Day - for over a century this day has served as a call to strengthen the position of women in society and the economy and work for an equal world.
On June 14 of last year, we had a nationwide women's strike in Switzerland and women across Switzerland demanded greater equality.
It's 2020, do actions like these even need to happen anymore? - Yes, for another 99.5 years.
Equality - a few facts:
Although we are making progress, there is still much to do:
- Only about a quarter of all seats in parliaments are held by women.
- In June 2019, 33 of the Fortune 500 companies (the 500 largest US companies) had a woman as CEO – which is only 6.6%.
- More girls (15 million) than boys (10 million) of primary school age do not attend school.
- 30% of the world's researchers are women - but already at the age of 6, girls consider boys more suitable for "really, really smart" jobs than their own sex.
- One in five girls is married before the age of 18 and globally 190 million women of childbearing age had no access to contraception (2019).
- Worldwide 18% of women experience violence through an intimate partner - but less than 40% seek help.
- The pay gap for girls already starts with pocket money - with the largest "pocket money gap" among 11-year-olds.
What is the situation in Switzerland and the UK?
In the annual Gender Gap Report of the World Economic Forum in 2020, Switzerland moved from rank 20 to 18 and is now positioned between South Africa and Canada. The UK lost a few ranks and moved from 15 to 21 and finds itself now between Albania and Colombia.
Switzerland gained two ranks mainly because of improvements in political empowerment. However, there is still further potential for improvement, such as economic participation, e.g. in the proportion of women on management boards - although this is on the rise, it is still only 10% among the 100 largest Swiss employers, for example - despite an increase, only just over half of these companies have women on their management boards
The picture for the UK looks very similar. There as well is room for improvement regarding economic participation and political empowerment.
What are the economic advantages of equality?
Various studies have confirmed that companies with above-average management diversification have almost twice as much income from innovation as companies with below-average management diversity. McKinsey (2018) found a possible positive interdependency between equality and financial results in a study of 1,000 companies from 12 countries. Studies by various financial institutions such as UBS and Credit Suisse show similar results.
Estimates show that such companies can achieve a sector-adjusted outperformance of 4% per year compared to those with below-average values). A similar effect also occurs with start-ups - diverse start-ups or those co-founded by women achieve a return of 78% per dollar invested (vs. 31% for one-sided teams).
Other benefits include better decision-making and better risk management - both of which can have a positive impact on results. However, this positive effect only fully sets in when about 20-30% or more women are present.
These advantages are also increasingly used for financial investments.
What is "Gender-Lens Investing"?
With this type of investment, you consciously invest in companies that are sustainably committed to diversity and equality. To make this measurable, criteria are applied, such as the 19 criteria by Equileap, a non-profit organization that provides data such as:
- Gender balance in management and staff
- Equal pay & work-life balance
- Business policy to promote gender equality
- Commitment to transparency and accountability
The concept of Gender Lens Investing is not really new, various forms of investment have been around for 15 years. The whole category is still rather a niche market compared to other investments, but with the increased focus on equality, investments and product diversity are increasing.
In the case of financial products, a really transparent overview is still lacking. If you are interested, you can find further information here: Global Gender-Smart Investing Summit, or the compilation by the Global Impact Investing Network for Gender-Lens-Investing.
How can you invest money with a "Gender-Lens"?
- Investments in companies that actively and measurably promote equality. Various indices and rankings exist: e.g. Equileap, Bloomberg Gender Equality Index or helpful indicators such as data on wage equality, the proportion of women in management and in the organisation. A number of financial providers offer gender-lens ETFs.
- When supporting start-ups, pay attention to diverse teams.
- Investments in companies that develop products and services for the growing "Female Economy", e.g. in the health sector or to solve social challenges that affect women (UN Sustainability Goal 5).
- Similar to sustainable investments, it is also possible to exclude companies with bad or inadequate practices from your own investment portfolio.
Regardless of what you decide on, similar to the consideration of sustainability criteria, the inclusion of investment criteria that consciously include diversity and equality is a possible way to achieve a positive signal effect in addition to returns.
Whether to invest with "gender glasses" or to engage in a different way for diversity - it needs all of us, so that it won’t take generations for our children to live in a really equal world.
This article has been produced in partnership with watson, a Swiss news platform.
Here is the link to the original blog article in German.
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