Investments in this strategy aim to increase women in leadership, ownership, and governance positions through leadership development and talent retention. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.


Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Broadly speaking, women, gender and sexual minorities (GSM), women and men of color, people living with disabilities, and others who have been traditionally marginalized based on their demographic characteristics are severely underrepresented in business governance, leadership, and ownership across worldwide markets. Yet data demonstrates that diverse and inclusive businesses benefit economically from their diversity and inclusion (1).

This strategy involves measuring the extent to which a business either already has gender-equitable representation among its leadership, ownership, and governance structures or has developed an enabling environment to increase its inclusivity and diversity. Social impact investors can apply this strategy to screen businesses and evaluate potential investees for their gender-equitable representation in leadership, ownership, and governance.

What is the scale of the problem?

Although there have been recent advances in gender diversity on boards and top executive positions, there is still a long way to go to achieve gender equity (2). Currently, 63% of U.S. business leaders are white men, while 24% are white women, 2% are black women, 1% are Hispanic women, and 1% are Asian-American women, with less than one percent of leaders comprising women in other racial and ethnic groups (3). In 2017, women accounted for 22% of CEO and direct-report-to-CEO roles in the Americas, 15% in Europe, and only 4% in Asia (4). Finally, a 2016 survey of 132 companies and 34,000 employees, conducted by Lean In/McKinsey & Company, found that women who negotiated for compensation increases or promotions were 30% more likely than men to receive feedback that they were too aggressive, intimidating, or bossy (5). This narrative is perpetuated across sectors in business and beyond.

Applied to companies of all sizes, from large to small, this strategy improves the inclusion of women as managers, in governance, and in leadership roles, as well as that of other minorities. Its combination with the other Gender Lens Investing strategies constructs a cohesive approach to women and GSM as workers and leaders. This strategy can also illuminate such challenges as recruitment pipeline, promotions, and talent retention.


Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Women: A Credit Suisse study of more than 3,000 global companies found that women held 14.7% of board seats in 2015 (6). This strategy gains women more leadership responsibility and greater decision-making authority, which can, in some cases, pave the way for higher incomes and more fulfilling employment. Furthermore, research has suggested that placing women in leadership roles improves firms’ social performance and social responsibility (7).

Racial or Ethnic Minorities: Only 4.7% of executive and senior level positions at S&P 500 companies are held by women of color and, as recently as 2013, women of color were completely unrepresented on the boards of directors of more than two-thirds of Fortune 500 companies (8, 9, 10). This strategy helps women of color increase their role in leadership, governance, and ownership of their organizations. In doing so, women of color increase responsibility and compensation—which are typically limited by systemic societal constraints—matching their full potential .

Gender and Sexual Minorities (GSM): Employees should be hired and protected from discrimination regardless of their sexual orientation or gender identity. While companies are beginning to institute policies to protect their GSM employees, no significant shifts have yet improved their representation in positions of leadership. Through this strategy, the gender lens can pave a critical pathway for welcoming leaders across a range of identities.

Broad Economic Prosperity: Diversity in leadership and representation on boards unlocks a large talent pool, and diverse leaders bring different perspectives from the marketplace (11). Greater gender diversity increases productivity, drives innovation, improves products and decision-making, and strengthens employee retention and satisfaction (12, 13). Thus, this strategy will improve the quality and performance of the market, increasing broadly shared prosperity.

What are the geographic attributes of those who are affected?

This strategy has potential impacts around the world in many different sectors (14). Concerning the representation of women on boards of directors, Europe leads the way, with East Asian countries such as Taiwan, South Korea, and Japan the farthest behind (4). Since there is no equality in ownership, leadership, and governance by gender, this impact target has vast global reach (15).


Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Screening investments using this strategy will lead to a fuller analysis of the extent to which a potential investee has gender-equitable representation in leadership, ownership, and governance. Investments made in companies meeting expectations in these areas will likely benefit from specific, evidence-backed outcomes in terms of profitability and economic performance.

A 2018 McKinsey & Company study of 1,000 companies in 12 countries found that companies in the top quartile for gender diverse executive teams were 21% more likely to experience above average profitability and 27% more likely to have above average value creation (15). Women ascend to these top positions much more slowly than do men, holding just 4.8% of CEO positions at S&P 500 companies and 26.5% of executive and senior-level positions (16).

Investors should therefore consider businesses that perform well on metrics that measure concrete actions to develop a female talent pipeline, not only those that have already achieved gender-equitable representation at the top. Since research suggests that businesses that perform well on gender representation return greater financial profit (17), by deploying a gender lens, investors can use venture creation to increase financial and social profit. Women represent the second-largest economy in the world; women’s personal income reached USD 15 trillion in 2014, 40% larger than China’s economy (18). Investing in gender equality can therefore lead to greater financial performance, as well as more social parity.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Beyond the obvious benefits to individual businesses that achieve gender-equitable representation in leadership, ownership, and governance, broad screening by investors for performance aligned with this strategy would shift expectations and open new paths to resolving gender inequalities.

Women currently hold an estimated 24% of senior positions in companies worldwide (16). A vast number of women could be brought into leadership and governance roles if investors expected businesses to perform in this area, with tremendous global impact, both socially and fiscally. A recent report found that if women participated in the global economy at the same rate as men, annual gross world product would be as much as USD 28 trillion larger, or 26%, by 2025 compared to the status quo (19). Such a broadly shared increase in prosperity would have additional social impact beyond gender equality.

