By Madeleine Huynh, Serene Khalaf and Alexandra Brown
The latest ASX Investor Study noted that women comprised 45% of total new investors over the 12-month period to March 2021, highlighting a positive uptick of female shareholders in the equity market, and progress toward enhancing women’s economic empowerment.
While the gender investing gap is narrowing with the increased participation of female retail investors, differences between women and men’s investing choices, grounded in a history of economic inequality by gender, continue to result in a lower number of female investors, compared to male investors. According to the study, among current ASX investors, approximately 58% are men, compared to just 42% women.
With continued uplift in the number of female shareholders, not only can the gender gap in investing be alleviated, but more crucially, a future of gender economic equality can be shaped.
To understand why a lack of female shareholders exists, we must consider why women are less likely to invest in equity markets. The gender pay gap in Australia currently stands at approximately 79c for every dollar earned by a man. This means it would take an additional two months of work for a woman to earn the same amount her male counterpart would earn in a year. Since women do not have an additional two months per year to catch up in wages, a significantly higher proportion of their income must be allocated to their survival needs, with less surplus to grow their wealth and invest in equities than men.
Despite tangible progress toward gender equity, the slow rate of positive change suggests it will take several decades before gender parity is achieved. The Global Gender Gap Report 2021 produced by The World Economic Forum estimates that it will take a further 26.7 years before the gender pay gap is non-existent. Although there has been a notable increase in the number of women working in skilled professions, women experience significantly slower wage increases and are underrepresented in executive leadership team and board positions. The Chief Executive Women (CEW) Census Report 2021 highlights that across the ASX300, women still hold only 26% of executive leadership roles, well below the gender balance level of 40%. Of the pipeline to CEO roles, 181 companies have no women in line roles on their leadership teams.
An increase in the number of women who hold key decision-making positions on ASX-listed corporates would encourage the participation of female retail investors, due to their enhanced ability to align their values of gender equity with their investments. The IPO of online retailer Adore Beauty (ASX:ABY), the biggest female-led float to join the ASX, saw a wave of first-time female investors enter equity share markets by investing in a company whose values they aligned with, led by a majority female board and management team.
Co-founder Kate Morris notes that “Gender diversity is still an active priority for us”, recognising the strategic imperative of gender diversity.
Not only crucial in increasing the participation of female shareholders and reducing gender economic inequality, according to a McKinsey and Company report, corporates with diverse leadership teams are more likely to outperform their peers. At the same time, penalties on financial performance for companies which are lagging on gender diversity are steepening, typifying the case for gender lens investing. In addition to financial outperformance, companies with gender diverse teams have been seen to benefit from fewer instances of fraud, stronger risk mitigation processes and scoring higher on environmental, social, and governance (ESG) performance.
With increased retail investor interest in ESG thematics and socially responsible investing, accelerated by the COVID-19 pandemic, more than ever, investors are considering the contribution of their investments toward the United Nations Sustainable Development Goals (SDGs).
SDG 5, Gender Equality, seeks to eliminate disadvantages endured by women in all facets of life, including in social, physical, mental, and political landscapes.
A United Nations Global Compact report estimates that advancing women’s rights can add $12 trillion to global growth. While progress toward gender economic equality begins with equal pay, it also includes equal involvement of women and male investors — equal opportunity for wealth generation.
By contributing to SDG 5 by addressing gender inequality, we are inherently supporting other SDGs given the flow-on effect of female empowerment to all facets of life, namely poverty, education, sustainability and economic growth.
In alignment with the Women’s Empowerment Principles (WEPs), female autonomy to make financial and investment decisions is a catalyst for the entire female community to achieve financial independence, positively contributing to the economy. Such action for women’s financial empowerment best occurs collectively, rather than individually. Female retail investors can achieve this through actively working in strong familial networks and groups. Such networks have already made groundbreaking progress toward the WEPs, evident in organisations such as the Hen House Co-op. As a strong voice on behalf of all retail shareholders, the Australian Shareholders’ Association (ASA) is perfectly positioned to support and coordinate new networks to lead the movement to close the gender investing gap.
Ultimately, by initially targeting the barriers to women’s financial empowerment such as the gender pay gap, workplace opportunities, and diversity of senior management, the female community’s access to, and involvement in, equity markets will positively increase. Through applying a gender lens to investing, the broader community beyond the investing landscape will benefit from greater diversity and inclusion, and long-term economic growth regardless of their gender.
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