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Investing in Companies that Empower Women

Investing in Companies that Empower Women

March 03, 2024

A socially responsible choice might also be a very smart financial move

In an era when gender equality remains a pressing issue, investors are increasingly recognizing the power of their portfolios to drive change. Gender lens or gender equity investing is a rising trend that allows individuals to invest for financial return while championing gender diversity within companies.

This approach is gaining momentum, with assets in U.S. gender equity funds doubling over the past three years to $1.3 billion, according to Morningstar.

The Rise of Gender Lens Investing

Gender lens investing focuses on channeling capital into companies that prioritize and promote gender diversity within their ranks.

While still representing a small portion of the overall investment landscape, it has gained traction due to the compelling benefits it offers.

Promoting Gender Equality:

Investing with a gender lens can actively contribute to advancing gender equality by supporting companies that foster diverse workplaces, pay equity, and opportunities for female professionals.

Financial Rewards:

Research demonstrates a strong correlation between gender diversity and financial performance. Companies with diverse executive teams and boards tend to outperform their peers.

The Financial Case for Gender Diversity

The financial case for gender diversity is compelling and has been substantiated by various studies:

Higher Returns on Equity:

S&P 500 companies with over 25% female executives have reported higher one-year returns on equity compared to their counterparts, according to research conducted by Bank of America.

Profitability:

Companies in the top quartile for gender diversity among executive teams were 25% more likely to experience above-average profitability, as revealed by McKinsey & Company.

Innovation and Decision-Making:

Diverse teams bring a wider range of perspectives to the table, leading to more innovative solutions and effective decision-making, which can translate into competitive advantages.

Attracting Top Talent:

Gender-diverse companies often attract and retain top talent, which can enhance long-term stability and performance.

How to Invest with a Gender Lens

Getting started with gender lens investing is relatively straightforward:

  • Research: Begin by researching gender equity funds and companies that prioritize gender diversity. Look for organizations with a track record of promoting women in leadership positions.
  • Select Investments: Choose investments that align with your financial goals and values. Many mutual funds and exchange-traded funds (ETFs) focus on gender diversity as a core investment principle.
  • Consult a Financial Professional: If you're unsure about which investments to choose, consider consulting a financial professional with expertise in socially responsible and impact investing.
  • Track Progress: Continuously monitor your investments and assess the impact of your gender lens approach on your portfolio's performance.

 Planning Matters

Investing in companies that empower women is not only a socially responsible choice but also a smart financial move. As gender lens investing gains momentum, it offers an opportunity for investors to support positive change while potentially reaping financial rewards.

By allocating capital to companies that prioritize gender equality, you can be a part of the solution to the gender disparity issue while working to build a more robust and diverse investment portfolio.

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.  All indexes are unmanaged and cannot be invested into directly.

Socially Responsible Investing (SRI) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by FMeX.

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