If you are managing investments, either your own or on behalf of clients, your primary goal is to generate the best returns possible and grow these assets. What most investors don’t realize is that when more women are involved in financial decision-making across all entities that make financial decisions (including governments, private and public companies, investment funds, real estate development, and individual households), money is managed more efficiently and effectively, investments are more profitable, and companies and governments make better decisions that benefit individual investors and, ultimately, the overall economy. You can put this knowledge to use. This is what we call the “XX Edge.”
More Pie for Everyone
Investing is not a zero-sum game. Untapped investment opportunities can be found at the intersection of gender and finance. Nevertheless, many investors still base their investing decisions on the notion that the total amount of the world’s assets is fixed and that if one investor is gaining, another must be losing. Milton Friedman memorably wrote in 1980, “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.”1 Instead, expanding the use of diverse talent in financial decision-making optimizes returns, grows the overall economy, and extends more opportunity to everyone. Optimizing human talent leads to more innovation and results in expanding financial returns for investors. Women’s leadership skills are currently underutilized across all capital markets. Women represent only a small fraction of the individuals making the financial decisions that impact domestic and global economies. This underutilization leads to inefficiencies and missed opportunities in the markets. In general, women are poised to tackle the challenges ahead of us because they are closer to most of the problems that need to be solved, utilize collaborative leadership styles, are more aware of risks (and therefore conduct due diligence and prioritize investment allocation differently), and take the long view in financial decisions. Women’s financial leadership will lead to more innovation, stronger investment returns, and accelerated economic growth.
When the financial services industry successfully includes women in decision-making roles and optimizes their skills across all capital markets, the individual investor will enjoy higher returns and benefit from the innovation and economic growth. Diversity makes the team stronger and offers you and others better returns. Those who are open to innovative ideas from all sources and who have confidence in their own potential while understanding that a more diverse team does not take them out of the game are positioned to capitalize on this opportunity and dramatically grow their wealth.
A New Paradigm for Gender-Focused Investing
The field of gender-focused investing is about to be flipped. Traditionally, the field has prioritized how finance can improve the lives of women and girls and thereby lift families and communities. Consider a different paradigm: one with women at the center of investing as agents and actors, not just as beneficiaries.
Gender analysis is the secret to unlocking better financial performance for all investors. The evidence is clear that when women share in the control of capital (as board directors, CEOs, entrepreneurs, borrowers, heads of government), better social and financial outcomes are the result.2 Furthermore, when women are included in decision making, they build solutions that also benefit their families and communities. When women have access to more money, they build wealthier and healthier economies—at family, community, national, and global levels. They make the economy grow and bring better outcomes to everyone. To be clear, this new paradigm demands we move away from the idea that microfinance is the only type of capital that we associate with women. We must open all types of capital to the full participation of women and have them involved in all allocation decisions.
Today only a small percentage of women participate in significant financial industry decision-making. Of the Fortune 500 companies, only 41 are led by women.3 Barely 14% of private equity fund managers are women, and less than 3% of venture capital is directed toward enterprises run by women.4
Why would women’s financial decision-making lead to better financial and social performance? Data indicates that more diversity in leadership brings additional talented people into company decision rooms, investment committee meetings, and public policy forums.5 Women tend to prioritize long-term outcomes and take on risk in a different way than men. Women bring distinct types of innovation and creativity to problem-solving because they directly experience the impact of the challenges that need to be addressed. And women tend to exhibit collaborative network leadership styles that are well suited to our changing global economy.6
To accrue higher returns and lower risks, the world of finance must fully appreciate that including talented women in decision-making positions is the secret to unlocking better financial returns. When all members of the investment community prioritize investments that place female talent at the table, demand for women board directors and CEOs will grow. This will drive pay equity at the top and throughout organizations and will generate a pipeline of talent in middle management, vocational schools, and universities. There will be a demand for female fund managers and entrepreneurs who will bring untapped venture capital to the hands of more female innovators and disruptors. This, in turn, will result in product development, services, and strategies that cost-effectively meet the needs of all, such as new forms of effective and safe contraception, more climate-friendly consumer goods, and financial products that reach those who are traditionally excluded. Women will be prioritized as business owners and mortgage holders, which will result in more reliable loan repayments and more stable neighborhoods and towns. This is just the beginning of how our economy will improve when women make more financial decisions and exert more control over the flow of capital. As an investor, you will want to take full advantage of this expansive and developing opportunity.
