Men no longer rule the investment world — women are investing more of their wealth in sustainable investment themes than men. The rise of female affluence and influence on investment decisions is one of the most important themes to emerge in wealth management. Although women only control one-third of the world's wealth, they are growing their wealth at a faster rate than the overall wealth market.
As women align investment goals and values, the rise in women's wealth is changing the world. This article describes how.
Social Impact Investing
Rich women are using their rising wealth to make a positive impact. Their sustainability agenda is motivating change in how we see fund management. Fund managers are adopting sustainability screens. The world's largest fund companies are switching from negative screening—for tobacco and alcohol, for example—to ESG risk assessments.
Green Consumer and Health Trends
On the retail end women, who drive 70-80 percent of purchase decisions, are shopping green. As many women are responsible for the well-being of their families, their portfolios are also more heavily weighted in healthcare and biotechnology stocks. Even though women make up less than half of the STEM workforce, they have a larger and growing influence on investment flows into biotechnology and technology.
Sustainable investing complements the more conservative investment approach of women. Female fund managers show a significantly higher preference to manage passive funds tracking an index than active funds. But without sacrificing returns.
How does the difference in investment themes between the sexes affect performance? In the first quarter of 2020, 24 of 26 Morningstar sustainable index funds outperformed the broader market. This performance makes sense since sustainable companies are known to have superior operating, and thus investment performance.
The higher returns are driving record inflows into ESG funds. As demand grows for sustainable assets, dozens of new ESG funds and ETFs have been launched over the last year. These ESG funds are making it easier for wealth managers to add sustainable value to investor portfolios in financial planning and retirement planning. Wealth management services are seeing a growing demand to screen investment portfolios for sustainable investing criteria.
Women's wealth will continue to change the world. As young, high-net-worth female investors bring even more wealth into the sustainability sector, BCG expects the shift to sustainable investing to accelerate. These environmentally and socially conscience millennials will inherit most of the world's wealth over the next few generations.Share
22 May 2020
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