Women are leading the way in ESG investing

Posted 21 September 2022

Recent studies have shown that women are the force driving ESG investment across financial markets.

According to a Cerulli Associates survey, 52% of women would opt to invest in companies achieving positive social or environmental outcomes, compared to 44% of men who indicated the same preference.

Increasingly, values-based investing has become an area favoured by women, according to Cerulli, as women display interest in companies that pay workers a fair or living wage and lead on environmental practices, while shunning those whose products actively contribute to ill health or are thought to be a danger to societies, such as tobacco or weapons.

McKinsey suggests that by 2030, women in America are expected to control a significant amount of the $30trn in financial assets held by baby boomers today, meaning women will be key beneficiaries to this transfer of wealth.

Since 1960, there has also been a near four-fold increase in the number of women in primary breadwinner positions, and the number of HNW women has also grown at twice the rate of affluent male counterparts.

This transfer trend has the potential to move the needle on ESG, and the evidence to suggest it already has is there. As women move beyond prioritising financial decisions based on the interests of their children and dependents, they align investments with the interests of wider society.

Responsible investment has been front and centre of financial markets for the last five years, and Bloomberg now expects global ESG assets to surpass the $41trn mark by the end of this year.

ESG mutual funds and ETFs attracted $120bn in the first six months of 2022, despite an extremely volatile market environment, according to data from Morningstar. While figures from the same period last year dwarfed this one, it is a stark contrast to capital flows into broader market funds, which saw investors withdraw $139bn.

While financial experts and advisers continue to highlight that male clients are still more likely to prioritise financial performance and take on more risk than women, studies are now showing women are more willing to take on higher risk levels, and lower returns, from investments tied up in companies making a difference.

By 2030, half of the investment market will be in the hands of women. Therefore demand for ESG-sound products is set to accelerate.

While gender equality in the public forum will likely still have a long way to go in 2030, as women take charge of a greater portion of wealth, it is likely they will guide the debate towards causes that concern them, including healthcare, sustainability, and education.

Women are also still targeted as primary decision-makers for the purchase of household goods and products and, therefore, tend to lead on elevating sustainability goals through selecting cleaner products with lower carbon footprints, including recycled solutions, and reducing consumption altogether.

With more women set to enter the investment management space, we can expect that both innovation and supply will be driven by this demographic.