Women’s outsized influence in aligning their money with their values is not about to end any time soon, with a new generation of female millennial and Gen Z investors right behind them.
Two pioneers in impact investing, Sallie Krawcheck and Jean Case, shared during recent interviews with TriplePundit why they think women will continue to shake up the booming field of impact investing.
Krawcheck is the CEO and co-founder of Ellevest a digital-first, mission-driven investment platform for women; she is Chair of the Pax Ellevate Global Women’s Leadership Fund, a fund that invests in the top-rated companies for advancing women.
Case is a philanthropist, chairman of the National Geographic Society and CEO of the Case Foundation. In her recent book, Be Fearless: Five Principles for a Life of Breakthrough and Purpose, Case says impact investing is a direct result of those principles: particularly, make a big bet and reach beyond your bubble.
“It is a big bet, when you think about it, that capital can be used powerfully to do more than just provide financial returns but also benefit society,” Case told 3p. “And in a risk-averse industry, reaching beyond your bubble to do something new in finance, that does involve a little bit of risk taking. We have a new class of entrepreneurs and investors who desire a market return rate or better but honestly believe that they are building a new generation of companies.”
The numbers underscore what women are up against. Today on Wall Street, according to Krawcheck’s estimation:
As a sign of change, a new female-and minority-led activist fund, Impactive Capital LP, launched earlier this month. The co-founders are industry veterans Christian Asmar, who is Hispanic, and Lauren Taylor Wolfe, who has risen as a leading expert in impact investing. Less than 9 percent of hedge funds are owned by minorities. Impactive launches with $250 million from the California State Teachers’ Retirement System, or CalSTRS. This fund will harness the increased investor interest in ESG (environmental, social and governance), as frequently reported on 3p.
Based on our conversations with Krawcheck and Case, here are the six reasons why women will continue to shake up impact investing.
Case noted that from the earliest days, women were launching firms focused on impact investing, providing the tools, and controlling foundations and pension money and moving it in the direction of socially responsible investing.
The Case Foundation has compiled a comprehensive list of the trailblazing role women have played in philanthropy, the investing community, research and metrics, as well as government, to move the needle on impact investing.
Women control $14 trillion of personal wealth in the U.S., and they are a driving force using that money towards impact investing. In a study of affluent women, Calvert Investments found that 95 percent ranked "helping others" and 90 percent ranked "environmental responsibility" as important.
Those wealthy female clients want their investments to have a positive impact on the environment and society, says Krawcheck. That’s why she founded Ellevest, she said: because of the lack of female financial advisors and the kinds of investments women are interested in.
Women will become the largest beneficiaries of the $30 trillion intergenerational wealth transfer over the next 25 years. It’s not clear how much of that $30 trillion women will receive, but as Forbes reports, one often-cited study from 2009 puts the figure at 70 percent.
“It is only a matter of time before women control the vast majority of wealth in the nation,” Case told 3p. “They care very deeply about how they use their wealth.”
Women are more likely to invest in a way that benefits women—whether that’s putting their money into women-led businesses or prioritizing investments with companies that have greater gender diversity. They lead the field of gender-lens investing—an approach to create female-centered portfolios that puts capital behind women in a more systematic way.
A startling figure reveals the extent of this challenge: only 2.2 percent of venture capital investment in 2018 went to U.S. female-founded start-ups.
“Investing in women tends to have positive ripple effects,” Krawcheck told 3p, “with more investments in companies with greater diversity.”
As Triple Pundit has reported, millennials and Gen Z are poised to shake up the investment world, with the vast majority engaged in socially responsible or impact investments, or planning to invest this way in the future.
This is particularly true for millennial women, who are the most likely to say social and environmental causes and issues are very important and drive much of what they do (90 percent, versus 81 percent for Generation X and 80 percent for Baby Boomers), according to GreenMoney Journal.
“Women and millennials are becoming savvier,” Krawcheck said. “They understand everything they do with every dollar has an impact, and therefore they want to make sure it is the impact they want to have.”
Women are better investors than men, Krawcheck says. Fidelity reported in 2017 that a growing body of research, including an analysis of the investing behavior of more than 8 million Fidelity retail customers in 2016, showed that women tended to outperform men in generating a return on their investments.
Both Krawcheck and Case are quick to emphasize that impact investing does not have to mean sacrificing returns. Krawcheck points out that the Pax Ellevate Global Women’s Leadership Fund, with over $227 million in assets under management announced in July 2018 that it had outperformed the MSCI World Index for the one year and three-year periods ending June 30, 2018.
“We’re at an exciting time in building this movement but we’re not yet at a tipping point,” says Case. “That said, we may see some progress in that direction in the next three to five years.”
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Based in southwest Florida, Amy has written about sustainability and the Triple Bottom Line for over 20 years, specializing in sustainability reporting, policy papers and research reports for multinational clients in pharmaceuticals, consumer goods, ICT, tourism and other sectors. She also writes for Ethical Corporation and is a contributor to Creating a Culture of Integrity: Business Ethics for the 21st Century. Connect with Amy on LinkedIn.