Businesses and financial institutions can do much more to engage with female investors, believes expert in sustainable finance Jessica Robinson
Women are economic powerhouses. They create, they control and they influence a huge amount of wealth. As consumers, the purchasing power of women is bigger than the GDP of China and India combined. Women make over 85% of all household decisions and 9 out of 10 women will be the sole decision-maker in their household about their finances at some point in their lives.
Yet as businesses increasingly recognise the growing economic power of women, one aspect is often overlooked – the role of women as investors. Research suggests that businesses, including financial institutions, can do much more to engage with female investors. This presents an exciting opportunity to support women in growing their financial confidence and becoming more active as investors. The question is – how do we get there?
Let’s look first to the financial industry
The financial industry is not doing a great job at connecting with its female clients. Many women report feeling disengaged from personal finance, less confident about managing money, and often patronised or talked down to by financial advisors. In part, we need to encourage more women to work in the industry itself. Better gender balance is critical because diversity of thought, experience and action are core components of what the financial services industry needs to be fit for the future, and this includes being more closely aligned with the needs of female clients.
We should also consider how we communicate with women about investing given that many hold the perception that “investing is not for them”. This is no surprise when you look at the way that both the industry and mainstream media communicate with women about money. Research indicates that we often portray women as excessive spenders, in need of guidance to help them save and restrict. The comparison with how we communicate with men is stark – men are encouraged to “dare to invest” and defined by the glories of financial success.
Women care about impact and sustainability
It is time to listen more carefully to what women are thinking about when making investment decisions. In particular, there is now a great deal of evidence that indicates that women are concerned about impact, sustainability and addressing the many global challenges we face. This concern extends to their investment decisions – women care about where their investment is going.
Women want to understand the environmental and societal impact of the companies and sectors they invest in. They want to be able to support businesses that are aligned with their values. They want to be able to make a difference in the world. This is where sustainable investing comes in – thinking beyond just financial returns and looking to have a positive impact in society and on the environment. Sustainable investing is a lever of change and businesses can do more to engage with women in terms of their sustainability priorities – whether this be combating climate change, cleaning up the supply chain or working with local communities.
Supporting female entrepreneurs
Women are steadily changing business, industry and innovation as we know it. Female entrepreneurs are building new companies, creating new markets and fast becoming prominent wealth creators. And yet, women founders are just not getting the cash.
We know that female entrepreneurs face a huge funding gap, and this is a global phenomenon. The numbers are shocking – the average size of a VC deal (venture capital deal) for all-female teams was $6.8m in 2020, compared to $18.7m for all-male teams. In fact, PitchBook recently reported women are drawing an even smaller piece of the start-up pie to prior years, giving newer women-founded companies an even larger funding gap to contend with.
An important trend to seize upon is that women want to invest in other women. This is increasingly evidenced by the impressive growth in gender-lens investing, with female investors often leading the charge. Encouraging women to incorporate gender into their investment strategy is an important discussion to have.
At the same time, we must make gender-lens investing easier and more accessible, including building the broader ecosystem through investor networks and education programmes. We need to think more deeply about women’s financial needs – “pink washing” will not cut it.
One good thing to come out of the pandemic is that many women are more focused on their financial futures. For example, a survey on women and money from UBS found that 63% of women felt that Covid-19 has affected how they think about money, and they’re more likely to discuss issues such as financial reviews and investing with their spouses and children. In a study by Fidelity Investments, 67% of women interviewed said they are more engaged in managing their money and have expanded their efforts to help shore up their finances.
This rise in financial feminism is exciting – but addressing it isn’t just about financial equality or simply rebranding products for a female audience. Yes, women need to invest more in order to address the gender investing gap. But at the same time, we must also think more deeply about what women want. Women take a different approach to investing, they are the driving force behind sustainable and impact investing and are controlling more money than ever before. It’s time we sit up and take note of this.
About the author
Jessica Robinson is a leading expert on sustainable finance and responsible investing, and author of ‘Financial Feminism: A Woman’s Guide to Investing for a Sustainable Future’. Find out more at moxiefuture.com