As investors review their portfolios for new sources of growth, one area that I believe is gaining the attention of policy leaders and corporate executives is the economic potential of investing in women.
According to Women as a Force for Economic Change, a UBS CIO Wealth Management Research report published in October 2016, just half of the world’s women are gainfully employed, compared to 75 percent of men. This gap has narrowed in many countries in recent decades, but considerable disparities still exist.
In addition, the UBS report shows that women earn on average 60 to 75 percent of men’s wages globally; yet if women were paid and participated in the labor market in line with best-in-region levels, they would add $12 trillion to the global economy within a decade. That’s an 11 percent jump in global GDP that could be attributed to women.
The reasons women are underrepresented in the workforce are varied and complex. Several are identified in Women as a Force for Economic Change:
- Maternity and domestic burden. When it comes to gender inequality, the one denominator common across cultures and regions is the issue of maternity and domestic burden. This is a key consideration for women who may opt to either abstain from the workforce entirely or seek part-time work.
- Limited educational opportunities. While women already surpass men in post-secondary school enrollment in most developed countries, educational opportunities for women are limited in some countries. According to the report, education has accounted for about 50 percent of economic growth in OECD countries over the last half century.
- Employment segregation gap. The UBS report shows that women remain underrepresented in many of the high-demand and high-paying sectors, such as science-related research and technology. Globally, women account for just 30 percent of all researchers, and just 33 percent of positions in IT and information. This segregation bias results in women concentrated in domestic work, education, health and social work.
- The glass ceiling. Getting more women into the workforce is only a partial victory if they are confined to lower levels of the corporate hierarchy. On the Road to Parity: Gender Lens Investing, a report by UBS CIO Wealth Management Research 1Q2016, showed that companies where at least 20 percent of senior leadership positions are held by women are more profitable than their less gender-diverse peers. Still, women hold only 18.1 percent of all directorships among MSCI World Index companies, according to Women as a Force for Economic Change.
While the gender gap may create a substantial drag on the global economy, it may also provide an opportunity for investors who would like to create positive change. According to a study by Booz and Company (“Empowering the Third Billion. Women and the World of Work in 2012”), raising female levels of labor participation to match those of males would raise gross domestic product in the United States by 5 percent and by 9 percent in Japan.
A UBS white paper, Gender Lens Wealth, suggests ways that individuals can help women advance through impact investing, which aims to generate an additive measurable social impact as well as a compelling return:
- Invest in female-led companies. Individuals can tilt their listed equity portfolios toward companies that have a greater proportion of senior female managers. A higher level of female executives and directors has generally been found to correlate with higher returns, according to the UBS white paper, so gender balance may be a reliable proxy indicator for better-performing companies.
- Seek out impact investment funds. Look for impact investing venture capital funds that benefit women. According to Women as a Force for Economic Change, on average firms with 30 percent female leadership see net revenues 15 percent higher than firms with no female leaders. Despite this, just 3 percent of venture dollars go to companies with a female CEO, according to On the Road to Parity: Gender Lens Investing. Funds, such as Rethink Impact, invest specifically in women-led companies and those seeking to solve issues impacting women.
- Embrace gender equality policies at work. Business owners and leaders can use their company policies to address gender equality workplace issues and lobby to encourage competitors and suppliers to adopt similar standards. Areas of focus can include maternity and childcare policies, health benefits, professional training and education for women as well as men, and zero tolerance for discrimination.
- Leave a legacy. Private individuals can pursue their chosen gender-lens causes in perpetuity by establishing or locking up dedicated capital in a permanent investment portfolio, charity, endowment or foundation.
- Pursue your passion. Get involved with traditional nonprofit work, awareness campaigns or lobbying for policy change in areas such as maternity, education, healthcare and property rights.
Doing Well, Doing Good
Empowering women through targeted investments can have positive social and economic effects beyond financial returns to investors. Women may represent a significant untapped potential for income and productivity growth. In addition, investing in women entrepreneurs and allowing them to lift themselves out of poverty can have positive ripple effects across entire families, communities and countries.
More from Make It Better:
- Impact Investing: Putting Your Money to Work for Good
- 10 Socially Responsible Exchange-Traded Funds for Impact Investors
- 12 Ways to Get Smart With Your Money: How to Start an Emergency Fund, Get That Raise and More
About the Author
Teri Conklin is a Financial Advisor with UBS Financial Services Inc., One Northbrook Place, Northbrook, IL 60062. Any information presented is general in nature and not intended to provide individually tailored investment advice. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. As a firm providing wealth management services to clients, UBS Financial Services Inc. offers both investment advisory services and brokerage services. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business and that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. For more information visit our website at ubs.com/workingwithus
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