Women investors prioritize impact in their portfolios

The gender pay gap — or the statistic that women make approximately 80 cents for every dollar that men make — is a well-documented phenomenon, backed up by data from the U.S. Census Bureau and the American Association of Women

Arguably as pressing an issue is the gender investment gap: Many women are less prepared for long-term financial health than their male counterparts.

Women have the potential to add $12 trillion to the global economy over the course of the next decade, so helping them use their assets advantageously is a win-win for all. Below, we take a deeper look at the gender investment gap and how to begin to close it.

Examining the gap

There are a few reasons why this gap exists. It’s not entirely unrelated to the gender wage gap: Since men tend to earn more, they naturally have more to invest with, which continues the cycle.

But there are more nuanced factors at play: This article published in the Wall Street Journal digs into the differences between men and women’s traditional styles of investing. Young women — and in fact young people in general — also tend to distrust the markets and often lack adequate financial education, which may hurt their long-term goals. 

Sheila Herrling, the senior vice president of social innovation at the Case Foundation, explains that there are a couple common themes among women investors. For one, they tend to be “risk-savvy (Herrling doesn’t agree with the umbrella statement that women are “risk-averse”), investing conservatively until they’ve gathered enough wealth to support their families. Secondly, many woman are inclined toward socially minded investments (such as impact investing). Women also tend to put a great deal of time and research into the investments they make, and they tend to associate money with personal independence and quality of life. 

Women tend to associate money with personal independence and quality of life.

“From a values-based perspective, many women want to have their investments not only make them excellent returns, but to also have a positive impact on the world,” she explains. “They have also exhibited flexibility in evaluating different investment opportunities, working across the risk-return spectrum and working with different types of capital – this makes them increasingly versatile investors.”

Investments that go beyond money

An impact investment that may resonate with women, for instance, is I AM THE CODE, an organization and global movement led by social entrepreneur Mariéme Jamme, a UBS Global Visionary. The organization helps young girls in Africa learn how to code and investigate STEAMD (Science, Technology, Engineering, Arts, Mathematics, and Design) careers.

“Many CEOs’ tell us that they experience difficulties finding qualified workers in STEAMD subjects. This is a result of a lack of investment in the education needed to develop a technologically competent workforce,” explains Jamme. “I AM THE CODE aims to educate and incentivize governments about the importance of investing in the training and education of the future workforce, particularly young women and girls.”

To date, I AM THE CODE has created more than 300 tech hubs across Africa. The program is also being rolled out in every school in Senegal. 

“Success does not come from just the financial resources invested in it,” says Jamme. “Rather, tangible results will come from the willingness to invest time in the development of young women.”

Long-term implications  

Laura Adams, a personal finance expert, author and speaker, points out that women also tend to outlive men — meaning they’ll feel the investment gap even more when they reach retirement age.

“Not investing is actually one of the riskiest things you can do,” says Adams. “That’s kind of counterintuitive, because a lot of people think they’re saving… they question why they’d want to expose it to any kind of risk. But with [historically low interest rates], that is not going to beat inflation and get you to your long-term savings goals.”

Image: flickr, john-morgan

In Adams’ book, Money Girl’s Smart Moves to Grow Rich, she offers advice for comprehensive  financial literacy. She also suggests a variety of resources that can help women get their feet wet in investing: Classic finance books by Jane Bryant Quinn, Thomas J. Stanley’s The Millionaire Next Door and George S. Clason’s The Richest Man in Babylon, to name a few. 

She says the “right” time to begin investing varies, but in general it’s during the life phase when you’ve started to build up a small financial cushion. (Anybody living paycheck to paycheck probably isn’t in a spot to invest just yet, she says.)

Closing the gap: The future and what to expect  

Both Adams and Herrling have a generally positive outlook on the future of women investors. Adams says millennial women, who are graduating from college at higher rates than any generation of women in history, are well positioned for high earning potential.

That’s not to say closing the gap won’t be challenging; there are larger-scale social norms that must first change.

Rina Kupferschmid Rojas, the head of sustainable finance for UBS & Society, adds that part of the responsibility for closing the gap falls to finance professionals in a position of influence: “Financial advisors who are prepared to listen to women and meet their personal needs are absolutely critical,” she says. “With respect to sustainable and impact investing, it is important for women to work with managers who have a rigorous process and are not going to compromise on either generating returns or supporting social or environmental causes.” 

Rojas works closely with UBS Unique, an initiative by UBS to better serve women investors and catalyze change within the financial industry. Long-term goals of the initiative include helping one million women improve their financial confidence over the next five years.

Herrling, too, offers a few courses of action that will be necessary to close the gender investment gap. She believes that “bringing intention” is the most crucial part of the puzzle: She supports “intentional action to close the wage gap; intentional investment in female founders; intentional opening of social networks to and between women (entities like digitalundivided, The Pink Ceiling, Women’s Startup Lab); and intentional buildout of products to scale impact investing, putting private capital to public good.”

Upping these efforts, she says, will be “a win-win for all.” 

Partnership for the goals: Achieving the United Nations’ Sustainable Development Goals

UBS White Paper

This paper for the WEF Annual Meeting explores our progress in meeting our commitment to the UN SDGs, in particular our pledge to raise USD 5bn of client money within five years to fund the SDGs. We unveil more than 30 partnerships which UBS has forged with public and private organizations to support positive social and environmental change.

Learn more about impact investing and the investing trends defining our modern world.

The value of investments can go down as well as up. Your capital and income is at risk. Assets used for secured borrowing are at risk if you do not keep up with repayments. In the UK, UBS AG is authorized by the Prudential Regulation Authority and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. © UBS 2018. All rights reserved.

More From this publisher : HERE ; This post was curated using : TrendingTraffic

Leave a Reply