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In the business world, as in so many other parts of society, views on gender are in a state of continuous evolution. It’s no longer enough for companies to merely have women on staff, nor to pay them equally, nor even to place them in the C-suite and the boardroom. The questions today revolve around how fully gender difference is integrated into the whole operation, across a wide range of factors.
The payoff, when it’s done right, can be significant. And for investors who are looking to put their money behind companies that are in line for those payoffs, there is a guiding mantra: gender lens investing. Recently on Knowledge@Wharton, Sandy Maro Hunt, associate director at the Wharton Social Impact Initiative talked to Jackie VanderBrug, managing director of Bank of America/U.S. Trust and a prominent thought leader in the gender lens investing space, about the many lenses people can use, and what they can help us see.
An edited version of that interview appears below.
Sandy Maro Hunt: Let’s start at the beginning, what is gender lens investing?
Jackie VanderBrug: Gender lens investing is a process. It’s the deliberate integration of gender analysis into investment analysis and decision-making. What’s important to understand about that is really two factors. First, the definition includes this aspect of lens, not limitation. Oftentimes, as soon as you say gender, people feel like you’re excluding men. This is not an exclusion. This is a lens, and not a limitation.
A lens is like a pair of glasses: Through my glasses, I’m going to see some things that if I didn’t have them on, I would otherwise miss.
Hunt: That’s a really great point. But your glasses are going to have a different prescription than my contacts — we’ve got different lenses. Can you give us a couple examples of how that might play out in real-world scenarios?
VanderBrug: Some investors, for instance, will say that they are really interested in getting women access to capital, and those women may be micro-entrepreneurs in an emerging market, or in a domestic situation here in the U.S. They might be women film directors, they might be women hedge fund managers. But these investors have realized that there are women who have less access to capital than men, and that’s the lens that the use.
“Clients are asking about the environment and social impact of their investments. Our research shows that 58% of high-net-worth individuals say that that is important to them.”
Other investors use a lens where they look across the value chain of a company, and they say, “How do I evaluate this company from the board, through its senior management, through the way that it is working within its organization to the supply chain? How do I gauge the way they are valuing women and men equally in the organization?”
Still, other investors are really looking at that product and service, and how is it that, if this company was wildly successful, given what it does, how would that change gender equality in its markets? Does it have a product that is going to solve a challenge for women, like women’s safety? Has it thought about gender knowledge? There is really interesting research now on how software is designed, and how software design has been predominantly for male patterns of problem solving. Thinking about how you could de-bias software design could open up a whole set of new product offerings.
Those are very, very different lenses, and they all overlap, and none of them are better than others. In general, what happens is I have an expertise, I have an experience, I have a theory of change and that creates my lenses.
Hunt: What I love about those examples is that the lens idea empowers everyone to have a voice. Whatever your experience, you’ve got a unique lens that you are bringing to this space, and it sounds like there is no wrong way to ask those questions. It’s a lens over all sectors. Tell us a little bit more about why that is so important.
VanderBrug: You’re absolutely right: All investments have impact, as you probably often say. All investments have gender impact….
Hunt: Good, bad, or ugly.
VanderBrug: Exactly. Gender lens investing crosses all sectors. It crosses all asset classes. And people use lenses in different ways, so it is also important to understand that my gender lens might not be the same as yours. Why it’s important is because we are starting to realize that so much of the way that we allocate capital is gendered. When we can be aware of that, and we can be aware of our biases, we can be aware of the opportunities, we can make much better investment decisions.
Hunt: Absolutely. That’s a great case for gender lens investing. Why is it important to Bank of America/Merrill Lynch/U.S. Trust?
VanderBrug: It is important because we are looking, as are all investors, to make the best investment decisions. Having additional information about an investment, whether that be the role of women within the company, whether that be the way the company is attacking potential important markets, whether that be the safety and security of the products that it’s creating — gender has a part to play in all of those factors. So that’s important to us.
