In my first post, I shared my story about starting an investment company, from scratch, and I described my concept of Integrated Investing, an impactful approach to investing which starts with integrating information from analysis, emotion, intuition, and body into our investment decisions. Integrated Investing is for both men and women, but women have stepped forward as early adopters, so I’m often asked about gender and investing.

Beginning my exploration, it quickly became clear that there was little hard data on gender and impact investing. As a result, the following analysis is not comprehensive, but rather a broad and illustrative overview of the intersection of gender and investing. In this post, I first examine the data made available through the ImpactAssets 50 database, then compare it to findings from a review of prominent venture capital funds in the US, and finally suggest a few possible explanations as to why women investors are so scarce.

ImpactAssets 50

The ImpactAssets 50 is the first publicly available database of experienced private debt and equity impact investment fund managers. This annually updated list is made up of a mix of impact venture firms, microfinance institutions, community development finance institutions, investment banks, and not-for-profits and included organizations from around the world.

A review of the ImpactAssets 50 list showed that the proportion of women in leadership teams of impact investing organizations was 34%, on a weighted average basis. For example, if one team had 3 women on their team out of 10 people, a second team had 2 women out of 5 people, and a third team had 3 out of 8, the weighted average is 8 out of 23 or 34.8%. The weighted average proportion of women on leadership teams appears to be higher than in conventional venture firms, as noted below, and the representation of women on leadership and senior executive teams is diverse, ranging from 0% to 100%. Though the ImpactAssets 50 list is not comprehensive of all debt and equity impact investment organization, it hints at low representation of women in investment leadership teams (compared to the proportion that women make up of the global population). However, it may also be indicative that there are opportunities for women in investing in the impact space or that impact investing and its variations are more welcoming or attractive to women compared to more traditional investing firms.

Women in prominent venture capital firms 

In 2012, Whitney Hess, an independent user experience consultant, reviewed prominent US venture capital funds, recording the number of women on their leadership teams. She noted that venture firms tended to have 0 to 2 women in leadership and management positions. Kleiner Perkins stood out with almost 25% of their leadership team represented by women. Of the handful of women-led, women-focused venture firms, the majority of firms demonstrated much higher representation by women. Whitney identified two venture firms that were not specifically women-focused and more than half of the leadership were women. On a weighted average basis, the proportion of women in leadership teams of prominent US ventures capital firms was 15%. This is 19% lower than the comparable datapoint for the ImpactAssets 50.

Reactions from the crowd 

Most people react to these kinds of observations and say that it’s not that bad. I don’t know what their benchmark is, but perhaps they are thinking at 15% is better than none.

But it is that bad. Women make up 50% of the world’s population, yet the percentage of women in leadership in VCs shows women are still in a token position when it comes to finance and investment decision-making roles. The ImpactAssets 50 datapoint alludes to the representation being better in impact investing, but it is still highlights an inequity.

So where are the women investors?

Responses to this question seem to follow a few similar themes. Joanne Wilson, a prominent, New-York based angel investor, suggests that personally, she does not want to be responsible for other people’s money. Some also suggest that women are more risk-averse than men. Others postulate that men perform better in science, technology, engineering, and math (STEM), areas of study that are perceived to be requisite for entrepreneurial venture success, leading to the capacity to invest.

Let’s put those myths to bed.

First of all: Perhaps there are simply fewer women who want to start and lead venture funds, but even if this were to be the case, it would not preclude these women from investing their own capital as angel investors.

Next: Women take risks. We start businesses, we innovate and experiment, we move around the world, we make decisions affecting ourselves, our families and our careers and we take action in the face of uncertainty. People take risks—just not always in the same way, nor are the resultant decisions always the same.

Finally: I frequently meet women with backgrounds in Physics, Biochemistry, Computer Science, Engineering, and Mathematics (like myself). I believe women excel in STEM fields. [Editor’s note: Data has suggested that the gender gap that we have witnessed in STEM careers is not due to any sort of aptitude imbalance, but as a result of cultural stereotypes and gender barriers.]

Are things getting better? 

Research by Catalyst reveals that amongst CEOs in the financial services and insurance industries in Canada, women represent only 10.8%. So far, the most promising statistic that I’ve identified is that the number of women angel investors is on the rise. In 2012, Centre for Venture Research at the University of New Hampshire identified that 21.8% of angel investors in the US were women, having risen from 12.2% in 2011. I’m curious whether that number has staying power or will rise.

Despite this positive growth in one segment of investing, the fact remains that across the investing spectrum women investors are less visible and are investing differently than their male counterparts, so what are the reasons why? 

In an earlier post on my own website, I suggested that personal privacy, investing via private clubs, and structural exclusion as possible reasons for the decreased visibility of women investors.

I also wonder if women tend to seek multiple outcomes (economic, social, and environmental) and that the investments they do make are not regularly reported in the media at the moment. Or that women are making small investments in others, and in their communities, such that any single investment does not capture the attention of the general venture community. If this is the case, then maybe women investors are showing up more frequently in the impact investing space than is currently accounted for.

Where the women are 

Research carried out by Barbara Stewart, a portfolio manager who advises high net worth individuals and families, focusing on women and finance may be more telling. Barbara asked 100 women how they are spending their personal time, energy and/or money and published her findings in her most recent white paper, Rich Thinking. Barbara found that the traditional investment model based on asset classes (that is, equities, bonds, real estate, and cash) did not tell the whole story.

“Women may invest in houses because this provides them with a sense of warmth and personal security, rather than producing some sort of calculated rate of return over time. But the less tangible investments are the ones they are making in their personal causes—these are what provide them with a deeper sense that they are doing what is important to them.” 

Barbara found that women are investing in their families and spending time and energy on them. I was particularly intrigued by her findings that, “women are intent on making a difference while they are going about their daily lives.” She also noted that women were investing in themselves by spending time, energy and money on things that mattered to them and enabled them to thrive—be it intellectual stimulation, physical challenges or ways of expressing themselves. However, by spending their time, energy, and money on a number of things simultaneously—family, personal causes, and self—the traditional model of make a lot of money and then do something good, be it philanthropy or angel and venture investing, doesn’t necessarily work for women.

By and large, women are integrating their activities of investing in their families, personal causes, and their selves into their lives and activities as they go along. Given this, I am inclined to believe that women could very well be natural impact investors.

Although I’m not starting an investment company in the conventional way, the analytical, emotional, intuitive, and physiological parts of my decision-making tell me that an Integrated Investing approach will bode well for the impact investing space and for women investors.

Part 1 in this Series: Creating an Investment Company with Purpose
Part 3 in this Series: Putting it in Practice: Enabling Diversity in Impact Investing

{This post was originally written for Gender and Investing: Where Are All the Women? was first published on August 27, 2013}

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