Did you know we just celebrated the 98th anniversary of Women’s Right to Vote?  On August 26, 1920, the 19th Amendment to the U.S. Constitution was ratified granting women the right to vote. While many take this privilege for granted today; it is due to the courage of the women leaders before us, we can vote freely in all elections in the United States. Women activists and leaders in past decades worked diligently to open up career opportunities for all women. Yet, there is still much talk about greater gender equality in the workplace and how we can continue to ensure women have unlimited career paths by making gender diversity a commonality across industries and regions. A unique way to continue to support and encourage women’s career choices and opportunities is through impact investing.

Affecting change through conscious screening of potential investments is called Impact Investing.  Impact Investments are financial investments made in companies, organizations, and funds with the intention of generating quantifiable social and environmental impact alongside a financial gain. It provides a different avenue to tackle social, environmental, and financial challenges instead of traditional charity work. With impact investing, companies and individuals can shape the future with money that is already slated to be invested.

By investing with impactful intentions, we can help shape the future of companies and their support of women in the workplace and companies that serve women customers. Investing in gender diversity at the corporate level is profitable for both companies and investors, and there is research to back it up.

Morgan Stanley collected and analyzed data from more than 1,600 stocks globally and determined that companies with higher gender diversity have delivered slightly better returns, with lower volatility, compared with their low diversity peers. Additionally, they have moderately outperformed on average in the past five years. The research also reviewed stocks by focusing on three main elements: the percentage of women in the workplace, company policies that promote equality and programs that accommodate the needs of women and working parents.

Results show that companies that focus on diversity have a better level of forwarding a one-year return on equity (ROE). This comes from a sample that looked at the connection between gender equality and ROE in the last six years. On average 0.7% of the companies with a focus on gender diversity did better than regional sector peers. Furthermore, they were 1.1% better than companies with a low representation of women.

Ensuring that more women are working and leading in companies is good business, especially for investors who not only care about the issue but want a solid return on their investment.  In a 2016 report on workplace gender diversity, a lead analyst for Morgan Stanley says, “a company’s percentage of female employees is positively correlated with its return on equity.”

By employing more women, a company is more likely to have increased productivity, higher employee satisfaction, higher retention, and more significant innovation. When a company leadership team includes both men and women, it can indicate innovation and new market opportunities.[1] Women and men have distinct leadership styles and when both men and women are part of the leadership team, a balance of leadership strengths and styles give the company vigor and better results.

If you are looking to make a meaningful impact on women in the workforce while getting a return on your investment, look for companies with women in the C-Suite, and talk with your financial advisor for your specific investment goals.

 

Claudia Mollerup-Madsen is Vice President and a Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston. The information contained in this interview is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.

Morgan Stanley Smith Barney, LLC, member SIPC.

 

 

[1] A Framework for Gender Diversity in the Workplace.  Morgan Stanley.  March 31, 2016.  Pdf.

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