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Cambridge Associates: Understanding gender lens investing

5 Mar 2021

Deborah Christie is a managing director at Cambridge Associates

Gender lens investing (GLI) is an investing approach that deliberately incorporates a desire to make a difference in the lives of women and girls while meeting risk/return objectives. While GLI is a new concept for many investors, studies regarding the importance of women in the global economy date back at least two decades. Much of the interest to date has come from impact investors who want to address gender inequity directly. A 2020 survey of Cambridge Associates’ clients, designed to explore the evolution of institutional practices around impact investing, showed that only 30% of respondents consider gender equity in investment decisions. While this is still relatively low it is nearly triple the volume of institutions considering gender since the same survey was conducted just two years prior and demonstrates the growing importance of GLI in the minds of investors. There are various ways GLI can be defined, however we have identified three primary pillars:

  1. Increased access to capital for women
  2. Workplace equity
  3. The development of products and services that benefit women and girls

These categories are not mutually exclusive; some investment strategies may focus on a combination of the three. As GLI expands, it will ultimately promote a culture that extends beyond counting women in the workplace toward one that views investing in women as a societal norm. Increasing client awareness has prompted the investment industry to think about how it can meaningfully incorporate a gender lens framework into products dedicated to the advancement of women and girls for social good, but also in terms of providing enhanced returns. The investment opportunities across all three pillars of GLI can be found in a wide range of asset classes, including fixed income, equity investments and public and private markets.

Investors should recognise that there is no universal solution for all portfolios and implementing gender lens objectives in an investment portfolio can be accomplished in a range of ways. In developing an implementation strategy, investors need to be clear on their beliefs around gender investing and then consider how this will be incorporated into their portfolio, either holistically across asset classes or a specific allocation to a GLI strategy to achieve their goals. It is important for investors when incorporating gender lens into their investment portfolios to communicate why they are doing so and what they hope to achieve.

Impact objectives tend to be strategies that align closely with an investor’s gender lens goals and generate measurable impacts and outcomes such as a venture capital fund that supports products to improve the lives of girls. Sometimes the positive effect on women and girls comes through indirect channels. For example, an institution might deliberately seek strategies managed by women alongside their traditional investment portfolio. Investment portfolios serve a range of functions for different investors, so it is important to consider financial attributes such as risk/return objectives and liquidity and income parameters when integrating gender impact. For example, multi-generational investment pools may want to consider early-stage venture capital strategies focused on boosting health out-comes for women and children – but these investments would be inappropriate for investors that require high levels of current income and liquidity.

Although the GLI opportunity set is growing, we encourage investors to build flexibility into their policy, allowing for new entrants and opportunities as the field evolves.

Investors should be nimble to take advantage of new opportunities as they seek to implement strategies that optimise impact and financial objectives.

GLI is quickly gaining traction, offering the potential to align portfolios with impact or mission goals, address gender inequality and generate returns attributed to the faster economic growth associated with gender equity. Investment managers are responding to this demand by launching new gender lens investment strategies. Perhaps even more importantly, interest in GLI is helping to facilitate a growing body of research examining the role of women in the global economy. These trends create a unique and compelling opportunity for investors to integrate gender lens strategies into their portfolios and to capitalise on the economic opportunity created by gender equity.

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