Investing in gender equality is not only the right thing to do, it is good for your portfolio. According to BNY Mellon and the United Nations Foundation, investing in companies that are gender diverse, led by women or provide services that help advance gender equality is a multitrillion-dollar opportunity. 

They say while women have made significant gains over the past decade in terms of education, health, economic participation and political leadership, gender equality has not been fully realised in critical areas such as water, contraception, telecommunications, energy and childcare at the cost of substantial and unrealised social and market benefits. Providing products and services in these sectors could unlock a market that would see more than US$300 billion in incremental annual spending by 2025, they point out in their Return on Equality report.

Narrowing the global gender gap could also increase the global gross domestic product by US$12 trillion, they add, citing McKinsey Global Institute’s 2015 report The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth. 

While investments in gender equality — mostly via impact or socially responsible investing — are on the rise, they were given a significant boost when 194 member states of the United Nations adopted the 17 Sustainable Development Goals (SDGs) in 2015. SDG 5 is aimed at empowering all women and girls and achieving gender equality. 

“Bridging the global gender gap will require leadership and investment by the public and private sectors. In particular, both institutional and individual investors have a significant market opportunity to realise and a unique role to play in accelerating the advancement of women and girls,” says the Return on Equality report.

“To date, private investment for financial return that simultaneously supports gender equality goals — commonly known as ‘gender-lens investing’ — has typically taken the form of investing in women-led businesses and companies that promote gender diversity in their workplaces. Increased focus is needed on a third, less common type of gender-lens investing: investing in companies that advance gender equality through their product and service offerings.”

Many mainstream investment firms, sovereign funds and family offices have added impact, sustainable and socially responsible investments to their portfolios on top of having environmental, social and governance criteria for their investments. The Forum for Sustainable & Responsible Investment found in its US Sustainable, Responsible and Impact Investing Trends 2016 survey that the number of US-domiciled investment funds using socially responsible investing strategies had jumped 33% since 1995 while assets had more than doubled to US$8.72 trillion from US$4.3 trillion in 2014. 

Based on these statistics, BNY Mellon and the UN Foundation state in their report that the need for such offerings is clear in both developing and developed markets. “Globally, 1.7 billion women still do not own a mobile phone and 1.1 billion women are unbanked — both major barriers to pursuing and benefiting from economic opportunities. 

“Every day, women around the world spend 200 million hours collecting water to sustain their families due to inadequate infrastructure — hours they could otherwise invest in education, gainful work or leisure. About 225 million women have an unmet need for modern contraception, preventing them from determining the number, spacing and timing of births that best align with their aspirations for themselves and their families. 

“Of course, these are not simply supply-side issues. Women’s access to and usage of products and services are shaped by prevailing social and gender norms, as well as constraints on women’s mobility and control over assets — obstacles that must be addressed to ensure women realise the full benefit of product and service offerings.” 

While these challenges are disproportionately faced by women in low- and middle-income countries, women in high-income countries are also disadvantaged by product and service offerings that fail to reach them or meet their needs, often due to deep-rooted gender biases in product design, market segmentation and marketing, says the report. “For instance, among women who have financial advisers, 67% stated in a [2014] survey [Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth by the Centre for Talent Innovation] that their financial adviser did not understand them or was not interested in their needs or goals. In addition to the moral imperative of closing the gender gap, the potential market impact is likewise substantial, creating significant opportunities for investors.”

Companies involved in these sectors

Ooredoo (Qatar), Spring Health (India), Unitive (the US) and Wise Eco Stove (Nigeria) are some of the companies that are working to reduce these gaps, says the report.

Ooredoo is expanding ownership of mobile phones among women with targeted distribution strategies and women-focused apps, enabling them to leverage technology to access market opportunities and financial services. The report says since there are 200 million fewer female mobile-phone owners than male mobile-phone owners worldwide, better phone distribution among women could lead to employment opportunities for 140 million women and US$20 billion in incremental annual mobile spending by 2025. 

