Women's Leadership

Women’s leadership in the workplace is a work in progress. But for many, it’s not advancing quickly enough.

Nearly 30 percent of senior management roles were held by women in 2019, according to a report by Grant Thornton. This is the highest number ever on record, featuring an increase of five percentage points over the previous year.

Still, women only held six percent of the CEO positions at S&P 500 companies as of December 2019.  Even more, in the US, women still earn almost 20 percent less than their male counterparts, according to the Forum for Sustainable and Responsible Investment Foundation’s Investing to Advance Women: A Guide for Investors

While the slow rate of change might make progress feel impossible, investors do have some say in the matter. More than ever, investors can put their money in companies that explicitly prioritize women’s leadership, helping to advance gender equality in the workplace and beyond. 

What Does It Mean to Invest in Women’s Leadership?

Financially investing in women can help to drive the growth of women in leadership roles. Moreover, it promotes gender diversity in business culture, recruitment policies, and staff retention policies.  At its apex, financial investment in organizations that focus on women in leadership has the potential to create gender parity at the most senior level. 

The history of formalizing a company’s commitment to women and communicating it to the public has evolved over prior decades, with each iteration more progressive than the last. 

In 2004, Calvert Women’s Principles™ were developed in partnership with the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women).

These principals were accepted as “the first global corporate code of conduct focused exclusively on empowering, advancing and investing in women worldwide.” They include: (1) employment and compensation, (2) work-life balance and career development, (3) health, safety, and freedom from violence, (4) management and governance, (5) business, supply chain, and marketing practices, (6) civic and community engagement, and (7) transparency and accountability. These principals were a sort of baseline for companies to say that “yes” we do this, and a temperature check to help identify where they fall short. 

In 2009, the Criterion Institute, a non-profit think tank, introduced the term “gender lens investing” or using investment to promote gender equality. The Institute’s goal extends beyond linking gender to just investing, but to (as they describe it): “equipping people to participate in making the connections between gender and finance.”

In 2010, the United Nations introduced the Women’s Empowerment Principles on International Women’s Day, which it adapted from the original Calvert Women’s Principles®.

In 2016, the mission continued with the launch of the Level Panel on Women’s Economic Empowerment at the Commission on the Status of Women. The panel is still in existence today with the aim to close the gender pay gap entirely, among other goals. 

Then, in 2017, Criterion introduced the Blueprint for Women’s Funds. This report sees corporate engagement as one arm of a larger toolbox. It seeks to bridge the leverage of the financial sector with diverse leaders that advocate for gender equity to have long-term impact.

All of these initiatives for gender equality further similar goals with different scopes. 

Why Invest in Women?

Investors increasingly want to leverage their financial power to further social change, including gender equality in the workplace. Investing is a great way to accomplish that end. 

According to the Women’s Investment Principals, investment in women is an engine for change. More and more, people are doing just that. 

Fidelity Investments launched a women-focused mutual fund in 2019. The Women’s Leadership Fund invests in companies that either have a significant percentage of women in leadership positions or “meet gender diversity initiatives for hiring, retention, paid leave and promotion of women.”

Why? Despite the lagging progress for equality, we all know that women bring a lot to the table. According to research featured in the Harvard Business Review, women outscored men on 17 of the 19 key leadership capabilities.

And, there are more and more success stories of women in corporate leadership roles. In 2014, Mary Barra became the first woman CEO in the auto industry at General Motors(GM). Two years later in 2016, GM named the first female chairman in the auto industry. In 2018, GM named Dhivya Suryadevara its Chief Financial Officer. During Barra’s tenure, she was tasked with tackling the ignition switch crisis as well as other recalls. She successfully led GM to transcend the public relations crisis, gaining respect as a leader in the industry.  

According to a growing body of research, female leadership is increasingly linked to improved financial returns.

According to analysis from Boston-based trading firm Quantopian, “women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men.”

More, the 2016 Gender Report by Credit Suisse found that the higher the rate of women in leadership, the higher the returns to investors. 

According to Patricia Lizarraga, managing partner at Hypatia Capital, “if every woman in the U.S. invested $100 in female business leaders this year, it’d total somewhere around $15 billion.” In other words, even small investment amounts have the potential to create some major momentum.

In the world of the “me too movement” and social change, the woman’s voice is louder than ever before.  Now is the opportune time for investors to back those voices with the dollars to create change in corporate culture specifically by investing in companies that advocate for women by offering them workplace equity and leadership opportunities.

How to Invest in Women’s Leadership

Of course, investing in companies based on social issues isn’t easy, as different companies take different approaches to these concerns and often their businesses are not directly related to them. However, ETFs and mutual funds focused on women’s leadership are a good way to access this growing sector without having to invest directly in specific companies. A search on Magnifi suggests there are a few different ways to do this.

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The information and data are as of the July 13, 2020  (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

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