Demand for “gender-lens investing” strategies has boomed as investors seek to put capital to work in companies that address gender equality in the workplace.

In the public markets alone, US$2.4 billion is invested in a variety of gender-lens strategies, like Pax Ellevate Global Women’s Leadership Fund (PXWEX) and SPDR State Street Global Advisors’  Gender Diversity Index ETF (SHE), up from US$100 million only four years ago, according to Veris Wealth Partners.

But, what does it mean to invest with a gender lens? Approaches vary, from strictly investing in companies with women in positions of influence, to investing in companies that provide services to benefit women in society. Public funds often offer a more narrow approach than private capital funds.

Research released last month from the Wharton Social Impact Initiative is likely to add to this debate by creating what the authors view as concrete standards that companies need to have to be considered a good employer for women. “If you don’t have standards, then you don’t really know what you’re aiming for,” says Katherine Klein, an author of the report, and the vice dean of the initiative.

Four for Women: A Framework for Evaluating Companies’ Impact on the Women They Employ lays out criteria the authors gleaned by reviewing and synthesizing “hundreds” of rigorous, peer-reviewed academic studies of an array of companies in diverse industries and locations.

The report concludes that for a company to be a good employer for women it:

  • employs a large percentage of women at every level and in every unit of the company
  • pays its employees at least enough to avoid poverty, pays equally for equal work, and has no gender pay gap;
  • supports and protects the health of the women it employs (and the men, too)
  • provides satisfying working conditions for women (and for men, too).

For an investor to learn this kind of information from a company can be more challenging than, for example, counting the number of women in C-suite roles, but knowing the number of women who work throughout various pay levels at a company, for example, is arguably a more useful measure of a company’s approach to gender.

The Wharton research is “the evolution of going deeper,” says Jackie VanderBrug, head of sustainable and impact investment strategy for Merrill Lynch and U.S. Trust. “To me this is a big, ‘and’,” VanderBrug says, meaning, it adds to the discussion of how best to invest with a gender lens. As the report points out, she says, “We’re all for diversity on the board and in the C-suite, and we can’t stop there.”

In the 2016 book, Gender Lens Investing, Uncovering Opportunities for Growth, Returns, and Impact, VanderBrug and her colleague Joseph Quinlan looked at the education of women, the employment of women, and women’s entrepreneurship as thematic drivers that are part of the transformation of the global economy. “That makes gender lens investing not something which is a fad, but which is grounded in economic trends,” she says.

What the Wharton report offers are more specific questions to ask depending on the goal an individual investor or investment manager has for focusing on gender, since in most cases, data on pay equity, for example, doesn’t need to be reported.

Although, in some cases, it does. Since 2017, the U.K. has required companies with 250 or more employees to report this kind of information publicly. “It’s a good starting place, right?” Klein says.

The U.K. legislation also requires companies to report on gender pay gaps, the difference between the average compensation for women and the average compensation for men. Of some 10,000 companies in the U.K. that reported this information in 2018, 78% had a gender pay gap that favored men, the report says. For U.S. companies, “I’d start by saying, measure and report the percentage of men and women in every single quartile of the company’s pay (scale),” Klein says.

Read more at Barron’s