Addressing Gender Diversity in Impact Investing

All through March, I watched with interest as nearly every media platform produced images, quotes and stories of women innovators and groundbreakers in honor of Women’s History Month. From scientists and politicians to social advocates and financiers, women have done it all.

That said, significant gender gaps still persist globally in education, health and well-being, politics, the workforce and finance. Worldwide, only 49% of women participate in the workforce, compared with 75% of men.1 Just 1-in-4 national parliament seats are held by women,2 and in 18 countries husbands can legally prevent their wives from working.3 In 2018, women made up less than 5% of CEOs of Fortune 500 companies.4

As an impact investor, I believe (and research from Morgan Stanley has found), that a diversity of perspectives can create greater economic value for companies and for investors. The good news: Investors who want to use their financial resources as a tool to drive social change and greater gender equality have greater opportunities today, both in number and sophistication. According to Bloomberg, at least eight mutual funds and exchange-traded funds focusing on gender were created in 2018.5 Morgan Stanley Wealth Management’s Investing With Impact Platform, which includes more than 120 investment strategies, now provides access to six gender-focused strategies. Furthermore, 45 strategies on our platform have broader environmental and social mandates that incorporate gender-related criteria when making an investment decision.

Looking to add gender themes to your own portfolio? Here are three approaches to consider:

  • Avoid gender-diversity laggards: Investors can screen out companies with poor records for gender diversity. With this approach, investors are mainly avoiding the risk of investing in companies that could face reputational risk, or that may have poor talent retention and productivity practices.

  • Seek out gender-diversity leaders: Investors can focus on firms that lead in promoting gender diversity at the board and senior management level, as well as firms with strong programs to support women in the workplace. The share of global companies reporting on their percentage of women employees grew to nearly 50% in 2017, up from 27% in 2010, according to data from Bloomberg.6 These firms may be better-positioned for productivity, decision-making and innovation. Plus, they may have better customer acquisition and retention records, as well as improved talent retention and recruitment. Those factors can all lead to long-term financial outperformance.

  • Invest in companies that seek to elevate women and girls: “Gender-lens investing,” a term that was coined in 2009, seeks companies that not only embrace female representation at all levels in the workplace, but also offer products and services aimed at improving the lives of women and girls, especially those who are marginalized because they are poor, uneducated, live in rural areas or are single mothers. Investors can aim for more direct impact on the causes they care about by choosing this approach across public and private markets for both equity and debt investments.

No matter your approach, recognize that gender-focused investing can be an important part of a portfolio that meets your financial goals and risk tolerance, while also integrating diversity objectives.

This article was derived from “The Gender Advantage,” an investing primer from Morgan Stanley’s Impact Investing team. Please contact your Financial Advisor for a copy or click here to find an advisor.

1Catalyst, Quick Take: Women in the Workforce—Global (October 31, 2018). https://www.catalyst.org/research/women-in-the-workforce-global/

2The World Bank, Inter-Parliamentary Union (ipu.org): https://data.worldbank.org/indicator/SG.GEN.PARL.ZS?view=chart

3The World Bank, “Changing the laws that keep women out of work,” March 29, 2018, https://www.worldbank.org/en/news/opinion/2018/03/29/changing-the-laws-that-keep-women-out-of-work

4Fortune, “The Share of Female CEOs in the Fortune 500 Dropped by 25% in 2018 (May 21, 2018). http://fortune.com/2018/05/21/women-fortune-500-2018/

5Bloomberg Professional Services, “Unlocking gender diversity’s value,” October 18, 2018.

6Source: Bloomberg, as of Feb. 15, 2019

 

Risk Considerations

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate, and proceeds from sales prior to maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

Rebalancing does not protect against a loss in declining financial markets.  There may be a potential tax implication with a rebalancing strategy.  Investors should consult with their tax advisor before implementing such a strategy.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.  Technology stocks may be especially volatile.

International investing entails greater risk, as well as greater potential rewards compared to U.S. investing. These risks include political and economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economies.

Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom.  Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, and sale, exercise of rights or performance of obligations under any securities/instruments transaction.

Disclosures

Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.  Past performance is not necessarily a guide to future performance.

The author(s) (if any authors are noted) principally responsible for the preparation of this material receive compensation based upon various factors, including quality and accuracy of their work, firm revenues (including trading and capital markets revenues), client feedback and competitive factors.  Morgan Stanley Wealth Management is involved in many businesses that may relate to companies, securities or instruments mentioned in this material.

This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading strategy. Any such offer would be made only after a prospective investor had completed its own independent investigation of the securities, instruments or transactions, and received all information it required to make its own investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument.  That information would contain material information not contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter.  We have no obligation to tell you when information herein may change.  We make no representation or warranty with respect to the accuracy or completeness of this material.  Morgan Stanley Wealth Management has no obligation to provide updated information on the securities/instruments mentioned herein.

The securities/instruments discussed in this material may not be suitable for all investors.  The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.  Morgan Stanley Wealth Management recommends that investors independently evaluate specific investments and strategies, and encourages investors to seek the advice of a financial advisor. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies and other issuers or other factors.  Estimates of future performance are based on assumptions that may not be realized.  Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates.  Certain assumptions may have been made for modeling purposes only to simplify the presentation and/or calculation of any projections or estimates, and Morgan Stanley Wealth Management does not represent that any such assumptions will reflect actual future events.  Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein. 

This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a primary basis for any investment decisions that you may make. Morgan Stanley Wealth Management is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended or under section 4975 of the Internal Revenue Code of 1986 as amended in providing this material except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol.

Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors do not provide legal or tax advice.  Each client should always consult his/her personal tax and/or legal advisor for information concerning his/her individual situation and to learn about any potential tax or other implications that may result from acting on a particular recommendation.

This material is disseminated in Australia to “retail clients” within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813).

Morgan Stanley Wealth Management is not incorporated under the People's Republic of China ("PRC") law and the material in relation to this report is conducted outside the PRC. This report will be distributed only upon request of a specific recipient. This report does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors must have the relevant qualifications to invest in such securities and must be responsible for obtaining all relevant approvals, licenses, verifications and or registrations from PRC's relevant governmental authorities.

If your financial adviser is based in Australia, Switzerland or the United Kingdom, then please be aware that this report is being distributed by the Morgan Stanley entity where your financial adviser is located, as follows: Australia: Morgan Stanley Wealth Management Australia Pty Ltd (ABN 19 009 145 555, AFSL No. 240813); Switzerland: Morgan Stanley (Switzerland) AG regulated by the Swiss Financial Market Supervisory Authority; or United Kingdom: Morgan Stanley Private Wealth Management Ltd, authorized and regulated by the Financial Conduct Authority, approves for the purposes of section 21 of the Financial Services and Markets Act 2000 this material for distribution in the United Kingdom.

Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the “Municipal Advisor Rule”) and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule.

This material is disseminated in the United States of America by Morgan Stanley Smith Barney LLC.

Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data.

This material, or any portion thereof, may not be reprinted, sold or redistributed without the written consent of Morgan Stanley Smith Barney LLC.

© 2019 Morgan Stanley Smith Barney LLC. Member SIPC.

CRC #2486312 (04/2019)