Women and the rise of ethical investing
21 Mar, 2022
Since the pandemic, there has been a big increase in the number of funds and portfolios labelled as ‘ESG’ (Environmental, Social and Corporate Governance) and ‘ethical’. Women have been driving this trend – in fact, our research shows that they are more likely to express an interest in ESG funds and ethical investing in general. But let's define those two key terms first.
What exactly is ‘ESG’?
ESG can be a tricky term to pin down - both for investors and fund managers - but it’s essentially a method for incorporating sustainability into your long-term financial returns.
What is ‘ethical’ investing?
This may sound similar to ESG, but there is a difference!
Ethical investing refers to putting your money into companies that align with your values and beliefs. Often, this will involve avoiding some companies, or limiting your investments’ exposure to various sectors. For example, you might choose to avoid tobacco companies or those involved in weapons manufacturing.
ESG, however, is based on environmental, social and sustainability criteria that will often be dictated by fund managers. Since there are no universal principles that govern ESG, this can make it difficult for investors to compare funds on a ‘like-for-like' basis. For example, one fund manager’s definition of ‘ESG’ may be very different to another’s!
By any definition, however, women are making ESG and ethical investing more popular.
In our Sustainable Investing Report last year, we revealed that women were more likely to express an interest in investing their money sustainably compared to men. And although they are less likely to invest overall, those who do invest are more optimistic about the potential returns they can get from sustainable investments compared to men.
About 7 in 10 women agreed that they could achieve better returns with sustainable funds, compared to just 6 out of 10 men.
45% of women who held savings or investment products said that they wanted their investment manager to focus on this area, compared to 34% of men.
47% of women we surveyed also said they wanted their investment manager to focus on developing and using sustainable materials, compared to 41% of men.
48% of women chose climate change as an area to focus on, compared to 42% of men.
How has the industry responded to the growing popularity of ethical and ESG investing?
The investing industry is adapting to the increased demand for ethical and ESG products. Here are a few recent examples:
Young millennials who manage their own accounts (DIY investors) are driving the demand for ESG funds, prompting big players like BlackRock to offer ESG-themed ETFs (Exchange-Traded Funds).
Australian ETF BetaShares screens for gender equality in its ESG Funds, screening out companies that don't have any women on their boards.
Although fewer than 1 in 7 fund managers are women, some firms have been more proactive than others in regard to improving diversity. About half of Goldman Sachs’ Asset Management's funds are now managed by women.
By early 2021, women occupied almost half of all jobs in the ESG sector, according to UK recruitment firm Acre Resources. That's a big step up when you consider that investing is a traditionally male-dominated sector.
So why does a significant gender imbalance persist in 2022?
If you read our recent article on the gender investment gap, you may remember that we mentioned that the gap had actually grown slightly in 2022. Just 40% of investors are women.
We discussed this issue in detail – and you can find out what our Boring Money CEO and Founder Holly Mackay has to say on this topic – but here are the two key findings from our research:
Women are less likely to invest than men
Women are more likely to say they are less-confident investors
The industry needs to work harder to get women more engaged and to help women understand the impact of their investments, particularly when it comes to ESG.
I want to invest more sustainably. Where can I start?
Check out our Best for Sustainable winners for 2022!
These providers offer easy access to ready-made bundles of investments, or have excellent content and filters to help you find decent sustainable investments and funds.
These winners provide easy-to-access, ready-made bundles of investments to help you find decent sustainable investments and funds.
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