Cornerstone looks at equal-pay policies and opportunities for recruiting and promotion at all levels of an organization. It’s also interested in financial inclusion funds and other investments that empower women financially, funds that focus on improving supply chains that employ women, and funds that support businesses owned or managed by women, Leonard says.
Cornerstone seeks funds that take an active role in proxy voting and shareholder advocacy. It also checks to see whether fund managers employ female portfolio managers and analysts, though that's not an exclusionary factor. (A 2015 study from Morningstar found that less than 10% of all U.S. fund managers are women.) Leonard declined to name the funds the firm is interested in because Cornerstone’s platform is proprietary. The Ms. Foundation is one of Cornerstone's wealth management clients.
Gender is also a big focus for Arjuna Capital, an independent registered investment advisor focused on sustainable and impact investing. It looks at gender lens investing in the public and private markets and adds gender as an overlay to its fundamental and technical analysis, says Boston-based Natasha Lamb, a managing partner at Arjuna and the firm’s director of equity research and shareholder engagement.
“Gender equity is an issue that cuts across everything,” says Lamb. “The research we’d seen from McKinsey and others showed that gender diverse teams led to much better outcomes in terms of return on equity, profit margins and stock price performance.” More diverse teams also lead to “radical innovation,” she says, “because you have a multitude of perspectives.”
Arjuna is adding gender equity as a theme to the Highwater Global Fund, a public equity fund it manages in partnership with Marion, Mass.-based investment advisory firm Baldwin Brothers Inc. Investing in companies that support gender equity has “been a policy for a long time, but we really think the issue has elevated to the point that it’s an investable theme,” says Lamb, director of research for the fund.
She points to companies in the fund that have strong female representation on their boards and in executive leadership roles. One is child-care provider Bright Horizons Family Solutions, which provides early education, employer-sponsored child care and backup child care. Others include public utility company American Water; industrial company Ingersoll-Rand PLC; and specialty chemicals company International Flavors & Fragrances.
Arjuna is considering adding cosmetics company L’Oréal and clothes retailer The Gap to its investable universe, says Lamb.
These companies have diversity policies; a high percentage of female board directors and executives; and policies for recruitment, training and work-life balance. The firm also looks at private market investments with a focus on helping women, such as MCE Social Capital’s Private Global Economic Opportunity Notes and Calvert’s Community Investment Notes.
The Calvert Foundation has been involved in gender lens investing since its founding 20 years ago, says Najada Kumbuli, the foundation’s officer of strategic initiatives. It started lending to community development financial institutions, microfinance institutions and affordable housing developers whose target beneficiaries were mostly women and underserved clients.
In 2012, the foundation launched its Women Investing in Women Initiative (Win-Win) to enable investors to more specifically channel their capital to support and empower women and girls worldwide, says Kumbuli. Over the past four years, nearly 2,000 investors have invested in Win-Win. The average return is 2% for a five-year note, she says.
Community Capital Management (CCM), a Weston, Fla.-based institutional fixed-income manager and RIA, has seen growing interest for investments focused on women. “In fact, gender lens became one of our 14 targeted impact themes in the last year because of the increased attention from investors looking to support initiatives benefiting women and girls,” says Jamie Horwitz, chief marketing officer for CCM.
Only institutional investors can buy into the firm’s focused themes such as gender lens investing (for a minimum investment of $500,000). But the firm’s retail investors can get exposure to all of CCM’s impact initiatives, including gender investments, through a retail fund (CRATX).
Engagement Efforts
Shareholders are becoming more involved in efforts to get gender issues on the minds of companies, specifically to include more women on their boards. A big push for that effort is coming from the Thirty Percent Coalition, the Women’s Inclusion Project and other initiatives, says Michael Passoff, CEO of Proxy Impact, a San Francisco-based proxy voting service for mission-based investors. Several dozen companies are being engaged on the issue of increasing board gender diversity through shareholder letters, dialogues and resolutions, he says. “Proxy access resolutions are also raising the issue with several dozen more,” he says.
The issue of gender pay is also taking off. Arjuna Capital filed shareholder proposals with nine leading technology companies for the 2016 proxy season asking them to prepare reports about their policies and goals for closing their gender pay gaps. Seven have since committed to equal pay. Lamb plans to extend engagement in gender pay to financial companies and some retailers in 2017.
Mainstream investors are also starting to pay more attention to the implications of gender diversity and better governance. “It’s significant that four of the biggest pension funds in America are taking a very active position on these issues,” says Passoff.
Overall, the future appears bright for investing through a gender lens. “At some point, there will be explosive growth of AUM,” says Ellis of Morgan Stanley. “We can’t all forecast when, but investors are certainly starting to gravitate toward it.”