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It’s not uncommon to find sources telling you to ‘invest in X, Y, or Z’, but what does this really mean?
The title of this very post is a direct call to action to invest in women and women-backed initiatives. The implications here are twofold. For one, it could mean helping build a society where women have economic independence (i.e. enabling increases in female education, professional development opportunities, access to resources, and societal influence either directly or indirectly). It could also mean investing in female-founded startups and establishments to spread their influence and broaden their horizons. The sentiment is the same in both instances, however, it is centered around helping women reach prosperity both financially and socially, further closing the inequality gaps.
Taking a look at emerging markets and relatively lesser-developed nations shows why it is vital to invest in women. Investing in women leads to more inclusive governments, stronger economies, fewer child deaths, less disease contraction due to higher education levels, and improved public service, to name a few. According to Lawrence Summers, previous chief economist of the World Bank, “Investment in girls’ education may well be the highest return investment available in the developing world”, with each year of secondary school boosting future earning power by 20%. By empowering women in marginalized communities one enables them to become vehicles of change, ready to impact society with bright horizons.
Human capital wealth constitutes a larger share of global wealth (⅔) than other types like natural resource capital and produced capital, and the best way to grow it and ensure it is evenly distributed around the world is to focus on women. The key to building it sees its roots in consistent female education from a young age, healthcare and nutrition, information transparency, and increased labor force participation, productivity, and resulting business ownership. The ultimate result of all this is economic growth and activity, a known indicator of a nation’s wellbeing.
While most of us don’t have the power nor influence to finance female education initiatives globally, we can put pressure on those who do by making our voices heard, signing petitions, indulging conversations with our circles, and donating wherever possible. We can also make more cautious decisions in our own financial journeys that will make a difference by allocating more resources to areas of need and yet high return. A win-win, if you may.
Expanding access to finance is pivotal to reaching equality and productive societies. Women in general have much lower chances of gaining access to finance and credit opportunities, with estimates of a $300 bn annual credit deficit for the women-owned businesses that do take flight.
In emerging markets, only 11% of seed funding goes to companies that have at least one female founder. Female founders received only 7% of emerging market private equity and venture capital. Clearly, something needs to change to elevate these societies and expand both equality and access to opportunities!
Gender discrimination and inequality in the business world and society in general are not unique to emerging markets. The International Finance Corporation of the World Bank published a full report on business-related evidence for investing in women in numerous aspects. From an entrepreneurial standpoint, female entrepreneurs open new markets, leverage unique abilities, and both strengthen and diversify supply chains. They are also more likely to prioritize CSR which has become a focal point of consumer decisions in today’s world. Despite all this, according to Crunchbase only 20% of newly-founded startups in 2019 were founded by women.
It has been proven time and time again that women-owned and women-led firms perform stronger financially than exclusively male-owned firms. Still not convinced?
Here’s a list of statistics that highlight the success of women in positions of power:
- Women-owned businesses in the US grow twice as fast on average as all businesses nationwide.
- In 2019, total employment by women-owned businesses rose 8% while the overall increase was only 1.8%.
- Fortune 500 companies with at least three women board directors outperformed those with zero women board directors by 84% on return on sales (ROS), 60% on return on invested capital (ROIC), and 4–6% on return on equity (ROE).
- Successful companies had a 7.1% overall median proportion of female execs compared to the 3.1% at unsuccessful companies.
- Women-friendly firms (those with a higher number of female board directors) outperformed industry median firms in revenues, assets, and stockholder’s equity by 1.6%.
- Businesses founded by women deliver more than twice as much per dollar invested than those founded by men.
And much, much more!
Despite female financial success in the business climate, only 2% of female entrepreneurs are motivated by financial gain, compared to 15% of male entrepreneurs. This shows a focus by female founders on longevity and long-term best interests of the company, which translates to a better and safer investment.
There is actually a term for this female-focused investing practice, ‘gender lens investing’, defined as the practice of investing for financial return while also considering the benefits to women, both through improving economic opportunities and social well being for girls and women. It’s a type of socially and environmentally responsible investing, or impact investing, and gives the investors complete freedom in strategy. The goals of gender lens investing include “increased economic and educational opportunity for women and girls, stronger economies, better corporate management, and greater profit for companies and shareholders”. It sounds like a win to us!
The above by no means intends to diminish the success of businesses globally that have yet to take the right steps towards inclusivity but rather aims to shed light on the possibilities and benefits of having more equal representation in the workplace. It has been proven to increase success and is what we need to further improve societies worldwide, so why not take this new route? By investing in women and women-backed initiatives, you are propelling society in the right direction — closer towards equality and fairness.
So, the next time you’re looking to invest monetarily in something or support an initiative, don’t skip over details of the team and founders!
By : Amina Shindy