Journal of Financial Planning: November 2024
NOTE: Please be aware that the audio version, created with Amazon Polly, may contain mispronunciations.
Kristin Hull, Ph.D., is founder and chief investment officer of Nia Impact Capital, a women-led team that invests in the public markets to power the transition to a regenerative, just, and inclusive economy. Kristin serves on the leadership committee of How Women Lead and on the board of directors for the Mosaic Project and American Rivers, as well as an adviser to African Women Rising, GenderSmart, and the Nicholson Foundation.
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In the evolving landscape of global finance, a profound shift is taking place, one that is redefining the efficacy and impact of investments through the powerful lens of gender. Gender lens investing (GLI) is not a new or fleeting trend—it is a robust, decades-long practice that is gaining unprecedented momentum and, I would argue, is essential for better serving our increasingly diverse client base.
There are two key events underway that are set to shake up our country and, in effect, our industry: the great wealth transfer and an aging, more diverse population.
As financial advisers, understanding and harnessing the potential of GLI can position you at the forefront of a financial revolution, one where inclusion, diversity, and equity become the bedrock of successful investment strategies and usher in a more powerful approach to wealth-building for all.
The State of Gender Lens Investing
My work in this space has been decades in the making; our firm’s name, Nia, means intention and purpose. Nia Impact Capital’s women-led practice invests at the intersection of social justice, gender equity, and environmental sustainability, connected by our team’s shared ambition, strong social justice values, and collective vision for transforming the way we invest.
At its core, GLI is an investment strategy that incorporates a gender analysis into financial analysis with a focus on achieving better outcomes for business and strong financial returns while advancing gender equality. The approach is multidimensional, going beyond merely investing in companies with female CEOs to include a holistic consideration of how investment decisions impact women and girls.
Examples of this strategy include investing in companies whose products and services benefit women and girls, measuring the positive and negative impacts of investments across all asset classes and beneficiary types, seeking out fund managers who are women-led or gender-balanced, and requiring that portfolio companies include women in leadership roles.
The United Nations has shone a spotlight on gender equity as central to its Sustainable Development Goals, specifically goals 5 and 6, which focus on achieving gender equality and promoting well-being for all.1 Significant capital is being channeled toward these goals, with recent reports showing substantial progress.2 To see GLI on the global stage is a testament to the incredible power emphasizing gender has to affect better investment outcomes and socioeconomic change.
Indeed, the financial implications of advancing gender equality are immense. According to a 2020 McKinsey study3 cited by the United Nations’ Economic and Social Commission for Asia and the Pacific (ESCAP),4 advancing gender equality could add an estimated $13 trillion to the global GDP by 2030.
As the McKinsey report wisely states, “What is good for gender equality is good for the economy and society as well,” particularly since women are about to become the biggest global shareholders.
How America’s Changing Demographics Will Impact the Financial Services Industry
Advisers must understand the flow of capital, where current capital is shifting, and how the population is changing over the next few decades to better educate and serve our clients.
Here’s what to know both in the short and long term.
This framing can be central to our investing thesis and front and center in our conversations with clients. In the next five years, we see American women not just reshaping their personal financial narratives, but they will also be influencing broader economic trends, transitioning from being merely wealth inheritors to becoming wealth creators.
As the current baby boomer generation ages, the Great Wealth Transfer continues to progress. An estimated $70–80 trillion in wealth is set to change hands by 2030. According to Cerulli Associates, a lion’s share of this wealth—approximately $72.6 trillion—is expected to pass to heirs, with approximately $12 trillion being allocated to philanthropic endeavors.5
Yet women are not a one-size-fits-all demographic. Many generations will be impacted by this shift, including Gen X, millennials, and Gen Z, all with competing financial priorities and interests. CNN reports that millennials will soon become the most wealthy generation in history, yet the increasing expenses for homeownership and the cost of living have dampened their prospects of achieving the old American Dream, which can trickle down to their willingness to have children.6 Subsequent generations witnessing this struggle might elect to rent homes and vehicles more often, preferring a more flexible or even nomadic lifestyle as work environments continue to change to meet their needs.
