Are Women Leading the Charge Toward More Sustainable Investing?
By Betsy Moszeter
Women are a significant economic force in the United States, currently controlling an estimated 60% of wealth, and the number of wealthy women is growing twice as fast as the number of wealthy men. On a global basis, women stand to inherit 70% of the $41 trillion in inter-generational wealth transfer expected over the next 40 years.
Historically, investable wealth in the U.S. was largely in the hands and minds of men. The investment industry is dominated by men, investment professional ranks are predominantly populated by men, and investment strategies are designed for men. We all know that men and women think and behave differently. What will be the effect of women taking an increasingly bigger role in investment decision making?
Women tend to view money as a way to enable themselves and their families to live their dreams—it’s a means to avoid becoming a burden to other family members, achieve security, independence, and a better life for their children. Men, on the other hand, view money as a means to an end—a way to buy a second home or pay for children’s education. The tangible things that wealth purchases may end up being the same by women and men; however, the mindset about getting there is very different.
Joseph Keefe summarized the effect that these different mindsets have on investing behavior: “Something’s happening here. Women, it seems, are more inclined to want their investments aligned with their values while men are more likely to compartmentalize—investments in one compartment, moral and political values in another. Whereas men tend to view money as ethically neutral, women generally have stronger feelings about the social and environmental impacts of money.”
Women are interested in long-term sustainability, both as investors and as decision makers. A study published last year shows that women retail investors are more interested than their male counterparts in corporate social responsibility, from all angles.
Increasing evidence also highlights the fact that women are seeking out investments that embed environmental, social, and governance (ESG) criteria in their investment processes. The U.S. Trust 2013 Insights on Wealth and Worth survey found that 65% of female investors believe it is important to consider the impact of investment decisions on society and the environment, versus 42% of male investors.
Women may very well be leading the charge to improve long-term investment decision making, with ESG factors increasingly integrated into professional investment management processes. As of April 2013, The UN Principles for Responsible Investment (UN PRI) had 1,200 global investment management signatories pledging to include ESG considerations in investment decisions, up from 100 signatories in April 2006. One out of every nine dollars under professional management in the U.S. is currently involved in sustainable, responsible, impact (SRI) investing in one way or another, and this value is increasing rapidly each year.
An increasing portion of wealth is transferring into the hands of women who want their investments aligned with their personal values. They know that their money has impact in the world, and they are choosing to pay attention to that impact. They may very well lead our society into the next stage of investing maturity.
Posted: September 17, 2013