What it means to invest with a gender lens

When clients tell financial adviser Catherine Valega that they want to invest their money in women, they are not always clear what they mean.

To be honest, there is no real answer yet.

If you have less than $1 million, investing with a gender lens typically means buying shares in mutual funds or exchange-traded funds that pick stocks with the goal of advancing the interests of women.

For direct investments in female-led firms or businesses focused on women's issues, you have to meet the high minimum investments of impact venture-capital funds.

There are now some 35 options of gender-lens funds. Total assets invested in gender account for $2.4 billion, according to a 2018 report on gender-lens investing from Veris Wealth Partners.

That is up from eight options and just $100 million four years ago. In contrast, there are some 10,000-plus other funds in the general market.

"I am a big believer in investing in companies that are doing the right thing. I do see them outperforming over the long term," Valega said.

Two of the largest gender-lens offerings are the Pax Ellevate Global Women's Leadership Fund, which launched in 2014 after a reorganization, and the State Street Gender Diversity Index ETF, which launched in 2016.

In the case of Pax Ellevate, the fund starts with more than 1,600 companies in the MSCI World index, eliminating businesses involved in tobacco, weapons and fossil fuels, said Julie Gorte, senior vice president for sustainable investing at the fund.

The remaining companies are ranked on gender issues — how many women are on the board, women in top leadership positions, adoption and implementation of the Women's Empowerment Principles of the United Nations, pay equity and how friendly are their HR policies toward women. The top three holdings are Microsoft, Best Buy and Estée Lauder.

The minimum to purchase shares in the global fund is $1,000. The fund now has more than $500 million in assets. The company has a range of other funds, including bond funds, multi-asset funds and separately managed accounts.

The global fund, for one, has been closely aligned with its index, and it beat its three-year benchmark, up nearly 44% vs. 41% for the index. The fund is up more than 3% for 2020 vs. 2.7% for the index.

Other options include Domini Impact Investments, which aims to do more than just buy stock in the companies that meet their criteria, but also to advocate through shareholder proxies for more change.

The firm offers a domestic equity fund, an international equity fund and a bond fund. The minimum investment is $1,500. The top holdings include Microsoft, Apple and Alphabet Inc., Google's parent company.

"As an investor you have a voice. You can engage in dialogue with companies or you can vote your proxies in a way that sends a strong signal to management," said Carole Laible, CEO of Domini Impact.

What women really want to know is what difference their dollars are making, Laible said. "We have reports that show 'here's the difference you made this year.' That's the next frontier."