Morgan Stanley
  • Wealth Management
  • Mar 30, 2020

Addressing Gender Equality in Impact Investing

Integrating gender-related criteria into your portfolio is getting easier, as investment options proliferate.

Every March, I watch with interest as nearly every media platform produces images, quotes and stories of women innovators and groundbreakers in honor of Women’s History Month. From scientists and politicians to social advocates and financiers, women have done it all.

That said, significant gender gaps still persist globally in education, health and well-being, politics, the workforce and finance. Worldwide, only 48% of women participate in the workforce, compared with 75% of men.1 Just 1-in-4 national parliament seats are held by women.in 2019, women made up nearly 7% of CEOs of Fortune 500 companies.3

As an impact investor, I believe that a diversity of perspectives can create greater economic value for companies and for investors. The good news: Investors who want to use their financial resources as a tool to drive social change and greater gender equality have greater opportunities today, both in number and sophistication. According to Bloomberg, assets in gender-themed funds reached $1.9 billion in 2019, 25% higher than 2018.1 Morgan Stanley Wealth Management’s Investing With Impact Platform, which includes more than 130 investment strategies, provides access to six gender-focused strategies. Furthermore, 45 strategies on our platform have broader environmental and social mandates that incorporate gender-related criteria when making an investment decision.

Looking to add gender themes to your own portfolio? Here are three approaches to consider:

  • Avoid gender-equality laggards: Investors can screen out companies with poor records for gender equality. With this approach, investors are mainly avoiding the risk of investing in companies that could face reputational risk, or that may have poor talent retention and productivity practices. 
  • Seek out gender-diversity leaders: Investors can focus on firms that lead in promoting gender equality at the board and senior management level, as well as firms with strong programs to support women in the workplace. These firms may be better-positioned for productivity, decision-making and innovation. Plus, they may have better customer acquisition and retention records, as well as improved talent retention and recruitment. Those factors can all lead to long-term financial outperformance.
  • Invest in companies that seek to elevate women and girls: “Gender-lens investing,” a term that was coined in 2009, seeks companies that not only embrace female representation at all levels in the workplace, but also offer products and services aimed at improving the lives of women and girls, especially those who are marginalized because they are poor, uneducated, live in rural areas or are single mothers. Investors can aim for more direct impact on the causes they care about by choosing this approach across public and private markets for both equity and debt investments.

Integrating Gender Themes Into Your Portfolio

With the help of a Financial Advisor, you can implement all three of these approaches, or pick just one. At Morgan Stanley, we believe portfolios need to be broadly diversified; not all asset classes and investing styles are represented with gender-focused funds, meaning that a partial solution may be most appropriate for your particular situation. You can carve out a portion of your portfolio for gender-themed investing, or use a fund or two for portions of your allocation and complement with a broader range of investment strategies that incorporate financial, environmental and social criteria.

No matter your approach, recognize that gender-focused investing can be an important part of a portfolio that meets your financial goals and risk tolerance, while also integrating diversity objectives.

This article was derived from “The Gender Advantage,” an investing primer from Morgan Stanley’s Impact Investing team. Please contact your Financial Advisor for a copy or click here to find an advisor.