Seeing this immense opportunity, UK-based Vodafone Inc has embarked on a similar initiative. The telecommunications company aims to give 50 million women cell connectivity by 2025.

Spring Health uses an innovative point-of-sale purification and distribution model to sell affordable drinking water to low-income families. This translates into reducing the hours that women and children spend on water collection every day. 

The report says such forms of unpaid labour are disproportionately performed by women and the reduction of that labour can free up time for women to invest in education, employment or leisure. It adds that 680 hours could be saved annually for each girl who collects wood, dung or other polluting fuel for household use.

Wise Eco Stove is a low-cost manufacturer of clean cooking stoves, which reduce the burden of firewood collecting on women. As 1.2 billion people around the world lack electricity, this translates into US$40 billion in annual capital spending to ensure access to electricity, in line with the SDG goals, says the report.

Unitive is a software provider that aims to automate résumé screening and reduce gender bias in the hiring process. The company was founded based on the principle of ensuring that talent is not overlooked due to unconscious bias. 

These companies present an opportunity to reduce the gender gap, says the report, as women constitute half of the labour pool but only contribute 37% to the global GDP. Narrowing that gap would produce US$12 trillion while closing it entirely would add US$28 trillion to the global GDP by 2025.

While gender equality is one of the United Nations’ 17 Sustainable Development Goals (SDGs), it is also an essential precursor to many of the other SDG aspirations, which are mutually reinforcing, say BNY Mellon and the UN Foundation.

They point out that the empowerment of women has multiplier effects on a wide array of areas essential to sustainable development, including hunger, nutrition and food security (SDG 2); health and well-being (SDG 3) and education (SDG 4). 

“For instance, the Food and Agriculture Organization of the United Nations (FAO) estimates that if women had the same access to productive resources as men (land, livestock, financial services, agricultural information and so on), their increased productivity could raise agricultural yields by 20% to 30% overall, lifting 100 million to 150 million people out of hunger,” they say in their Return on Equality report.

“And higher educational attainment and literacy rates among women are associated with lower rates of early and/or forced marriage, increased use of modern contraception and lower levels of stunting among children. Gender equality also supports inclusive economic growth, reduces income inequality and bolsters overall gross domestic product 

(GDP) growth (SDGs 1 and 8).

“The McKinsey Global Institute estimates that the world economy could gain up to US$12 trillion in annual GDP by 2025 by narrowing the global gap between men and women in the areas of labour force participation, hours worked and the sector mix of employment in order to reach a ‘best in region’ scenario (in which countries match the rate of improvement of the best-performing country in their region). 

“Such a gain would represent an 11% boost to GDP above a business-as-usual scenario — a tremendous advance in a span of less than a decade. A ‘full-potential’ scenario (in which women participate in the economy identically to men) would add up to US$28 trillion to the annual global GDP by 2025 — 26% more than a ‘business as usual’ scenario.”

To leverage these opportunities, the report suggests that investors, asset managers and companies advance gender equality and drive financial returns by taking the following steps.

Institutional investors: Incorporate a products-and-services approach to the existing gender-lens and environmental, social and governance investing strategies. 

Individual investors: Shift investments towards companies that offer products and services that support gender equality, focusing on companies that are committed to quantifiable goals or measures. 

Asset managers: Create new funds and financial instruments for institutional and retail investors focused on companies offering products and services that support gender equality. 

Companies: Assess the gender equality impact of the company’s business strategy and current operations, such as the gender mix of its customer base. Assess whether and how the company’s products and services can evolve in new ways to promote gender equality. Also, measure and report progress on communicating the company’s potential social impact on investors and consumers alike. 

By investing in companies that offer products and services that promote gender equality, investors can earn the “return on equality”, seizing profitable, under-tapped market opportunities. Given how the use of products and services shapes the health outcomes, livelihoods and opportunities of billions of women on a daily basis, this investment approach has the potential to advance gender equality on a greater scale.

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