It is encouraging that wealth advisers are also becoming increasingly diverse: data from the CFP Board indicates that the overall number of women CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals has increased to 23,484 (23.8 percent of all CFP® professionals), and new racially and ethnically diverse CFP® professionals grew to 858 in 2024, a 12.6 percent increase over 2022.7
While Hispanic or Latino/Latina CFP® professionals account for only 3.1 percent of financial planners, Asian/Pacific Islanders (4.2 percent), and Black (2.0 percent) financial planners as of 2024, we have seen growth in investors of color. According to Investopedia, since 2015, there has been a 9 percent increase in the number of Black investors, a 6 percent increase among Hispanic or Latino/Latina investors, and a 7 percent increase among Asian/Pacific Islander investors.8 By contrast, the percentage of White investors remained relatively stable during the same period.
Still, these shifts underscore a critical need for more asset managers and financial planners to adapt, ensuring their practices reflect the needs, preferences, and priorities of increasingly influential demographics.
Seven Strategies for Financial Planners to Incorporate GLI
Incorporating GLI into your practice necessitates a thoughtful, committed approach. Here are seven strategies for financial advisers to consider as they begin this important work.
1. Measure and Champion Women in Leadership
The first step toward implementing GLI is to ensure that the companies in your portfolio include and champion women in leadership roles. The presence of women in senior positions often correlates with enhanced company performance and innovation. By prioritizing investments in such companies, we not only advocate for gender diversity, but we can also potentially improve financial returns for your clients.
At the highest levels of leadership, Pew Research Center reports that “the share of women CEOs of Fortune 500 companies reached an all-time high of 10.6 percent in 2023, with 53 women heading major firms.”9 According to MSCI, “Women held 25.8 percent of board seats at large- and mid-cap companies, up from 24.5 percent in 2022, yet growth slowed compared to previous years.”10 We have a long way to go, and investors can make a difference. Assist clients in investing in companies that include women in executive management and on the board of directors.
2. Promote Activism Through Investment
The rationale behind all-male leadership teams is increasingly questioned, and such homogeneity is becoming less acceptable to investors, and for good reason. A recent study from Vanguard confirms, “By controlling for fund characteristics along with other dimensions of diversity, we find that maximizing gender diversity correlates with as much as a 38.9 basis point improvement in fund performance.11 This relationship is strengthened by controlling for education quality and non-gender related diversity—suggesting that even among well-qualified and otherwise diversely educated teams, gender diversity is important for active equity management.”
Financial advisers have the power to influence this narrative by directing investments into companies that demonstrate a commitment to gender diversity. Investors can use their voice to demand and drive change, including hiring and promotion practices that center on an inclusive workforce.
3. Help Clients Engage Formally and Proactively as Proxy Voters
Financial advisers can educate clients on their ability to actively engage with companies to promote gender-balanced policies. We see proxy voting as both a right and a responsibility of investors.
By choosing asset managers who engage in proxy voting and direct advocacy, investors can influence companies within their portfolio to adopt practices that support gender parity, such as equitable recruitment policies and comprehensive sexual harassment protocols.
4. Invest in Women-Led Ventures
Women-led companies and startups have historically received a disproportionately small share of venture capital funding.12 This lack of access to capital not only inhibits social progress toward gender equity, but also overlooks potential high-return investments, as some data suggests women entrepreneurs tend to outperform their male counterparts.13 Financial advisers can help investors consciously challenge biases and support women-led investments across all asset classes to ensure equitable access to capital.
When choosing funds or investment products managed by women portfolio managers or, when selecting municipal bonds, looking for opportunities that support women, we diversify portfolios while investing in equity. One great example is a New York project retrofitting public housing for single mothers. By engaging with a gender lens, we can support our clients to think and invest outside the box.
5. Think About Solving Everyday Problems for Women and Girls
Companies led by women or that design products and services that solve everyday problems for women and girls often open unique market opportunities. These businesses contribute to society by addressing female-specific needs while often enjoying competitive advantages and strong growth prospects.
Choose companies that produce goods and/or services beneficial to women, purposefully investing in women-owned businesses, either by making loans, investing in privately held companies, or choosing women asset managers investing with a gender lens.
6. Integrate GLI into Policy Statements and Investment Criteria
Corporate policies that support women’s reproductive health and family and maternity leave significantly impact a woman’s ability to participate and excel in the workforce. When evaluating potential investments, consider the company’s employment policies as an indicator of its commitment to gender equity, its ability to attract and retain top talent, and as a factor influencing its long-term sustainability and attractiveness as an investment.