The XX Edge: Unlocking Higher Returns and Lower Risk will be published in June 2022. Hear from Patience Marime-Ball at Total Impact Summit 2022 in Philadelphia in May.
1. Milton Friedman and Rose Friedman, Free to Choose: A Personal Statement (New York: Harcourt, 1990), 13.
2. Jena McGregor, “More Women at the Top, Higher Returns,” Washington Post, September 24, 2014, https://www.washingtonpost.com/news/on-leadership/wp/2014/09/24/more-women-at-the-top-higher-returns/; Brande Stellings, “Female Board Members Are Good for Business,” The New York Times, April 1, 2015, https://www.nytimes.com/roomfordebate/2015/04/01/the-effect-of-women-on-corporate-boards/female-board-members-are-good-for-business.
3. Emma Hinchliffe, “The Female CEOs on This Year’s Fortune 500 Just Broke Three All-Time Records,” Fortune, June 2, 2021, https://fortune.com/2021/06/02/female-ceos-fortune-500-2021-women-ceo-list-roz-brewer-walgreens-karen-lynch-cvs-thasunda-brown-duckett-tiaa/.
4. “Women Make Up Just 14 Per Cent of Partners at UK Private Equity Firms and Hedge Funds,” Private Equity Wire, August 31, 2018, https://www.privateequitywire.co.uk/email/267911; Karen Firestone, “When Will We See More Gender Equality in Investing?,” Harvard Business Review, March 25, 2019, https://hbr.org/2019/03/when-will-we-see-more-gender-equality-in-investing; “Venture Capital and Entrepreneurship,” Harvard Kennedy School Women and Public Policy Program, accessed December 18, 2021, https://wappp.hks.harvard.edu/venture-capital-and-entrepreneurship.
5. Lauren Hirsch, “The Business Case for Boardroom Diversity,” The New York Times, January 23, 2021, https://www.nytimes.com/2021/01/23/business/dealbook/diversity-board-directors.html.
6. Derek Thompson, “Why Women Prefer Working Together (and Why Men Prefer Working Alone),” The Atlantic, August 21, 2013, https://www.theatlantic.com/business/archive/2013/08/why-women-prefer-working-together-and-why-men-prefer-working-alone/278888/.
Patience Marime-Ball has more than two and a half decades of investment experience across capital markets and is widely recognized for using the levers of finance to innovate pathways for creating a more equal world. Patience has led many “firsts” in the investing space; she developed the Banking on Women platform at the International Finance Corporation (IFC) and was responsible for co-designing IFC’s Global Trade Liquidity Program, as well as the first-ever gender bond issued on the Uridashi market. As the founder and CEO of Women of the World Endowment, an investment nonprofit focused on gender intersectional investing, and most recently, the co-author of her new book The XX Edge: Unlocking Higher Returns and Lower Risk, Patience actively drives forward a capital system that is more inclusive. Patience is a non-executive Board member for MIO Partners and Intelligent Medicine Acquisition Corp (Nasdaq: IQMD). She serves as a member of multiple advisory boards including Emerging Sun LLC, a company she co-founded in 2005.
Ruth Shaber, MD, is an innovator and changemaker on a mission to change the face of finance. As the founder and president of Tara Health Foundation, which promotes health, well-being, and opportunity for women and girls through innovative evidence-informed programs, the co-founder and board chair of Rhia Ventures, a group of foundations and investors that collaborate to bring new types of capital and enterprise to the field of reproductive health in the U.S., and now, as the co-author of her new book The XX Edge: Unlocking Higher Returns and Lower Risk, Ruth’s entire career has been dedicated to pushing for change. She had a robust career as an obstetrician and gynecologist and executive at Kaiser Permanente where she founded the Women’s Health Research Institute. She serves as a board member at the Women of World Endowment and Toniic, and Ruth was recognized as a Forbes 2020 Impact 50: Investors Seeking Profit—and Pushing for Change for her contributions to the field of impact investing.