Controlling for these kinds of hidden influences requires investors to consistently and deliberately assess the gender dynamics of their investment processes. Dr. Iris Bohnet, Professor at Harvard University and author of “What Works: Gender Equality by Design,” offers thirty-six research-grounded actions to reduce unconscious gender bias. For example, to maximize investment team performance, “make sure every subgroup [such as women] is represented by at least three people or makes up about a third of the total” in order to “seize the benefits of diversity.” 3 Investors may also consider standardizing certain elements of their investment due diligence to ensure every investment opportunity is judged on the same basis of fact.
The WEPs provide valuable guidance for investors and serve as a benchmark against which to assess both asset managers and the companies in which they invest. Just as investors might change their view of a company’s value based on the durability of its profit margins, they may also adjust their analysis based on the extent to which its business practices align with these principles. Companies that treat women and men fairly at work, for instance, may be more likely than peer organizations to attract and retain the talent needed to support their growth. Those with gender-related problems in their supply chain, such as forced labor, may be susceptible to value-destroying scandals.
An increasing number of institutional investors are integrating such considerations into their investment processes. Both the New York City Retirement System and APG, two of the world’s largest pension funds, have added sections to their due diligence questionnaires about gender. 4 In fact, gender analysis is consistent with the broader practice of environmental, social, and governance (ESG) investing, which embraces the idea that non-financial factors can have a material influence on company or investment performance.
Asset managers have also crafted a number of investment strategies designed to target companies that exhibit positive gender-related characteristics. The Pax Ellevate Global Women’s Index Fund, launched in 1993 as the Women’s Equity Fund, was “the first broadly diversified mutual fund [to invest] in the highest-rated companies in the world for advancing women through gender diversity on their boards and in executive management.” 5 A number of similar strategies have since followed, including the Glenmede Women’s Leadership Fund, the BMO Women in Leadership Fund, and State Street Global Advisor’s SSGA Gender Diversity Index ETF. Among the most sophisticated strategies is the Women’s Inclusion Strategy available in separately managed account format from Aperio Group. The firm uses optimization techniques to tilt an investor’s preferred index exposure, such as the S&P 500, towards companies with positive gender-related characteristics, while controlling risk. 6
Though fewer in number, gender-focused strategies are also available in the fixed income markets. Community Capital Management, for instance, offers fixed income funds that include a gender lens component. In one of its strategies, the firm invests in customized mortgage pools providing capital exclusively to low- and moderate-income women borrowers. 8
[1] Dana Kanze, Laura Huang, Mark Conley, and E. Tory Higgins, “Male and Female Entrepreneurs Get Asked Different Questions by VCs— and It Affects How Much Funding They Get,” Harvard Business Review, June 27, 2017. Accessed via: https://hbr.org/2017/06/male-andfemale-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get
[2] Ibid.
[3] Iris Bonnet, What Works: Gender Equality by Design (Cambridge, MA: The Belknap Press of Harvard University Press, 2016), p. 242 and p. 232
[4] Nicholas Neveling, “Gender diversity at private equity firms improving,” realdeals, July 11, 2017. Accessed via: https://realdeals.eu.com/ news/2017/07/11/gender-diversity-private-equity/
[5] “Pax Ellevate Global Women’s Index Fund,” Pax World Management, LLC. Accessed via: http://paxworld.com/funds/pax-ellevate-globalwomens-index-fund/
[6] “Women’s Inclusion Strategy” (Investor presentation, Aperio Group, 2017)
[7] “Community Capital Management Adds Gender Lens Criterion to its Customized Mortgage Pools for Low- to Moderate-Income Borrowers” (Press release, Community Capital Management, June 13, 2017). Accessed via: https://www.prnewswire.com/news-releases/community-capital-management-adds-gender-lens-criterion-to-its-customized-mortgage-pools-for-low--to-moderate-income-borrowers-300473166.html
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