Carole notes that companies are under pressure to be ‘good’ and nothing talks quite like market forces – but why are sustainable investments attracting women? Maybe investing for ‘good’ appeals to women because it finally gives them a reason to show some interest
Good. What kind of a word is that? If we were playing word association, I would put money on most people quipping ‘bad’ right back without much hesitation. If a word is best defined by its opposite, you have to question its credibility. Ask yourself: ‘Am I good with money?’. Better still, ask an investment professional: ‘Is that a good investment?’. What are you actually asking? What do you mean by ‘good’? Chances are, you’ll get a ‘yes’ if there is an alternative outcome that would have been worse. Good, it seems, is relative.
Good at investing or investing for good?
I gave this topic a thorough airing in Women are better than men at investing – fact? back in the spring and, while I was at it, touched on the notion of ‘good at investing’ in the sense of ‘investing for good’. Think about this: are you a ‘good’ investor if you’ve made more money than Croesus but achieved it by
- Risking house, home and the shirt off your back; and/or
- Blithely investing in companies that shamefully exploit the workers who made that shirt on your back?
One woman’s meat is another vegan’s poison
It’s definitely not ‘good’ to take more risk than you can handle – and that’s not me being judgy, it’s just plain common sense. But who is doing the judging when it comes to whether the companies that are available for investment are ‘good’ or ‘bad’? Is it down to the individual investor to painstakingly peer into the nooks and crannies of every business subsidiary, stamping their subjective judgment on it as they go? Is it down to the investment managers of funds to do this? Pension fund managers and trustees? Financial advisers who recommend the funds? Consumer websites that guide and educate investors? Who decides what is good and what is bad? After all, one woman’s meat is another vegan’s poison.
A confusing mish-mash
At the moment, there is a bit of ‘all of the above’ going on. And the result is a mish-mash of labels and descriptions for a number of investment products that are designed to appeal to investors who want to do ‘good’ with their money. It’s a bit confusing and there is much that needs to be done to bring both investors and advisers and everyone involved in selling or recommending investments up to speed with the various forms of ‘good’ that are on offer.
Pressure is mounting on companies to be ‘good’
But hello market forces! As it becomes increasingly clear to companies that they can fall out of favour with investors for being ‘bad’, so they are looking at their accountability. Where previously investors – individuals and professionals alike – would consider investing in a company based on its financials and whether shareholders were getting a decent return, they are now also analysing how ‘good’ the company is. The effect of this is that increasing numbers of companies are disclosing information about their carbon footprint, anti-slavery policies, plastic and waste management etc etc, thereby helping investors make their judgments. On top of that, big thinkers in the industry are pressing for companies to have to follow proper standards of reporting on these issues – just as they do with their financial reporting. This might be a way off but, in the meantime, pressure continues to mount from investors themselves for companies to be at least as good as the best there is – otherwise, they won’t invest.
Wary of pigeon-holing women
So where do women investors stand on all this? When I launched the mini-blog series on sustainable investing earlier this year (How long is this sustainable for?) I was – and remain – wary of pigeon-holing women as the champions of ‘good’ investing by dint of their gender alone. Where data shows a female bias, I have assumed this has to do with them being non-investors rather than ‘non-men’ (most women don’t currently hold an investment). My thinking is that their minds may be more open to the ‘new’ – and less anchored on the ‘traditional’ – purely because they’ve not been much exposed to investing in general.
So I was interested to see a quote by CEO of Boring Money, Holly Mackay, this week (ftadviser.com) that challenged my thinking:
“It is particularly interesting to see the growing appetite among advised female investors, who historically have been less engaged or interested than men”
Why would more women increase their sustainable investments?
According to the research that Boring Money has undertaken, more women than men (32% versus 26%) who have an adviser – and who are already investors – are looking to increase their exposure to sustainable investments. So, maybe I’m wrong. Maybe the interest is not just coming from the fresh pair of eyes of a non-investor. But the bit about being “less engaged or interested than men” still seems to me to be a nod in that direction. As ever, with my ‘how-can-we-make-investing-and-financial-planning-more-relatable-to-women’ hat on, I am really interested in why women – whether they already hold investments or not – are taking the lead here.
An industry that isn’t ‘talking to me’
Women I have spoken to in my workshops (and I really do hope to be able to get back to those soon) have talked of ‘switching off’ when it comes to matters of long-term finance like investing. Many are risk-averse because a lack of knowledge or understanding makes them cautious – or even suspicious. Others feel alienated by an industry that doesn’t seem to be ‘talking to me’ and one or two have admitted that their male partners do have a financial adviser but that they themselves don’t feel part of that relationship.
A struggle to engage
What is it about the sustainable investing world that seems to be turning this around, I wonder? Does the idea of doing/being ‘good’ appeal to us more than it does to men? Or is that there is something in the message that we can relate to and that makes sense to us? Consumers in general have been encouraged for so long to think of the investment world as being oh-so-very-complicated and not-just-a-little-bit-dull what with all its jargon and tiny print on the communications (stories of crazy-high salaries in the City also give credence to the idea that it must be staggeringly hard to be an investor) that many people – not just women – struggle to engage. Add to this the male-dominant culture that has until very recently extended through to the marketing (think determined-looking men climbing mountains) and you have an extra layer of alienation for women.
Hard to enthuse about leverage on a balance sheet
Whereas in the past investment decisions tended to be informed mostly by a company’s financial outlook, I wonder if the new social and environmental company policies being promoted are speaking more readily to us – even to those women who already hold investments. I, for one, would much rather read about an exciting new technology that makes reinforced solar panels out of recycled bottles than I would about the leverage on a balance sheet (I don’t assume to speak for all women here – but I know a few who would agree!). The leverage on a balance sheet is of course still really important in making those investment decisions but it can be jolly hard to drum up much enthusiasm about.
Finding something you can relate to
Of course, there’s no rule that says you have to come over all unnecessary at the mere mention of investing. If you’re already planning your finances for the future and either know what you’re doing or have a trusted professional advising you then nobody says you have to be engaged. But for those who are first embarking on an investing journey or maybe starting to take an active interest in what they already have, it is so much easier to tackle if you can find something in there that relates to you and your world.
A sustainability agenda as a ‘way in’
Anyone who has had offspring at home during Lockdown will know how hard it is to persuade a child to knuckle down to a piece of schoolwork that seems to them to have “no point”. Asked when they are ever going to be called upon in life to analyse the part Charles I played in his own execution, it can hard to pull off a convincing response – especially after your third Quarantini. We like to relate things back to ourselves and if a sustainability agenda is your ‘way in’ to taking an active and interested approach to your long-term finances then that, Readers, is something that we can unapologetically agree to call a ‘good’ thing.
31 July 2020
All opinions are those of Carole Haswell and do not constitute financial advice
carole@talkingfinances.co.uk
Talking Finances is a trading name of Talking Finances Ltd. Talking Finances Ltd is an appointed representative of Beaufort Financial Planning Limited, Kingsgate, 62 High Street, Redhill, Surrey, RH1 1SH, which is authorised and regulated by the Financial Conduct Authority, FCA Registration No. 583233
