Selective ownership of publicly traded stocks can promote women’s equality, while increasing social and environmental impact. It can also generate market-rate (and higher) returns for shareholders.

“When we started looking at companies through the gender lens, we found a correlation between board diversity and environmental policies and practices,” said Luan Jenifer, executive vice president at Miller/Howard Investments, speaking on a panel on impact investing at the seventh annual Inside Alternatives conference held recently in Denver. “Companies that performed poorly in terms of environmental sustainability reporting and transparency also tended to have no women on their boards.”

Jenifer said her firm avoids investing in companies with zero women on the board. “We see board diversity as an indicator of a healthy existing culture within a firm. Those are the kinds of companies we want to own.”

Studies by Ernst & Young, McKinsey & Company and Catalyst, Inc. have also investigated the connection between financial performance and gender diversity.

“There are over 200 well-respected studies looking at issues of gender diversity, at the board level and executive management team level, correlating them with different financial metrics,” said panelist Tracey Rembert, assistant director of Catholic Responsible Investing for Christian Brothers Investment Services. On average, companies with the highest percentages of women board directors outperformed those with the lowest by 42 percent on return on sales, 53 percent on return on equity and 66 percent on return on invested capital, she said, citing one major study.

Other studies have shown that three is the “magic number” of women on corporate boards. Having a minimum of three women, reduces “group think” and allows other views to be considered. It also improves risk management, because women tend to solve problems and evaluate threats differently than men.

In addition, women tend to take a longer-term view, focus more on sustainability and consider the needs of customers. “They are often the breadwinners and spenders and can bring into the board discussion the viewpoint of the consumer or stakeholder,” said Rembert who once served as an analyst charged with evaluating a Japanese feminine products company that had no women on its board or in senior management—a major barrier to understanding the company’s core customer.

When it comes to women on boards, “The key is not so much being equal, but being different,” said panel moderator Perth Tolle, founder of Life + Liberty Indexes. It’s about “having the value of women’s unique perspectives recognized.”

“It’s important to point out that it’s not ‘better’ or ‘worse.’ It’s truly different,” said panelist Gloria Nelund, chairman and CEO of TriLinc Global.

“Scientifically, our brains are different. Women actually look at problem solving with both sides of their brains and, typically, men don’t,” Nelund said. “It’s not about filling the ‘gender slot.’ It’s important to making better decisions.”

Active Approach

For some investors, active ownership of publicly traded stocks is an avenue to tackling widespread problems that devastate women physically, emotionally and economically.

“We focus a lot of our engagement work on human trafficking and sexual exploitation,” said Rembert.

Of the 21 million people who are victims of human trafficking worldwide, 55 percent of those are women and girls. When it comes to sexual exploitation, the numbers are far greater, Rembert told the audience. “These people are sometimes actual slaves. Women can’t think about education, empowerment or microloans if they’re enslaved.”

Investors can hold a variety of financial products that promote women’s equality. But active ownership can have even more impact. “We also need investors that care about digging into the thorny and ugly systemic issues that are really problematic in this space,” said Rembert. Activist investors can address these problems by strategically using proxy votes, filing shareholder resolutions and engaging companies directly on gender issues.

Rembert said her clients want Catholic ethical and social teachings on helping the poor and disempowered woven into active ownership principles, as well as proxy voting guidelines. For the past 15 years, human trafficking has been the primary issue of concern for clients.

After addressing basic issues of personal liberty and bodily integrity, the focus can shift to education. “If you don’t have an education and you’re poor, your ability to move up and contribute to GDP and your nation’s economic success, your community’s economic success, is very unlikely,” said Rembert.

Advisor’s Role

So how can financial advisors help clients invest in women -- and why is it important?

“Women control more than 60 percent of the total financial wealth in the United States,” said Nelund. “Seventy percent of the women who control their investments want their investments aligned with their values, which means that you have to know what their values are and work to align those investments with what they care about.”
Nelund said advisors should find out what clients are truly passionate about. “Sometimes those are difficult conversations to have, but they’re really important conversations, particularly if you want women investors. There are more products today than there were 10 years ago, or even five years ago. There are a lot of ways that you can get clients market-rate returns and have their investments aligned with their values.”
Impact investing is, after all, about trying to use investors’ dollars to influence companies to solve social and environmental challenges. When it comes to addressing the plight of too many women, the time to invest is right now.

“Women 15 to 44 years of age globally are more at risk from rape and domestic violence than cancer, automobile accidents, war and malaria,” said Rembert citing a recent United Nations study. “We’re using our economic power to try to direct change.”