When looking at the problem of how to cross the seeming chasm of getting women to enter the arena of investing, the first ideas that come to mind are those to do with making investing simpler, easier or less intimidating. Rarely is much thought given to what might appeal to already strong desires and drives that women have, and even less to existing products and ideas that might elegantly leverage this interest and energy to create better on-ramps for women to initiate investing activities.
There is one area of very low-hanging fruit that meets all these criteria – and puzzlingly remains highly under-utilized: the area of impact investing.
The case for impact investing:
Simply put, impact investing is an investing approach that directs capital to enterprises that generate social or environmental benefits. It has several cousins and siblings, known by various names including sustainable investing, and socially responsible investing. Gender-lens investing is another sophisticated variant of this kind of approach to traditional investing activities.
This field spent several years as the ugly step-child for several years, due to the unstated assumption that you can either make good or do good with your investing, i.e. that there is a trade-off between returns and impact. But all that is changing – the field is slowly rising to prominence, with several leading institutions recognizing and actively promoting interest and initiative in this segment. Estimates suggest that the total participation in impact investing could rise from approximately $80 billion in 2011 to a projected $400 billion by 2020 – big numbers by any stretch.
And while the return expectations of investors vary across the spectrum, it’s certainly more true now that you can have the cake and eat it too: you don’t have to give up return to make an impact.
Impact investing and women
What does all this have to do with women?
The Philanthropic Initiative (TPI) is an advisory and consulting organization that aims to help individuals, families, foundations, and companies increase the impact of their philanthropy. It also conducts research in related areas. In 2016, TPI conducted an extensive survey and literature review on opportunities and challenges in around women and impact investing. Findings from this study shed fascinating light on this area, but one message stands out loud and clear: if there is one area of investing that has a disproportionately high level of interest and support from women, it is impact investing.
Women show overwhelming interest in socially responsible and impact investing, significantly more than men : 70-79% of women vs. 49-62% of men, depending on study.
TPI report on women and impact investing
But there is a disconnect here as well:
10% of men and only 9% of high net-worth women report engaging in impact investing!
TPI report on women and impact investing
These two data points seem to point to impact investing as one of the most effective on-ramps to bring women into the fold of regular investing.
The TPI report goes on to describe specific barriers to rapid adoption of impact investing by women – and it’s striking that virtually none of these barriers is unique to investing, for example:
- Lower investment confidence compared to men
- Less time spent on investing activities
- Fewer women taking financial responsibility for investing
- Lower risk tolerance and higher need for information
- Challenges in the advisor sector , with advisors being more invested in traditional high-compensation products
- Lack of on-ramps to gain first-hand experience
Sound familiar?
The report does go on to paint the silver lining by pointing out trends that give cause for hope and optimism. For example, women formed the vanguard early on in leading the way towards more socially responsible investing within family offices and foundations.
As financial institutions everywhere become more attuned to the size of the behemoth women’s market, it’s natural to expect that they will discover and seek to meet the high interest that women have in impact investing, by developing products that meet that demand.
The best part of the upside for me was the fact that women who try impact investing become more engaged and increase their investing agency overall: this is excellent news for anyone who wishes to see women do more investing for their own benefit and for the market overall.
Given the immense challenges facing women who need to secure and better manage their financial futures, it would seem logical that the industry needs to meet women where they are: passionately interested and engaged in making a difference.
Then, the task of solving all the other related problems, for example, those related to under-confidence, lack of engagement, lack of activity and agency, become that much easier to solve because institutions will benefit from the tail-winds of an area that already has women excited.
The question then becomes one of translating this interest into actionable steps, products and programs that sees a clear and significant uptick in the investing activity and invested funds attributable to women. How can that be made to happen?
Translating insight into action
The TPI report provides some excellent suggestions and pointers to action, including:
- Creating learning opportunities for women that emphasize peer-based educational programs to build confidence, transparent product offerings and other research-based actions
- Time-efficient and friendly entry ramps to practice making investments beyond angel-funding groups, as well as collaborative grass-roots investing circles
- Supportive networks including advisor networks, partnerships with women’s organizations, etc.
I believe all of these constitute excellent macro-level actions to drive greater participation and engagement from women in an area that seems close to their hearts.
Yet, is this all that can be done?
I have to imagine that with the plethora of impact investing organizations, funds and products, it is not a very difficult task for a well-established provider to simply direct some of the existing marketing and outreach efforts to highlight products they already offer to a segment that offers immense economic potential to them.
Whether it is in the form of simple email marketing messages and webinars that many of them already do, or more coordinated efforts such as an impact investing focused outreach, even small and low-budget efforts to shine the light on an area of immense excitement to women, along with simple steps to help them get started, should go a long way to increase participation not only in impact investing, but in investing overall.
Reference:
Women Leading the Way in Impact Investing, The Philanthropic Initiative