It’s also important because it’s important to our clients. Increasingly, as many of your readers know, clients are asking about the environment and social impact of their investments. Our research shows that 58% of high-net-worth individuals say that that is important to them. Interestingly, 50% more women say that than men. So we don’t think that gender lens investing is investing for women — it’s investing for smart investors. That said, research does show that women are more likely to start asking these questions. To say, “What is the impact of my portfolio on women and girls?” And also, “How is my portfolio taking advantage of fully diverse organizations and the power they bring?”
Hunt: I’m curious about another demographic group that is of particular interest to the financial services industry, the millennials, who will inherit something around $30 trillion in this boomer wealth transfer that has just begun to happen, and will be happening over the next few decades. Talk to us about what you see from that audience, and how you see gender lens as a part of their priorities and experience.
“People use lenses in different ways, so it is also important to understand that my gender lens might not be the same as yours.”
VanderBrug: That audience, to your point, has a completely different world-view. When we ask them, “Do the social and environmental impacts of your portfolio matter?” 93% of them said yes. They’re almost saying, “Why are you asking us this question?”
Hunt: Right, almost rhetorical.
VanderBrug: Almost rhetorical, exactly. Their view is that they are looking for equality. They want to work in organizations that have diverse management teams, they want to buy products that reflect their identity, and increasingly, their identity is one of community and doing things together and so forth. They want to make the world a better place, and they understand what that takes.
Research shows that countries that are more inclusive in terms of women’s labor force participation, in terms of women’s access to legal rights, have higher GDP growth over time. This is in the zeitgeist of our time. But they’re also hearing things like Melinda Gates saying, “Women do more unpaid work than men. Girls do more unpaid chores than boys,” and they’re saying, “Hmm, this isn’t the world I want to live in. I want to live in a true meritocracy.”
Hunt: You’ve heard the phrase “the sandwich generation,” applied to people who are or will be managing both childcare and eldercare at the same time. That’s a double hit on the women who are doing that unpaid work, so I understand why it’s a huge issue.
We’ve been painting a really positive picture about why gender lens matters, and why it’s so important. If I can be a pessimist for a moment: What are the challenges that are facing gender lens investing that prevent it from growing more quickly?
VanderBrug: Partly, I would say that there is a lack of understanding of what it actually is. Oftentimes people think gender lens investing is small, soft, and pink. Small investments, maybe a loan to a low-income woman to help her become an entrepreneur; it’s soft meaning it’s not research based; and it’s pink meaning it’s just about women, it’s not actually about gender and the role that men and women play in society. When we shift out of that bias, we can understand what happens when, say, CalSTRS starts working with State Street Global Advisers and creates an ETF called SHE, and they move $500 million under the ETF.
Hunt: There’s nothing small or soft about pension money moving.
VanderBrug: There’s nothing small or soft about that. But part of it is the bias. The second factor is the data. The data is challenging because there is not enough of it, and it’s not apples to apples across countries and across companies. Now you are starting to see companies be more revealing about the role of diversity across their ranks, around questions like pay equity and so forth.
You are seeing organizations like Data 2X really look at driving more consistent gender data across countries. And the sustainable development goals are going to push that forward as well, because as we look at those, and how gender equality is both a separate, called-out sustainable development goal, and integrated throughout the other 17 goals, you need measurement for that.
Hunt: It’s a lens throughout those other goals, right?
Hunt: You and I have talked about how fewer people than are actually investors consider themselves investors. We are all investors in products and services: We are buying, we are supporting, and we’re managing our capital. What can someone do if they are interested in advancing the conversation around gender lens investing?
VanderBrug: It’s true that we tend to think of “investors” as a few talking heads on CNN.
“It’s very easy for people to get confused, and to think gender lens investing is just about investing in women entrepreneurs.”
Hunt: Very wealthy ones.