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

Genuine—as opposed to tokenistic—shifts in a business’s understanding and active promotion of gender-equitable leadership, ownership, and governance significantly impact indicators of business performance. Examples of change include:

  • In 2004, Catalyst found in a sample of 353 Fortune 500 companies that those with the highest percentage of women in executive positions had 34% higher total return to shareholders and 35% return on equity than those with the lowest percentage of women in executive positions (20).
  • Another Catalyst study found that Fortune 500 companies with at least three female directors for four of the five years from 2004 to 2008 outperformed those with no female directors over the same period by 60% in terms of return on invested capital (21).
  • Studying the financial performance of U.S. companies from 2011 to 2016, MSCI Inc. found that those with at least three women on their boards had 10% higher median return on equity and 37% higher earnings per share compared to companies with no female directors (9 22).


Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

Various risk factors could hinder implementation of this strategy, including the following.  

  • Execution Risk: On the surface, any push for greater representation of women, people of color, people of diverse gender identities, and others who have been traditionally marginalized from leadership and governance opportunities may seem to promote tokenism. To avoid tokenism and drive genuine, successful change requires shifts in cultural attitudes, behaviors, practices, and policies alongside shifts of representation in decision-making.  
  • External Risk: Societal and gender-normative patterns traditionally push women towards specific roles, limiting their workplace achievements due to inequitable and disproportionate pressure to perform care-taking and household tasks. Therefore, women are broadly underrepresented in certain industries as a whole, and are even more underrepresented in leadership or governance roles. While the contours of these patterns depend on industry, geography, and sociocultural context, businesses may face immediate challenges in achieving gender-equitable representation that require them to promote a pipeline of talent from within or actively seek out and welcome more women into their industry.

    Further, in some contexts, women's entrepreneurial activity has been associated with an increased risk of marital conflict and gender-based violence as women spend increasingly less time inside the home on traditional domestic activities (23). Risk can be reduced in these cases by engaging with family members and providing programs to reduce and prevent gender-based violence.  
  • Evidence Risk: Evidence presented in this overview concerning gender and company decision-making or performance is correlative, but it may not be causative. Otherwise better companies may also better work towards gender equity in representation and decision-making roles. Some of the aims of this strategy may imply causation, meaning that gender-equitable representation and decision-making themselves make companies better. Such thinking can also easily become essentialist, linking performance to something inherently “woman," rather than recognizing that power imbalances and implicit biases in the workplace impact women’s advancement and well-being, as well as that of other minority groups. 

What are likely consequences of these impact risk factors?

These risks could limit the impact of the strategy, and they could even lead to a backlash against increased gender equality in governance, leadership, and ownership

Illustrative Investment

SEAF invested in AKM Glitters Company, a poultry business in Tanzania with a distribution model that includes a network of 113 (as of June 2018) women-owned businesses that rear chicks until they are four weeks old and then sell the chicks, feed, and other items to smallholder farmers (24). According to AKM Glitters Company, the investment helps support the growth of the women-owned businesses and increases their access to high-quality poultry and feed. The company plans to partner with an additional 150 women-owned businesses in the next three years.

In 2017, Tara Health Foundation made a USD 300,000 private equity investment in the Next Wave Impact Fund, which is dedicated to increasing diversity in angel investing by engaging more underrepresented groups in early-stage investing (25). The Next Wave Impact Fund was designed based on research concerning financing strategies for women-led businesses. The new fund comprises 99 women investors, including 25 women of color, and among the criteria it uses to evaluate investments is the diversity of management teams (26). The fund invests in a number of women-owned and women-led businesses, achieving impact across a range of sectors, including financial inclusion, community development, health and wellness, and sustainable products.

Goldenseeds, an early-stage investment firm with a focus on female leaders, has invested more than USD 110 million in more than 150 women-led businesses (27). One of its successful exits includes Gdiapers, a certified B Corporation and member of the Circular Economy 100. Gdiapers produces disposable diapers that include Cradle-to-Cradle certified inserts that can be flushed or composted (28).

In June 2014, PAX World Funds launched the Pax Ellevate Global Women’s Leadership Fund, a mutual fund that invests in companies with the highest global ratings on advancing women’s leadership with a goal of proving “in real time, with real money,” that companies with more women in leadership can deliver better investment returns (29). According to Pax, the fund outperformed the MSCI World Index—a benchmark commonly used to measure stock performance across developed markets—for the one-year and three-year periods ending June 30, 2018 (29).

In 2017, the National Australia Bank launched the country’s first gender bond, raising AUD 500 million (USD 384 million) for the NAB Social Bond (Gender Equality), the proceeds of which are invested in Australian businesses that champion women and promote gender equality (30). One of the companies in the gender bond’s portfolio is Mirvac, a real estate group, which has targets for female representation in senior management and management across the business, linked to personal scorecards to encourage accountability and ownership. The group’s board of directors is now 50% women, and it has also reduced the gender pay gap (31). The five-year gender bond yields approximately 3.5%.

Have another illustrative investment we should consider? Let us know!

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

The Bottom Line: Corporate Performance and Women’s Representation On Boards (2004–2008)

Catalyst, The Bottom Line: Corporate Performance and Women’s Representation On Boards (2004–2008) (2011).

The Power of Parity: How Advancing Women's Equality Can Add $12 Trillion to Global Growth

McKinsey Global Institute, The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth (2015)

IMF Working Paper: Gender Equality and Economic Performance

Romina Kazandjian, Lisa Kolovich, Kalpana Kochhar, and Monique Newiak, IMF Working Paper: Gender Equality and Economic Performance (2016)

Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe

Lone Christiansen, Huidan Lin, Joana Pereira, Petia Topalova, and Rima Turk, IMF Working Paper: Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe, 2016.

The Problem of Underinvestment in Women-Led Small and Growing Businesses in Latin America and the Caribbean: ´The Most Missing of the Missing Middle (M4)

Oxfam Research Reports: The Problem of Underinvestment
in Women-Led Small and Growing
Businesses in Latin America and
the Caribbean:
´The Most Missing of the Missing Middle (M4), June 2014

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.