April 3, 2017 • Paul Ellis
Jackie VanderBrug is a managing director and investment strategist at U.S. Trust, Bank of America Private Wealth Management. She has co-authored the recent book Gender Lens Investing: Uncovering Opportunities for Growth, Returns and Impact. Financial Advisor magazine spoke to her about the ways gender issues are changing economics. Ellis: Jackie, during the last four years you’ve been developing the impact investing platform at U.S. Trust. VanderBrug: I joined U.S. Trust, Bank of America Wealth Management four years ago after consulting with individuals and large foundations who had pioneered the impact investing field since 2006. I realized that I could have more influence on a bigger platform and ultimately serve more investors if I joined a large organization. Ellis: In one of the videos on the U.S. Trust website, you use the term “womenomics” to describe aspects of the platform. VanderBrug: This is a term we use to describe how the growing economic power of women is changing the world. We did not coin the term, but use four focal points to look at what’s happening. One is education. In the U.S., over 50% of undergraduate and graduate degrees are being earned by women. Think about what that means for employers in the competition for talent in the U.S. Similarly, the sustainable development goals include a target of eliminating global gender disparities in education and ensuring equal access to all levels of education by 2030, making this a huge driver for womenomics. The second [focal point] is change in social status. Some 155 economies had laws that constrain work opportunities for women. Sixty-five of those economies have changed their laws for the better over the last two years. Examples include applying for a passport or job, conveying citizenship to your children or inheriting property. We are making remarkable progress—but the pace of change can be painfully slow. Over the last two decades, 125 economies have outlawed domestic violence, yet one in three women experience physical or sexual violence during their lifetime. The third focus is the role of employment. U.S. women are the primary breadwinners in 40% of households. Women as economic earners have been termed “the third billion” by Booz & Company, which claims their economic force is greater than that of India and China combined. Ellis: So this is economic gender power being brought to the table on a global scale. VanderBrug: Yes, and how to think and talk about that can be confusing, since many people still think of women as economic victims rather than a collective powerhouse. The final focus point lies in entrepreneurship. McKinsey [Global Institute] says women entrepreneurs are collectively seeking $1 trillion dollars of capital investment in developed economies on a global scale. IFC research [in its 2013 jobs study] has focused on how reducing income inequality improves GDP growth, and reducing gender inequality also reduces income inequality. Clearly, funding businesses run by women would greatly reduce both poverty and inequality. Ellis: And yet we continue to struggle with the gender wage gap in the U.S. economy, as well as a bias against career advancement for women employees and entrepreneurs. How is U.S. Trust engaging with these issues? VanderBrug: The financial services industry has struggled to create a gender-inclusive culture. While we are far from perfect, I am proud that Bank of America is part of the Bloomberg Financial Services Gender Equality Index [a list of companies leading in gender equality practices]. The work takes place on many levels, from board nominations to leave policies, from programs for advancing women to reviewing investment offerings for diversity in fund managers. Ellis: In my experience as an advisor and in my role as a consultant, women investors are more interested in impact investing than their male advisors are. VanderBrug: Women are 59% more likely to say that the social or environmental impact of their portfolio is important to them than their male counterparts. It is important to note, however, that 58% of high-net-worth investors find it important—this is no longer a minority of clients who are asking these questions. If advisors are not engaging with their clients on a strategy to incorporate these issues, someone else is. I have yet to hear an advisor say that a client of theirs was upset because they raised the possibility of integrating impact investing into their portfolio. Male and female advisors are understanding that clients are increasingly interested in the impact of their portfolios. Our research shows that the number of individuals who reviewed their portfolios for social or environmental impact rose 32% in the last year, with the fastest growth in millennials, women and the ultra-wealthy. The real hurdle for investors and advisors continues to be the perception of underperformance, which a decade of studies now shows is unwarranted. Ellis: Yes, what I refer to as the first principle of ESG mythology. VanderBrug: It’s helpful for advisors to understand that what was once considered purely social is now economic. For example, environmentally efficient resource management strategies will translate into better financial performance. We are also starting to see people understand the human capital argument, that companies that have engaged employees that use their talents in the most effective ways improve performance in the long term. All of these arguments are now supported by research around materiality. We’ve written a white paper, “Performance Realities,” which summarizes research for our advisors to read, internalize and decide to offer these strategies to clients without reservation. The breadth of opportunities for impact investors is also growing. For example, today we can say that we have a Calvert equity fund, as well as a BlackRock equity fund. The advisor can make a comparison, which brings a different level of legitimacy to the field. Ellis: It also allows advisors and investors to consider different pricing models and compare and even integrate active and passive portfolio management styles. VanderBrug: At both U.S. Trust and Merrill Lynch we offer clients multi-asset-class impact portfolios, which use top-of-the-house asset allocation and active and passive impact strategies. We have been running our proprietary internal impact strategy, “Socially Innovative Investing,” for four years, which has performed well against its Lipper peer group. Ellis: Are institutional investors leading the impact investing field in ways other than their obviously larger pools of capital to deploy across strategies? VanderBrug: Some institutional investors—faith-based institutions, for example—have been leaders in this field for years. Their perspective is morally and ethically based, but like the rest of us, they seek competitive performance to grow the assets that fund ongoing philanthropic work. They seek competitive performance while adhering to their values. Some consider headline risk in their investment decisions, not wanting to support businesses creating problems that they are trying to solve through their mission. Ellis: We agree that advisors learn best from their peers. Give our readers an example of how peer-to-peer learning can happen using portfolio integration of the Women and Girls Equality Strategy (WGES) from the U.S. Trust Impact Investing platform. VanderBrug: Sure. One advisor might say to another, “I have found that the WGES strategy is a very smart investment strategy, which is not only for women investors. It fosters a positive reaction from my clients and I learn more about who they are and what they care about. It has also allowed me to connect to their adult children.” That story travels around the advisor community quickly.
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