Women prefer value based investments. Here’s What It Could Mean for Their Wealth

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Women prefer to invest in ways that help the environment and promote social well-being, some studies have found. According to financial experts, such value-based investments can help boost women’s general enthusiasm for investing and promote long-term wealth.

According to a recent survey by Cerulli Associates, about 52% of women would prefer to invest in companies with a positive social or environmental impact. This is true for 44% of men.

According to Scott Smith, who led Cerulli’s research on investor behavior, the eight percentage-point difference is “meaningful,” if not a huge gap. This disparity persists to a large extent when comparing women and men across different ages and asset groups, he said.

This trend also exists beyond US borders. According to S&P Global, about 43% of women (versus 34% of men) think a company’s stance on social or environmental issues is “very important.” surveyed Investors in 11 countries including America

“Nearly every new client I meet is looking to invest in their values,” said Cathy Curtis, a certified financial planner based in Oakland, California, whose clients are primarily women.

“And if they didn’t before, they’re asking me to do it now,” said Curtis, founder and CEO of Curtis Financial Planning and a member of CNBC. Advisory Council,

ESG Fund

Investment funds that use so-called environmental, social and governance principles have grown in popularity in recent years. These investments (also known as “sustainable” funds) can invest in firms focused on renewable energy or that promote racial and gender diversity, for example.

Investors poured a record $70 billion into ESG funds last year – 14 times the amount just three years ago, according To John Hale, director of sustainability research for America at Morningstar-owned Sustainlytics.

He said there were three times more mutual and exchange-traded ESG funds in 2021 than there were five years ago, totaling more than $350 billion.

Women are most interested in investing in companies that: Pay workers a fair or living wage; are leaders in environmentally responsible practices; And he doesn’t sell “objectionable” products like tobacco and firearms respectively, according to Cerulli. (The men’s top three ESG priorities remain the same.)

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“It’s more of an emotional thing with women,” Curtis said of his ESG Libra. “It’s absolutely because they don’t want to invest in things they see harming the environment. [or] Harming the cause of women.

“They really care about those things.”

Meanwhile, women invest less often than men overall: About 48% currently have money in the stock market, while 66% of men do, for example, according to a recent NerdWallet. Survey, This is despite evidence that women investors are better long term investors compared to their male counterparts.

The typical female-headed household also has less assets: the typical male-headed household has about 55 cents for every dollar of wealth, according to the Federal Reserve Bank of St. Louis. In household retirement accounts, the typical woman saved $28,000, less than half of the $69,000 men reported, according For the Transamerica Center for Retirement Research.

However, ESG enthusiasm among women has the potential to make them more enthusiastic about the overall investment, which could prove beneficial for long-term wealth creation, said experts.

“It definitely gets them more involved, because they care about [ESG] discussion,” Curtis said. “They don’t care about how large-cap America is and how many international and emerging markets they have. [in their portfolios],

investment return

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In fact, women’s values ​​tend to override considerations relative to investment returns, Curtis said.

Of all individual investors, 70% believe sustainable investing means a financial trade-off – a 64% increase in 2019, according For the Morgan Stanley Institute for Sustainable Investment. The share is higher (83%) among millennials relative to older age groups.

However, according to Morgan Stanley, the data does not support this “myth”.

According to Morningstar, about 74% of permanent funds have been in the top half of their respective investment categories over the past five years. In other words, ESG fund investors don’t sacrifice performance for their values. (Of course, ESG funds don’t necessarily always outperform. Many people have a tough 2022For example, largely because of technology-sector exposure, experts said.)

“For investors and advisors who are hesitant to invest in permanent funds because they are under the impression that such funds as a group underperform chronically, [2021] There is further evidence that this is not true — as it has been in the past five years,” Hale said.