VanderBrug: Exactly. And those investors are powerful and important, but all of us have an opportunity to be curious about this and to ask questions. So if you ask questions of your investment advisor about how a gender lens might be implemented in your portfolio, that starts a conversation that is between the two of you, but also between your investment adviser and their firm. The same is true for any board that you serve on, for any organization. All of the questions we ask around the topic of “How are we inclusively using the talents of men and women as we do our work?” lead to opportunities.
Hunt: What are some opportunities for advancement of gender lens investing ? And what are some areas where you think a research institution like Wharton can play a role in advancing it?
VanderBrug: I think there’s a lot of research to be done around perceptions and communication. As we talked about, it’s very easy for people to get confused, and to think gender lens investing is just about investing in women entrepreneurs. And while investing in women entrepreneurs is important, and women’s access to capital is critical, there are other factors in terms of how men and women play role throughout a company, in terms of the product and research. There is fascinating work being done in terms of the way that knowledge is gendered.
This question of: What kind of data is an organization gathering, and how does that determine the products and services that they are creating? There are lots of opportunities there, in terms of how do we get that complexity into something called gender lens investing. There’s some great research around the financial performance of companies; there’s great research to be done around impact, and how the role of gender lens investors can drive impact. The research that I’m most interested in is potentially the intersection of those — the flywheel effect that happens when gender lens work creates more impact, which then creates better financial returns.
Hunt: Let’s move to a success story. Jackie, can you give us an example of something that has been particularly inspiring or exciting to you, emerging in the gender lens investing space?
VanderBrug: There are a lot, so it’s hard to pick. But I will say, one of my favorite examples of gender capitalism — which is the term that Sarah Kaplan and I use to explain the converging of those who traditionally were on the gender lens philanthropy side with those who were more traditionally just straight investors, coming together to see the power of a gender lens to drive forward both objectives — is the partnership between U.S. Trust and the Women’s Foundation of California. We came together to use the deep gendered knowledge of the Women’s Foundation of California, and the investment acumen of U.S. Trust to put together an investment fund that we call the Women and Girls Equality Strategy.
It’s a U.S. all-cap equity and fixed-income strategy. It enables the Women’s Foundation of California, and other investors, to invest in those companies that are thoughtfully engaging women — as consumers, as employees, as leaders of global change. We look across the entire value chain of a company, and say, “How is it that they are harnessing all of their work force and being thoughtful?”
The success story here is not just that it was launched, but that at the three-year mark, it is outperforming its benchmark, and that it is now available more broadly, beyond U.S. Trust, at Merrill Lynch. And also, that there’s a whole set of other investment opportunities in this space that are similar. But that is the kind of model I think is interesting — where you take deep, gendered knowledge and deep investment knowledge, and you merge them.
Hunt: Excellent. I’ve heard you talk a lot about moving from counting women to valuing women. How did you measure success, and what did you look at to determine what you would do to consider this investment vehicle something that you wanted to grow and replicate?
VanderBrug: Part of the question is: How is it generating change in the field? As we have more and more investment vehicles in the public debt and equity space, questions get asked. These vehicles are less about direct change, and more about systemic change in the field, so I think the level of conversation around gender lens investing, which has happened because these investments has become successful, is really important.
Hunt: This is such an exciting space, and we love that we have a chance to work with great thought leaders like you. What else would you recommend our readers and viewers look at to learn more about this space? I’ve heard of a book coming out that might be of some interest.
VanderBrug: It is true. In the fall, we will have a book out that I co-authored with Joe Quinlan, who is our chief market strategist at U.S. Trust/Bank of America, called Gender Lens Investing. That’s a great place to start.
There are lots of other great places, though. I would really suggest that viewers sign up for the blogs that Wharton puts out, because your work on gender lens investing is fabulous. There’s a new community globally called Women Effect Investments that has a great resource list on it. It includes some of the best reports that have been written, some of the research bases, so that’s another place to start.