Gender Lens Investing: Three Goals
by Jackie VanderBrug
Investing with a 'gender lens' means using a gender analysis to uncover hidden opportunities and recognize bias in the deployment of capital.
FOCUS #1: Improve access to capital. Consistently, women receive six to seven per cent of available venture capital, and the story is even worse for women of colour. The problem is not restricted to the U.S. The data indicates a $320 billion gap in terms of funding for small and medium-sized enterprises (SMEs) who have a woman on their founding team. We refer to this as ‘capital punishment’, and as a result of it, the World Bank and other developmental finance institutions have started to proactively move capital in this direction.
Not surprisingly, as a result of the reality faced by women entrepreneurs, the goals in this arena are very conservative: We are hopeful that by 2025, one-quarter of all venture deals in the U.S. will have at least one woman on the founding team. Achieving this target will require a lot of behavioural interventions in terms of networks, changing the process for reviewing deals and much more.
FOCUS #2: Promote equity along the entire value chain. Some investors use a lens where they look across a company’s entire value chain to gauge whether it is valuing women and men equally. To do this, they might look at the composition of the board and senior management, at promotion processes and even at the supply chain. The news on this front is encouraging: McKinsey & Company has found that companies with more women in leadership are 21 per cent more likely to deliver financial returns above industry means. And quantitative analysts at the Bank of America recently wrote a piece called, “Women, the X Factor,” showing that companies with women on boards, women in leadership roles and progressive inclusion policies have lower price and earnings volatility. Year-over-year numbers from two years ago vs. last year indicate that the deliberate integration of gender-based data makes a difference in terms of long-term performance. All of these findings are very important to investors, and Wall Street is waking up—if slowly.
FOCUS #3: Create products and services that drive gender equality. Some investors focus on an enterprise’s products and services, and how they might improve gender equality in their markets. Does the company have a product that is going to solve a challenge for women, like women’s safety? Has it taken women into consideration in its offerings? Recent research shows that software design, for example, has predominantly addressed male patterns of problem-solving. Thinking about how to de-bias software design could open up a whole new set of product offerings. I sometimes ask people, ‘When do you think we started to mandate the use of female crash test dummies in the driver’s seat in the U.S.?’ The answer shocks them: 2011. In general, the design process for new products and services contains significant gender gaps—and at the same time, huge opportunities.
Jackie VanderBrug is a Managing Director and Investment Strategist at U.S. Trust, Bank of America Private Wealth Management within the Global Wealth & Investment Management division of Bank of America.
This article appeared in the Spring 2019 issue. Published by the University of Toronto’s Rotman School of Management, Rotman Management explores themes of interest to leaders, innovators and entrepreneurs.
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