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Can ethical investing play a part in narrowing the gender investment gap?

2 years ago

Women invest less than men; that’s a fact, and a major new study commissioned by AJ Bell suggests the average levels of savings and investments held by women is less than half the amount held by their male counterparts.

*AJ Bell commissioned an independent survey of 5,000 people from Opinium, conducted between 26 and 30 August 2021, creating the AJ Bell Money Matters report.

To put a number on it, if you extrapolate the average difference in savings and investments between the men and women questioned and factor in UK population, then the gender investment gap comes in at a staggering £1.65 trillion.

“It actually did become an emotional decision and it still is. Now I will only invest in a company that I believe will do good for the planet or that at least has a green initiative.”

There are many reasons for the gap – from pay differences to maternity leave and the fact that women generally think differently to men – but there could be one change that might actually start to make a difference.

Chatting to two first-time investors during research for our new Money Matters campaign, it emerged that, while both women had different reasons for starting their investment journeys, and both had sought advice, they had really focused in on the ability to have their money work for positive change. 31-year-old Dee told me, “When I first started investing… I was just happy to give it a go to see if it was for me but as I got more experienced, it very much became a conscious decision of what company I invested in and any organisations that I would like to support. I stated reading an organisation’s green polices… and it actually did become an emotional decision and it still is. Now I will only invest in a company that I believe will do good for the planet or that at least has a green initiative.”

Similarly, Georgia, who is 28 said, “I think the first time I looked at the favourite funds, I was getting a sense of how it worked. I invested a small amount, still quite a small amount relatively I’m sure, but I got to grips with what all the different words meant. Now I’ve been able to use that information to make more ethical decisions about where I put money and decide the best options for me that fit my values as well.”

“That’s not to say women are the only ones putting their money where their ethics are – far from it. Two thirds of fund inflows in September went into funds that invest specifically according to ESG principles.”

Proportion of fund inflows made up by responsible funds

Source: The Investment Association

Responsible investing on the rise amongst men and women

That’s not to say women are the only ones putting their money where their ethics are – far from it. Two thirds of fund inflows in September went into funds that invest specifically according to ESG principles and, over the last year, most months saw around £1bn of funds being invested in responsible funds. But as Dee says, at least amongst her friends, investing means different things to different people: “I’ve got a small circle of friends that invest. Some are female, some are male – most of my female friends only invest in companies they believe in; most of my male friends, in fact all of them, invest in the company they think will get them the most money or most reward in return. They very rarely look at the company as an overall whole.”

Ethics isn’t a barrier to reward, and when you look at AJ Bell’s most traded lists for this year and compare it with five years ago, you can see change is coming but it’s coming slowly.

Top 15 trades 2021 vs 2016

Source: AJ Bell

Investment appetites are changing

Several high-carbon emitters have slipped out of the top 10, but BP remains a popular choice and its ESG credentials come with great big caveats. Pre-packaged funds which help advisers tell investors exactly what’s ‘in the tin’ have become more popular, and making sure that both advisers and investors have easy access to that kind of clear information might just be the most significant thing to emerge from COP26, the Glasgow-based climate change summit of world leaders.

“It’s often said knowledge is power but there have been many complaints that ESG reporting so far has lacked clarity and lacked a mechanism for judging whether all those net-zero promises are more than just lip service.”

From April next year, over 1,000 of the largest UK-registered businesses will be required to disclose mandated climate-related financial information – and investment products will also come under the spotlight, with the FCA due to consult on criteria for ESG labels.

It’s often said knowledge is power but there have been many complaints that ESG reporting so far has lacked clarity and lacked a mechanism for judging whether all those net-zero promises are more than just lip service.

In this case, the knowledge might make a double impact: helping make the UK and the world a cleaner, greener place and giving more women the impetus and the confidence to seek out investing for the first time. Helping the planet and helping themselves.

For more information about AJ Bell’s Money Matters campaign, please visit the Youinvest website and listen in to our new Money Matters podcast.

Past performance is not a guide to future performance and some investments need to be held for the long term.

The value of investments and the income from them can go down as well as up and you may not get back your original investment.

Author
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Danni Hewson
Name

Danni Hewson

Job Title
Head of Financial Analysis

Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

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