Bridging the gap

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Responsible investment could see a US$1.87 trillion windfall if women invested more according to research commissioned by BNY Mellon Investment Management. But how can the investment industry help achieve this?

The global financial system could be as much as US$3.2 trillion richer if women invested at the same rate as men, with more than half that amount flowing into responsible investments, according to BNY Mellon Investment Management’s Pathway to Inclusive Investment study.

The research, conducted in 2021, interviewed with more than 8,000 women and men globally, and gained insight from 100 asset management firms. Among its conclusions, the study also found women were more inclined to do good with their money if they were to invest.

The study found on average women are more likely to make investments that have a positive social and environmental impact. What’s more, it revealed US$1.87 trillion of capital could flow into responsible investments, if the amount women invested were equal to that of men.

Showing a preference for investments that aligned with their personal values, 53% of those surveyed said they would invest (or invest more) if a fund had a clear goal or purpose for good. Further, two-thirds (66%) of women who currently invest try to do so in companies that support their personal values.

The age of individuals tends to affect how they view responsible investment, with the trend being more pronounced among younger women. The study found older men (aged over 50) – who make up the bulk of today’s investment industry – being less focused on their investments having a positive impact and aligning with their values.

While 69% of young women (aged 18 to 30) currently select investments based on their impact, this is true of only a third (33%) of older men. In addition, 71% of women under 30 prefer to invest in companies that support their personal values, compared with 54% of men over 50.

Younger women strive to combine purpose with profit
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Source: The Pathway to Inclusive Investment. 26 January 2022.

But while the report identified the huge potential benefit to responsible investment if more women were to invest, it also found three key barriers preventing them from doing so: a lack of confidence; a perception they need a higher level of disposable income; and a concern investing is too risky.

Lack of confidence

According to the research, globally, just 28% of women feel confident about investing, falling behind other areas like savings, property and pensions.

Japan is where women feel least confident investing some of their money (15%), followed by Italy (18%) and Canada (24%). By contrast, women in India have the highest level of confidence to invest (47%), followed by Brazil (46%) and the US (41%).

Women’s investment confidence map
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Source: The Pathway to Inclusive Investment. 26 January 2022.

The study notes these figures could be explained by demographic trends because India and Brazil have relatively young populations and, typically, younger women are more engaged with investing. For example, 60% of women aged 18 to 30 are open to investing or have invested in the past, compared with 45% of women over 50, the study found.

Education also plays a part. Half of the Indian women in the study, for example, said their parents educated them on investing, compared with an average of 32% of women across all markets and just 12% in Japan.

Another barrier identified in the study is the fact women don’t think they have enough money to invest. On average, women consider US$4,092 of disposable income each month as the minimum required – in the US this assumption jumps to more than US$6,000 a month.

The average amount of monthly disposable income women think they need to start investing
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Source: The Pathway to Inclusive Investment. 26 January 2022.

The study notes this is “clearly unrealistic”, given the fact more than a quarter of women (27%) describe their financial health as poor or very poor. It says the investment industry should make it a key priority to quash this misconception by clearly explaining that only a small amount of money is needed to start investing.

Looking inwards

To empower women to invest, the asset management industry may need to look inwards. The report notes 86% of the global asset management firms participating in the study admit their default customer is male. Further, three-quarters of asset managers (73%) state their investment products are primarily aimed at men.

The traditional stereotype of the person who is interested in investing – the wealthy older man – is outdated and needs to be dismissed,” says the study.

Role models

Another part of the problem singled out by the research is a general underrepresentation of women across the asset management industry. Half of the asset managers participating in the study said just 10% or fewer of their organisation’s fund managers and investment analysts were women.

The study says to address this, women and girls considering a career in asset management need to see more examples of females working in various roles in the industry. Indeed, nearly three-quarters (73%) of asset managers believe the investment industry would be able to attract more women to invest if the industry had more female fund managers.

A 2021 survey by the Knight Foundation found, across asset classes, minority and women-owned asset management firms are underrepresented relative to other firms. It revealed just 3.2% of funds in the US mutual funds industry are owned by women. Overall, the percentage of US-based assets under management by women is just 0.7%1.

Percent of US-based assets under management managed by minorities and women
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Source: Knight Diversity of Asset Managers Research Series: Industry 2021. Knight Foundation and Bella Private Markets. 7 December 2021.

1 Knight Diversity of Asset Managers Research Series: Industry 2021, Knight Foundation and Bella Private Markets. 7 December 2021

Important information 

https://www.bnymellonim.com/outlook/global-disclosure/

GE1050567 Exp: 21 October 2022

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