What investors get wrong about backing women-led businesses

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Gender balance can be an important signal for investors, but they may be looking for it in the wrong place.
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Gender balance can be an important signal for investors, but they may be looking for it in the wrong place. A study by Calvert Impact Capital found that diversity in a company’s senior staff had a bigger impact than the number of its female directors or the gender of its founder.

“We saw a particularly strong relationship to women in leadership,” said Leigh Moran, Calvert’s director of strategy. “We think there’s a common misconception that incorporating gender is solely limited to investing in women-led businesses.”

In a study of its $23-billion global lending portfolio, Calvert determined that companies with the most women in senior leadership positions — the people who report directly to the chief executive — delivered double the average annual return on equity over the last 11 years compared with the companies with the fewest.

Calvert saw better performance when women made up 33% to 75% of the leadership, she said. Firms with the fewest women in senior management — 20% or less — returned on average 4.4.% per year. Those with the most — more than 57% women — returned 8.6%.


The number of female directors seemed to matter less. Firms with the fewest women in board seats posted average annual returns 1.7 percentage points fewer than those with the most.

As an example, Moran pointed to SunFunder Inc., a Kenya-based solar energy finance firm in the portfolio. With a male founder and CEO, it doesn’t immediately stand out as a gender play. A closer look reveals that 50% of the management team and 48% of the staff are female, as is 40% of the board.

Calvert, Moran said, has worked with the company “to build an awareness of the importance of gender into their business early on so it grows with them and the sector they are helping to shape.”

SunFunder also recognizes the effect that solar home systems can have on women in particular, said Alana Heath, a debt funds associate based in London for SunFunder. “We don’t have an explicit gender focus, and yet it’s very core to our business.”


Chasan writes for Bloomberg.

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