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Women prefer value-based investing. Here’s How It Affects Their Wealth

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Some studies have shown that women prefer to invest in ways that benefit the environment and benefit society. According to financial experts, such value-based investing can increase women’s overall enthusiasm for investing and increase their well-being in the long run.

According to a recent survey by Cerulli Associates, about 52% of women would rather invest in companies that have a positive impact on society or the environment. This is true for 44% of men.

According to Scott Smith, who leads the Cerulli study on investor behavior, the eight percentage point difference, while not a huge gap, is “significant.” He added that this discrepancy largely persists when comparing women and men of different ages and wealth levels.

The trend also exists outside the US. According to S&P Global, about 43% of women (compared to 34% of men) believe that a company’s position on social or environmental issues is “very important” when making an investment decision. questioned investors in 11 countries, including the USA

“Almost every new client I get wants to invest with their values,” says Cathy Curtis, a certified financial planner in Oakland, California, whose clients are mostly women.

“And if they haven’t done it before, they’re asking me to do it now,” added Curtis, founder and CEO of Curtis Financial Planning and a member of the CNBC Board of Advisors.

ESG funds

Investment funds using so-called environmental, social and governance principles have become more popular in recent years. These investments (also known as “sustainable” funds) can be invested in, for example, firms focused on renewable energy or promoting racial and gender diversity.

Investors poured a record $70 billion into ESG funds last year, 14 times more than just three years earlier. according John Hale, director of sustainability research for the Americas, Sustainalytics, a Morningstar company.

In 2021, there were three times as many mutual and exchange-traded ESG funds as there were five years ago, he said, and their total amount exceeded $350 billion.

Women are most interested in investing in companies that: pay workers a fair wage or a living wage; are leaders in environmentally responsible practices; and who don’t sell “unwanted” goods such as tobacco and firearms, respectively, according to Cerulli. (Men have the same three main ESG preferences.)

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“Women are more emotional,” Curtis said of their tendency to ESG. “It’s absolutely because they don’t want to invest in things that they think are bad for the environment. [or] harming women.

“They really care about these things.”

Meanwhile, women tend to invest less frequently than men overall: about 48% currently have money in the stock market compared to 66% of men, for example, according to a recent NerdWallet. interview. This is despite evidence that female investors are generally better suited for long-term investing than their male counterparts.

The typical female-headed household also has less money: about 55 cents for every dollar of wealth of the typical male-headed household. according to the Federal Reserve Bank of St. Louis. Among household retirement accounts, the typical woman has accumulated $28,000, less than half of the $69,000 reported by men. according at the Trans-American Center for Retirement Research.

However, women’s enthusiasm for ESG may make them more interested in investing in general, which could prove beneficial for building wealth in the long run, experts say.

“It definitely gets them more involved because they care about it. [ESG] discussion,” Curtis said. “They don’t care how many large US companies and how many international and emerging markets they [in their portfolios].”

Return on investment

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In fact, women’s values ​​tend to take precedence over return on investment considerations, Curtis added.

Among all individual investors, 70% believe that sustainable investing involves financial compromise, up from 64% in 2019. according at the Morgan Stanley Institute for Sustainable Investment. The share is skewed higher (83%) among millennials compared to older age groups.

However, the data does not seem to support this “myth”, according to Morgan Stanley.

Over the past five years, about 74% of sound funds have fallen into the top half of their investment categories over the past five years, according to Morningstar. In other words, ESG fund investors have generally not sacrificed performance for their values. (Of course, ESG funds don’t necessarily always perform better. hard 2022for example, largely due to the impact of the technology sector, experts say.)

“For investors and advisors who have hesitated to invest in sound funds because they were under the impression that such funds as a group were chronically underperforming, [2021] is further evidence that this is not true – as it has been for the past five years,” Hale said.


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