We often hear of the gender gap in politics, with women identifying more as Democrats. On public policy issues, women are more likely than men to favor an activist role for government in guaranteeing health care and basic social services while also being more supportive of gun control, same-sex marriage and legalized abortion.
Not surprisingly, these attitudinal differences between the sexes play out when it comes to money and investing as well. Women are more inclined than men to want their investments aligned with certain social and environmental values.
A recent U.S. Trust survey of high-net-worth investors asked how important social, political or environmental impacts were in evaluating investments. Such impacts were considered “somewhat” or “extremely” important by 65% of women but only 42% of men. Another survey reported that 53% of affluent women are interested in “environmentally responsible” investments and 47% are interested in “socially responsible” investments, compared in each case to only 33% of men.
Not surprisingly, this gender divide appears to play out among investment advisors as well. Female advisors say they are more interested than their male counterparts in using sustainable investing funds or strategies -- those that integrate environmental, social and governance factors into the investment process -- by a margin of 59% to 34%.
Something’s happening here. Women, it seems, are more inclined to want their investments aligned with their values while men are more likely to compartmentalize -- investments in one compartment, moral and political values in another. Whereas men tend to view money as ethically neutral, women generally have stronger feelings about the social and environmental impacts of money.
They may be on to something: Studies have shown that companies with positive environmental, social and governance attributes are often better financial performers as well.
Moreover, this gender gap in investment attitudes is taking place at an historic juncture: Women are becoming a major economic force worldwide. Forty five percent of American millionaires are women and by 2030 it is projected that roughly two-thirds of the nation's wealth will be in women’s hands.
If financial brokers and advisors are going to serve this fast-growing market, they had better be attuned to the gender gap in investing. Financial advisors who have been catering to a husband for years may not understand the differing needs and attitudes of the wife. Rather than simply chasing the highest returns, women may actually prefer to invest in a way that is consistent with their values and integrated with the rest of their lives.
Sustainable investing -- integrating ESG factors into the investment process -- is a rapidly growing part of the investment landscape. It accounts for about $3.3 trillion in assets under professional management in the U.S., or approximately 11% of investment dollars. A lot of people -- not just women -- want their investments to have a positive impact on the world their children will inherit and are therefore opting to align their investments more closely with their values.
Women are leading the way. This is an historic opportunity for the financial services industry -- as well as an obligation. If financial brokers and advisors are going to serve this growing market, then they will need to consider offering socially and environmentally sustainable investment options as a core component of their practice. It’s as simple as that. Their clients -- who increasingly will be women -- are going to insist upon it.
Joseph F. Keefe is president and CEO of Pax World Management, investment adviser to Pax World Funds.