Women And Girls Equality: A Clear Focus For Social Investing

By applying a gender lens, investors can align their portfolios with the goal of supporting gender equality while seeking attractive financial returns.

U.S. Trust's Women and Girls Equality Strategy uses a proprietary framework for selecting U.S. equities that consider a wide array of criteria that combine principle and financial performance.


Gender lens investing is the deliberate integration of gender-based data into the investment process with the goal of improving financial returns and gender equality. Investment products using this approach can be found in multiple asset classes and at varying levels of risk and return, including community development notes, microfinance, private equity, venture capital, pooled funds and managed accounts. Such investments sometimes have a direct, grassroots impact — for example, financing a catering business owned by women that serves nutritious meals to children in public schools, or providing poor women in India with access to low-interest loans to foster the development of cottage industries. Recently, as investor appetite for creating social change has grown, public equity strategies have become available for investing in companies with progressive corporate employment policies that seek to promote gender equality. Meanwhile, mounting academic and practitioner research points to a measurable financial benefit to investing with a gender lens (Morgan Stanley Quantitative Research, 2016; "Gender Diversity Continues to Work"). Whatever the investment vehicle or approach, the impact can be synergistic, with endowments, foundations and individual investors beginning to recognize that focusing their investments to create a level playing field for women and girls, may also achieve relatively attractive financial returns.


Yet while institutions and individuals are increasingly drawn to gender lens investing, making such investments on a significant scale has, until recently, been problematic. Although global microfinance and U.S. community development investments have historically been common avenues for investors looking to leverage their capital to support gender equality, these vehicles are often limited by scale or geographic scope. On their own, they do not allow an investor to align a fully diversified, multi-asset class portfolio with their objectives.

In recent years, product development for gender lens strategies has advanced and myriad investments, often through mutual fund and exchange traded fund (ETF) vehicles, have come to market. These strategies typically invest in public companies that promote gender equality through their employment practices by seeking gender diversity at the board or executive level.

While product development within the asset management industry can be driven by client demand, the investment merits of gender lens investing are increasingly documented and compelling. Companies with progressive policies toward gender equality tend to be well-managed, and human capital practices based in equality often help them recruit and retain top-level talent. Such companies may also benefit from their engagement with women as an economic force in terms of the wealth they control and their influence on purchasing decisions.

An abundance of independent research has found that gender inclusion and strong corporate financial performance can be mutually reinforcing. A recent study by McKinsey found that companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians (McKinsey, 2015; "Why Diversity Matters").

A study by the Peterson Institute of International Economics found that companies with a 30% female share across the board of directors and C-suite positions experienced a 15% increase in profitability compared to competitors with no women's representation in these roles (Noland, Moran and Kotschwar, 2016; "Is Gender Diversity Profitable? Evidence from a Global Survey").

There is also a growing cohort of global corporations, spanning all market sectors, seeking a competitive advantage through supportive employee benefits and a diverse workforce. One global mining company, for example, has committed to ensuring that women make up 50% of its workforce by 2025. This ambitious target, in an industry where women make up 8% of the workforce on average ("Women in Mining," 2015; "Mining for talent 2015"), is underpinned by executive management's clear commitment to gender equality and its financial benefits. For example, the miner has found that there is a strong positive relationship between the representation of women on the local team and site safety records. They have also included goals for more female employment in performance indicators and bonus structures for executives.


Gender-based investing strategies can often be niche approaches limited by scope, investment vehicle or prohibitive minimum capital commitments. Many of the recently launched mutual funds and ETFs, for instance, employ a singular focus, such as representation of women on boards or in management, but do not move beyond this to actively promote the more comprehensive needs of employees both internally and throughout the supply chain.


To help overcome such limitations, U.S. Trust, in partnership with the Women's Foundation of California, has developed a quantitative investment approach called the Women and Girls Equality Strategy (WGES), which allows investors to apply a gender lens to traditional asset classes by considering a wide spectrum of criteria that focus on both gender equality and financial fundamentals. This approach gives women-focused endowments and foundations the opportunity to align core exposures in their portfolios with their stated missions. It can also enable individual investors to incorporate personal values and objectives such as equal opportunity, the role of women in the economy or the importance of women's empowerment into their investments.

The Women and Girls Equality Strategy uses a two-part due diligence framework to identify industry leaders with respect to equality and empowerment. First, it looks for thoughtful, proactive corporate policies relating to women, and for a commitment to use business practices to change the global landscape of rights and equality for women and girls. The second component considers a company's track record and performance on quantifiable factors to seek to ensure that policy decisions produce the intended outcomes.

Specifically, the WGES investment process evaluates a company's policies on family leave and other benefits such as childcare and eldercare; commitments to pay equity for women; track records in hiring, retaining and promoting women; the composition of their workforce, from new hires through the board of directors; and career-advancement opportunities for women. The strategy also examines human rights policies governing a company supply chain and subcontractor relationships, whether a company's policies specifically address the protection of women, and overall adherence to international labor standards for women and girls. Companies whose goods and services benefit women and girls are also favored.

Through this approach, the strategy realizes measurable impact with respect to empowerment and equality. Figures 1 and 2 compare women's employment and benefits in companies in the WGES portfolio versus companies in its stated benchmark, the Standard & Poor's 1500, a broad-based stock index. Companies sought by the strategy, on average, employ more women at all levels of the corporate hierarchy, and offer significantly better family benefits to employees, than those in the S&P 1500


The Women and Girls Equality Strategy merges gender lens investing with the traditional fiduciary asset management principles on which U.S. Trust was founded. Rigorous fundamental analysis seeks to ensure that every security held in the Women and Girls Equality Strategy can stand on its own as a sound investment with the potential to generate financial returns meeting or exceeding those of its benchmark. The strategy also seeks to achieve significant social impact, by identifying and investing in those companies that appear to be leaders in proactive and effective human capital strategies.


The Socially Innovative Investing (S2I) team manages a suite of proprietary equity portfolios that invest in industry leaders with respect to environmental stewardship, human capital engagement, and corporate citizenship and governance. The S2I strategies are based on a growing awareness that strong corporate financial performance and social responsibility are not mutually exclusive; rather, they are mutually beneficial qualities.

This report is provided for informational purposes only and was not issued in connection with any proposed offering of securities. It was issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and does not contain investment recommendations. Bank of America and its affiliates do not accept any liability for any direct, indirect or consequential damages or losses arising from any use of this report or its contents. The information in this report was obtained from sources believed to be accurate, but we do not guarantee that it is accurate or complete. The opinions herein are those of U.S. Trust, Bank of America Private Wealth Management, are made as of the date of this material, and are subject to change without notice. There is no guarantee the views and opinions expressed in this communication will come to pass. Other affiliates may have opinions that are different from and/or inconsistent with the opinions expressed herein.

This publication is designed to provide general information about ideas and strategies. It is for discussion purposes only, since the availability and effectiveness of any strategy are dependent upon each individual's facts and circumstances. Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial strategy.

Other Important Information

All sector and asset allocation recommendations must be considered in the context of an individual investor's goals, time horizon and risk tolerance. Not all recommendations will be suitable for all investors.

Social impact investing is a relatively new and evolving investment opportunity which is highly speculative and involves a high degree of risk. An investor could lose all or a substantial amount of their investment.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments

Investing in fixed income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments, and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop and vice versa.

Global investing poses special risks, including foreign taxation, currency fluctuation, risk associated with possible differences in financial standards, and other monetary and political risks.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.


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