How to Invest in Women-Led Companies

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How-to-use-investments-feature-women-wealth-spotlight — Photo: Kailey Whitman

During the height of the pandemic, it became clear that women were being far more adversely impacted by COVID-19 closures and unemployment than men. A string of reports from organizations such as the Brookings Institution and the Center for American Progress substantiated this reality, finding that not only were women taking on more of the resulting childcare responsibilities triggered by COVID-19, but they were also more frequently reducing their hours at work, working from home, or leaving their jobs behind entirely.

The Center for American Progress reported that four times as many women than men dropped out of the labor force in September 2020—roughly 865,000 women compared with 216,000 men. The Washington Post, meanwhile, declared the coronavirus childcare crisis would set women back a generation; CNN said the United States job market may never be the same, as a result of all the mothers leaving the workforce to care for children.

The common theme among all the headlines and reports: During the course of just one year, the pandemic eroded 100 years' worth of gains made by women in the workplace.

Yet, while this is all true and very discouraging, a parallel development has been emerging that may, over the long run, prove extremely useful for the advancement of women. A recent New York Times article noted that investing for social good, or impact investing, has finally become profitable. For those not familiar with these terms, impact investing aims to promote a social good or alternatively prevent a social ill, as the Times explains. And amid the coronavirus pandemic, these types of investments were regularly doing better than more traditional investment vehicles and options, thus creating what very well may be a turning point that encourages far more people to make such investments.

Now, here's where it all comes together and why it matters to you, the reader, right now.

Impact investing is increasingly being used not only to address environmental challenges, but also social causes, and specifically to support the advancement and support of women in the workplace, female-owned businesses, and businesses that are visibly and meaningfully committed to gender diversity in leadership positions. Investment funds are being created around these critical efforts and purposes, and the demand for such investment vehicles is often coming from investors themselves.

"The space has really grown, especially in the last few years," says Sylvia Kwan of Ellevest. "Over the past few decades, the focus had been on perhaps negative screening with your investments, such as 'I don't want to put my money into tobacco or oil companies.' Fast forward, and we're now seeing that this movement has become not only about that type of avoidance strategy but going beyond that and asking, 'What can I do and how can I use my dollars to move the needle and impact those areas I'm most concerned with?'"

"We had seen a trend toward impact investing, but the pandemic has really accelerated that," continues Kwan. "There are so many more eyes on businesses and big companies and small companies, and we're all looking at how they're treating customers and employees and how they're helping the communities in which they operate."

And one final but critical point: While all of this impact investment momentum is growing, there's a very clear recognition that you don't have to concede returns in order to invest alongside your values, notes Kwan.

In other words, now may be time to take a look at your portfolio and decide whether you might want to rethink some investment choices in favor of helping to actively support women—or perhaps right some of the wrongs triggered by the pandemic. Here are some of the ways to do that and how to get started.

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Investment choices that support the advancement of women

How-to-use-investments-3-women-wealth-spotlight — Kailey Whitman

There are both equity funds and fixed-income funds that have been designed to actively support women. Some of the options in this space include:

PAX Ellevate Global Women's Leadership Fund: The first broadly diversified mutual fund, PAX Ellevate invests in the highest-rated companies in the world with regard to advancing women through gender-diverse boards, senior leadership teams, and other policies and practices.

Fidelity Women's Leadership Fund: This is another fund focused on investing in gender-diverse companies and allowing you to invest with purpose. The fund invests primarily in companies that prioritize and advance women's leadership.

Glenmede Women in Leadership U.S. Equity Portfolio: Glenmede's Women in Leadership fund is focused on investing in socially responsible large-cap stocks.

YWCA WOMN ETF: WOMN tracks the Morningstar Women's Empowerment Index. For those not familiar, the Women's Empowerment Index was designed to provide exposure to companies worldwide that have exhibited strong policies and practices in support of women's empowerment and gender equity.

Among the notable fixed-income options is the Access Capital Community Investment Fund, which supports affordable housing, job creation, and economic development.

But how, exactly, does putting your money into these funds support women? Mindy Yu, director of investments for the investing app Stash, explains further.

"Many ETF providers out there have stated with proxy voting power, they will vote against boards that don't have female representation," says Yu.

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Additional option

Those looking for a less traditional method to support women might consider Harvest Returns, an online platform created in 2016 with a focus largely on connecting female investors with female farmers and allowing for passive wealth generation. The site's marketing manager, Allison Stewart, says the percentage of women farmers in the U.S. is small but growing, noting that a USDA study says women made up about 30 percent of U.S. farm owners in 2012, which is up from 14 percent in the late 1970s.

"Harvest Returns has helped several women-run farms and agribusinesses raise capital in very innovative sectors of agriculture, such as hydroponic farming," says Stewart. "Some of our really innovative farms, including an indoor aquaculture operation and a large-scale greenhouse, feature women C-Suite executives. Women farmers bring a fresh approach to agriculture, an industry struggling to keep up with rapidly evolving consumer preferences."

Harvest Returns investments start at $5,000.

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Points to keep in mind when making impact investments

How-to-use-investments-2-women-wealth-spotlight — Kailey Whitman

Like any investment, there's no guarantee, of course, that all impact investments will deliver great returns. As Kwan points out, that would be like saying all technology company stocks are a sure bet and will provide great returns.

"You should apply the same criteria to impact investing as you would with any investment and be just as selective," explains Kwan.

Still, there's no denying the upswing the impact investment segment has witnessed. As the New York Times noted, impact investing, which is generally focused on environmental, social and governance categories and thus is known as E.S.G investing, can be tracked through the performance of various exchange traded funds. And overall, 64 percent of actively managed E.S.G. funds outperformed their benchmarks through the first week of August 2020. This is compared to 49 percent of traditional funds.

Yu suggests that at least one of the reasons why impact investments are suddenly performing so impressively is, well, women.

"Many of these companies that ETFs are investing in have women in leadership positions as CEOs or CFOs, and it's really the traits that these leadership people hold that's transforming how the companies perform," says Yu. "Women-led companies have compassion, and are creating cultures that are inclusive, engaging, and where there's less turnover—and that really translates into how successful a company is."

"It is what's creating the differentiating factor when you think about the improved returns and performance in impact investing, these traits are resulting in differences in how companies perform," adds Yu.

The research from the Pax Ellevate Global Women's Leadership Fund supports Yu's comments, noting that companies with women in leadership have "higher returns on capital, greater innovation, increased productivity, and higher employee retention and satisfaction."

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How to ensure your money is making a difference

Yet another concern when making a social impact investment, particularly one earmarked for the advancement of women, is how to make sure your money is really helping or having the desired benefit. There are various ways to ensure this is the case.

"When you go to the websites for these funds, look to see how they report out on impact," says Kwan. "It's important to see the impact of your dollars and understand how each investment reports out on that."

Identifying this type of reporting and ensuring that the fund does indeed do what you hope should be part of the criteria used when deciding where to invest, adds Kwan.

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How much money do you need to get started?

One last but incredibly important point: You do not need to be a millionaire to make a difference with investment choices. In fact, Kwan says Ellevest encourages people to start small.

"Don't wait," she says. "A lot of people do wait because they're worried they have so little money to invest or they decide to wait until they have a better salary. Starting early means you have time on your side to build that investing habit and then you can take some of that money as it grows and invest in companies you believe in and have the impact you want."

Let's recap, shall we? Don't wait. Start investing now. And feel free to boldly use those investments to help women. There's no better time.

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