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Women prefer values-based investing. Here’s how that impacts their wealth


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Women prefer investing in a way that helps the environment and does social good, some studies have found. Such values-based investing could help raise women’s general enthusiasm for investing and boost long-term wealth, in keeping with financial experts.  

About 52% of ladies would somewhat spend money on corporations which have a positive social or environmental impact, in keeping with a recent poll by Cerulli Associates. That is true for 44% of men.

While not an unlimited gulf, an eight-percentage-point difference is “meaningful,” in keeping with Scott Smith, who heads Cerulli’s research on investor behavior. And the disparity largely stays when comparing ladies and men across different age and wealth bands, he added.

The trend exists beyond U.S. borders, too. About 43% of ladies (versus 34% of men) think an organization’s stance on social or environmental issues is “very necessary” when deciding whether to speculate, in keeping with S&P Global, which polled investors in 11 countries, including the U.S.

“Almost every latest client I get wants to speculate with their values in mind,” said Cathy Curtis, an authorized financial planner based in Oakland, California, whose clients are primarily women.

“And in the event that they didn’t before, they’re asking me to do it now,” added Curtis, founder and CEO of Curtis Financial Planning and a member of CNBC’s Advisor Council.

ESG funds

Investment funds that use so-called environmental, social and governance principles have grown in popularity in recent times. These investments (also often called “sustainable” funds) might spend money on firms focused on renewable energy or that promote racial and gender diversity, for instance.

Investors pumped a record $70 billion into ESG funds last yr — 14 times the quantity just three years earlier, according to Jon Hale, director of sustainability research for the Americas at Sustainalytics, which is owned by Morningstar.

There have been thrice as many mutual and exchange-traded ESG funds in 2021 as there have been five years ago, holding greater than $350 billion total, he said.

Women are most interested by investing in corporations that: pay employees a good or living wage; are leaders in environmentally responsible practices; and that do not sell “objectionable” products like tobacco and firearms, respectively, in keeping with Cerulli. (Men have the identical top three ESG preferences.)

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“It’s more of an emotional thing with women,” said Curtis of their ESG bent. “It’s absolutely because they don’t need to be invested in things they see as either harming the environment [or] harming women’s causes.

“They really care about those things.”

Meanwhile, women tend to speculate less often than men overall: About 48% currently have money within the stock market versus 66% of men, for instance, in keeping with a recent NerdWallet survey. That is despite evidence that female investors are likely to be higher long-term investors than their male counterparts.

The standard female-headed household also has less wealth: about 55 cents for each dollar of wealth held by the standard male-led household, according to the Federal Reserve Bank of St. Louis. Amongst household retirement accounts, the standard woman has saved $28,000, lower than half the $69,000 reported by men, according to the Transamerica Center for Retirement Research.

Nevertheless, ESG enthusiasm amongst women has the potential to make them more passionate about investing overall, which could prove helpful for long-term wealth creation, experts said.

“This definitely gets them more involved, because they care about this [ESG] discussion,” Curtis said. “They do not care about how much large-cap U.S. and the way much international and emerging markets they’ve [in their portfolios].”

Investment returns

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In truth, women’s values are likely to override considerations relative to investment returns, Curtis added.

Amongst all individual investors, 70% consider sustainable investing implies a financial tradeoff — a rise from 64% in 2019, according to the Morgan Stanley Institute for Sustainable Investing. The share skews higher (83%) amongst millennials relative to older age groups.

Nevertheless, data doesn’t appear to support this “myth,” in keeping with Morgan Stanley.

About 74% of sustainable funds ranked in the highest half of their respective investment categories prior to now five years, in keeping with Morningstar. In other words, ESG fund investors tended to not sacrifice performance for his or her values. (In fact, ESG funds don’t necessarily all the time outperform. Many have had a tough 2022, for instance, largely on account of technology-sector exposure, experts said.)

“For investors and advisors who’ve been hesitant to speculate in sustainable funds because they’re under the impression that such funds as a bunch chronically underperform, [2021] is further evidence that this is not true — as are the past five years,” Hale said.

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