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FEATURE ARTICLE - September/October 2011
Investing to Empower Women
Socially conscious investors have
been making investments in
companies that make equal rights
for women a priority. A growing
body of research confirms that doing so is
a smart financial decision.
Experts have found there is a relationship between women’s participation and the economic success of both companies and overall economies, which means that shareholders may enjoy better financial and social returns from companies that have more women in management.
But women are still underrepresented in the economic arena. A March article in The Atlantic, for example, points out that 23 of the world’s top companies have no women at all on their boards.
Also, the World Bank notes that “in low-income countries, women consistently trail men in formal labor force participation, access to credit, entrepreneurship rates, income levels, and inheritance and ownership rights.”
There are now a wide range of actions investors can take to boost women’s involvement in the global economy—while gaining from it financially.
Strengthen the Economy
“Eliminating gender inequality and empowering women are finally being recognized, on a global basis, for what they are—urgent moral and economic imperatives,” says Joe Keefe, president and CEO of Pax World Management. In Pax’s recent report, “Gender Equality as an Investment Concept,” Keefe is helping bring these findings to light.
“Numerous studies … have shown that companies that empower and advance women are likely to reap the benefits in terms of improved performance and profitability,” writes Keefe, citing several reports, including a 2008 paper entitled “A Business Case for Women” from the management consulting firm McKinsey & Co. The paper cites research suggesting that companies with several senior-level women tend to perform better financially.
The United Nations also notes that “among Fortune 500 companies, those in the top quartile when it comes to women’s representation on their boards outperform those in the lowest quartile by at least 53 percent on return on equity.”
Investments That Support Women
“Even though we know women improve business, the world does not behave that way. The financial sector is still dominated by men,” notes Leslie Christian, president and CEO of Portfolio 21 Investments. But investors don’t have to sit around waiting for this to shift—they can actually effect change.
The most obvious way to increase gender diversity in business is to invest in companies that are committed to diversity and to empowering women.
Donna Clifford, investment consultant at Rainbow Solutions Inc. in Medford, MA, notes investors can first look at a company’s board of directors and management team to see how many are women. Investors can also examine a company’s policies and procedures, such as on equal opportunity, maternity leave, advancement, and educational opportunities, says Clifford. Hiring a socially responsible financial advisor can be a big help here.
By investing in socially responsible mutual funds, investors can take a shortcut, as these funds screen for social criteria, often including diversity and equal opportunity. They may eliminate companies with poor diversity records, and seek out businesses with forward-thinking policies that promote opportunity for women. At least one specialty fund makes women’s empowerment its primary focus: Pax World’s Global Women’s Equality Fund.
Criteria behind the fund screens vary,
as do definitions of how much diversity, and what kind, is enough. You can find out details about a mutual fund’s screens or other efforts to promote diversity in its prospectus or by discussing this with a financial advisor. (Click here for Green
America’s picks of mutual funds that are
active on women’s empowerment.)
Shareholder Action for Women
One powerful way stock-market investors can promote diversity is to vote their proxy ballots, which every publicly traded company sends out annually to each shareholder. The boards of directors are elected through these ballots.
In addition, many investors are taking a stand on diversity by filing shareholder resolutions. These non-binding requests to management also end up on a company’s annual proxy ballot—which is voted upon by shareholders, thus alerting them and the public to hot-button issues.
Large-scale shareholders—such as mutual funds, pension funds, foundations, faith-based groups, or other investor coalitions—can use their considerable economic power to wield a great deal of influence by entering into dialogue with corporate management or by filing resolutions.
Byrd Bonner, executive director of the United Methodist Church Foundation in Nashville, TN, has been involved in several shareholder campaigns on diversity. For example, he says, at Hertz Global Holdings, “we negotiated to include some language in their proxy statement disclosures that puts them on record as having a commitment to seeking women and people of color for board membership.”
An ongoing case of a resolution being repeatedly filed to keep pressure on a company involves Home Depot. Eight different parties, including Trillium Asset Management, filed a resolution with Home Depot in hopes of persuading the company to make public its data on diversity, which it is required to collect under federal law. Having to disclose diversity data, thus making the company accountable and marking its progress, is an incentive to break the glass ceiling. Susan Baker, portfolio manager at Trillium, adds that “diversity strengthens a company’s brand image, employee satisfaction, and customer loyalty, and can sustain shareholder value over the long term.”
A failure to ensure diversity in the workplace has financial consequences relevant to investors: Home Depot has paid out more than $100 million to settle discrimination lawsuits in the last 14 years, she notes. “That’s investor capital getting diverted to settle lawsuits.”
If you own stock, vote to support diversity-related shareholder resolutions that appear on your annual proxy ballot. Online services such as MoxyVote.com and ProxyDemocracy.com can help you keep track of and vote your proxies.
You’ll only get your proxy ballots for individual company stock you own—not for mutual funds. Fund managers cast proxy ballot votes for all mutual funds. Each fund is required by the SEC to disclose its proxy-voting guidelines and records, so call investor relations or visit its Web site to view this information.
Microlending for Women
Microcredit serves as another avenue toward women’s empowerment. The term generally refers to very small business loans, perhaps as small as $25, for lowincome people across the US and around the world otherwise unable to access capital. These programs frequently focus on women, who research shows register higher repayment rates. Studies also show that increasing women’s participation in the economy, as many microcredit programs aim to do, benefits society overall.
“Gender equality has a whole slew of positive ramifications on development, including increased poverty reduction,” says Malcolm Ehrenpreis, senior gender specialist at the World Bank.
Numerous studies show that when a mother is educated, her children gain better health and education prospects, which are the foundations for sound human development that in the longer run tend to lead to higher rates of economic growth, he notes. Research also shows that giving women access to credit or a salary leads to greater increases in the welfare of all household members, Ehrenpreis says.
Expect these topics to be fleshed out further in the World Bank’s much-anticipated “World Development Report 2012: Gender Equality and Development,” due out late this year.
Also, women tend to invest their business proceeds “in ways that would have a longer-lasting, more profound impact on the lives of their families and communities,” notes Women’s World Banking, a nonprofit microfinance organization. “The key economic priorities for poor women—to a far greater extent than for men—continue to be health care, the education of their children, and housing.”
Consult our free guide to community investing to find screened and approved community development organizations offering microfinance investments. You can invest as little as $10 through Web-based services such as Kiva.org.
Laura Berry, executive director of the Interfaith Center on Corporate Responsibility, says she sees these strategies beginning to bear fruit. “Even though the numbers haven’t changed as much as we’d like, I think we’re directionally correct,” she says. “Women have moved from tokenism to authentic leadership. Even when you look beyond the social investing audience, you can start to see women making a real difference.”
The strongest argument to keep moving in this direction is simply that involving women makes better business, Christian says: “Investing in women is a very smart business decision.”
—Kristi Bahrenburg Janzen
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