7. Choose Women-Led Funds and Advisers
When it comes to selecting wealth management services and investment funds, prioritize platforms managed by female financial advisers and portfolio managers. This criterion not only supports women in the finance industry, but also diversifies the perspectives and strategies within your investment approach. Troublingly, less than 1 percent (only 0.7 percent) of total U.S.-based assets under management (AUM) are managed by women-owned firms.14
In 2023, Amrutha Alladi, a quantitative analyst for Morningstar, reported another startling statistic: “while the number of women included on portfolio management teams has certainly increased from 20 years ago, so has the overall number of people on these teams. Globally, the percentage of female fund managers has consistently hovered around 12 percent over the past two decades.”15
Fast-growing markets like technology (particularly AI) and healthcare are areas to consider with a gender lens. As I shared earlier this year in an interview, “As AI becomes a tool that is used by so many, we need to have a very diverse set of users at that designing table,” so we are hyper-conscious of the need to account for implicit bias in the algorithms.16 Investors are also paying close attention to women’s healthcare; a 2023 report from SVB cites a single-quarter record of $435 million invested in Q3 2023.17
How to Talk to Clients About GLI
You’ve likely heard that it takes the average person close to seven times to hear something before they remember it. By being aware of and understanding GLI, you’ll be able to speak knowledgeably about this approach with your clients for whom these concepts will resonate.
Investors who care about making their money work for both them and society have a lot of data in their ears. Every day, consumers are bombarded with the steps they need to take to curb climate change or promote racial equity. It’s imperative to help them put their individual impact into perspective within the entire ecosystem.
Be sure to fold an introduction to GLI into your next scheduled client meeting with some recommendations about how you can begin to adjust their investments based on initial feedback. Advisers who send a newsletter to clients can also begin to incorporate articles about the benefits of GLI and the Great Wealth Transfer into their content mix. Lastly, as individualized thought leadership continues to hold court on social media channels, advisers would be smart to share their own learning journey about these new concepts with peers on their personal LinkedIn feeds.
Embracing the Inevitable Shift
The question is not if, but rather when the financial landscape will overwhelmingly reflect a gender lens mandate. It’s imperative for financial advisers to anticipate this shift, integrating GLI as a foundational philosophy of their investment strategy.
The adoption of gender lens investing is not merely about preparing for the future—it’s about actively shaping it. By prioritizing GLI in the due diligence process, financial advisers may unlock higher alpha potential, tap into unprecedented growth opportunities, and contribute to a more equitable and inclusive economy.
Gender lens investing represents not only an investment in women, but also an investment in a better, more prosperous world for all and the future of the profession. Financial advisers have a tremendous opportunity to take the lead and champion this transformative approach—for their clients, their industry, and the global community
Endnotes
- See www.unwomen.org/en/digital-library/publications/2024/02/empowering-women-building-sustainable-assets-strengthening-the-depth-of-gender-lens-investing-across-asset-classes.
- See www.tiresia.polimi.it/empowering-women-building-sustainable-assets/.
- See www.mckinsey.com/featured-insights/future-of-work/covid-19-and-gender-equality-countering-the-regressive-effects.
- See www.unescap.org/story/closer-look-gender-lens-investment-paving-way-women-led-businesses-innovate-and-thrive.
- See www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045.
- See www.cnn.com/2024/03/01/economy/millennials-richest-generation-in-history/index.html.
- See www.cfp.net/news/2024/01/cfp-board-approaches-100000-cfp-professionals-with-most-ever-exam-takers-in-a-single-year.
- See www.investopedia.com/financial-advisor/fa-profession-accountable-lack-diversity.
- See www.pewresearch.org/social-trends/fact-sheet/the-data-on-women-leaders/.
- See www.msci.com/research-and-insights/women-on-boards-and-beyond-2023.
- See https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4081494.
- See www.flat6labs.com/why-invest-in-women-in-tech-7-reasons-investors-and-vcs-shouldnt-miss/.
- See https://womenentrepreneursgrowglobal.org/2024/06/03/women-business-owners-generate-greater-revenues-create-more-jobs-dream-bigger-global-and-execute-better-than-their-male-counterparts.
- See https://knightfoundation.org/topics/diverse-asset-managers/knight-diversity-of-asset-managers-research-series-asset-management-industry/.
- See www.morningstar.com/funds/percentage-female-fund-managers-is-almost-exactly-where-it-was-20-years-ago.
- See https://news.pachamama.org/investing-with-purpose-funding-the-future-interview-with-nia-cio-kristin-hull.
- See www.svb.com/globalassets/trendsandinsights/reports/svb-innovation-in-womens-health-report-20232.pdf.