1 Financial Equality: A Preliminary Theoretical and Legal Background

Since the commitment to gender equality made in 1995 at the United Nations (UN) Fourth World Conference on Women,¹ “gender mainstreaming” has become an important international strategy to advance women’s equality (see also Chapter 3 of this volume). According to the UN Economic and Social Council (ecosoc), “[m]ainstreaming a gender perspective is the process of assessing the implications for women and men of any planned action, including legislation, policies or programmes, in all areas and at all levels” [emphasis added].²

As highlighted by several international instruments,³ equality of women is a goal for all policies and sectors, including the economic and financial ones. Among others, the Convention on the Elimination of All Forms of Discrimination against Women (cedaw)⁴ requires parties to take appropriate measures “in particular in the political, social, economic and cultural fields […] to ensure the full development and advancement of women”.⁵ Moreover, several (non-governmental) declarations and documents have stressed the need to empower women’s economic rights. For example, the Montreal Principles on Women’s Economic, Social and Cultural Rights, adopted at a meeting of experts in Montréal from 7 to 10 December 2002,⁶ and the 2012 Declaration of the G20 Leaders, recognised “[…] the need for women and youth to gain access to financial services and financial education […]”.⁷

Women’s economic empowerment was listed as a global priority in the 2015 G7 Leader’s Joint Declaration, where they “[…] reaffirm [their] commitment to continue our work to promote gender equality as well as full participation and empowerment for all women and girls [… and] to overcome discrimination […] and other cultural, social, economic and legal barriers to women’s economic participation”.⁸ Two years later, in 2017, the priority theme for the 61st session of the UN Commission on the Status of Women (csw)⁹ was “Women’s economic empowerment in the changing world of work”.¹⁰ The background document for the preparatory meeting in the Asia-Pacific region made it very clear that “[t]here is an urgent need to analyse […] the role of fiscal policy in upholding the right to life for girls and women”.¹¹ Overall, we find several references and commitments to advancing the economic empowerment of women and to adopting the “gender mainstreaming” approach in the economic and fiscal discourse.¹²

But what do we mean by economic empowerment of women? A report prepared for the International Center for Research on Women has developed the following definition, which effectively draws together the elements of economic empowerment: “[a] woman is economically empowered when she has both the ability to succeed and advance economically and the power to make and act on economic decisions […] women need the skills and resources to compete in markets, as well as […] the ability to make and act on decisions and control resources and profits” [emphasis added].¹³

In the financial sector, in particular, economic empowerment can be achieved by promoting financial inclusion, meaning the possibility to access, and actively and effectively use, all the relevant financial services, such as bank accounts, loans, and insurance.¹⁴ One tool that has been used to promote economic empowerment of women in the fiscal policy framework is the so-called “gender budgeting”,¹⁵ which allows fiscal authorities “to ensure that tax and spending policies and/or public financial management instruments address gender inequality and the advancement of women in areas such as education, health, and economic empowerment”.¹⁶ As underlined in one of the expert papers prepared for the 61st session of csw, “[g]ender budgeting is ideally a fiscal innovation that translates gender commitments into fiscal commitments”¹⁷; however, “[a] tremendous amount of confusion exists on the concept of gender budgeting […]”.¹⁸

Indeed, particular stress has been laid on the need to enhance the capacity building of national governments so that they can adequately address the question of fiscal equality. In this regard, UN agencies and other international organisations have been providing technical assistance and training to countries over the years.¹⁹ For example, the International Monetary Fund has supported countries to use fiscal policy to promote gender equality.²⁰

Nevertheless, women’s financial inclusion still faces several barriers.²¹ Increasing women’s financial inclusion is not just a matter of providing the relevant financial instruments, it is also a matter of improving women’s skills and capabilities to use them effectively.²² In this respect, financial literacy, which provides individuals with the “knowledge, aptitude, and skill base necessary to become questioning and informed consumers of financial services”²³ is an effective instrument to achieve financial equality and, consequently, strengthen women’s economic empowerment.²⁴

In this chapter, we want to stress the overall need for a new narrative when it comes to financial equality. The following section illustrates what we mean by “new narrative” together with an overview of the most significant obstacles that women are still facing in the financial sector.

2 Financial Equality: the Need for a New Narrative

It is a fact that wealth is increasingly growing in the hands of women around the world. According to the statistics, women worldwide already hold more than 30% of global wealth,²⁵ and will hold even more in the next couple of decades as a result of the wealth transfer down the generations.

This means that there is a huge opportunity for the finance industry to focus more on women. Even though women hold a significant part of the global wealth, they still suffer from inequalities: recent research published by ubs shows a dramatic picture of how a pay gap can influence women’s wealth accumulation over her lifetime. The research simulates the earnings, savings and wealth accumulation of a professional woman and the impact of a potential pay gap compared to a man’s earnings in a similar professional position. A pay gap of 10% can lead to the woman accumulating 38% less wealth over the course of her life. Furthermore, the woman’s wealth gap can increase dramatically if other life circumstances are taken into consideration, as we will explore below.²⁶

Women face several barriers to financial participation and access to capital. And in many countries, financial equality is still very new: let us take for example Switzerland, where it has been barely 35 years since married women were first allowed to open bank accounts without the consent of their husbands.²⁷ Accordingly, the financial empowerment of women in the country is also still in its infancy. And, according to the 2019 “ubs Investor Watch. Own your worth” report, although 80% of daily household financial decisions are taken by women, only 23% take the lead on long-term financial decisions. Moreover, 8 in 10 women still believe their male partners know more about money than they do.²⁸

Although it is true that companies are increasingly implementing policies aimed to foster equal opportunities,²⁹ significant gaps in pay and funding remain.³⁰ In this respect, it is worth noting the report “Women’s Empowerment and Business: 2020 Trends and Opportunities” prepared by the UN Global Compact initiative in partnership with the nonprofit organisation Business for Social Responsibility. This report effectively highlights that, while 68% of the companies surveyed have made a leadership commitment or offer ‘support for gender equality and women’s empowerment, only 28% of them have time-bound, measurable goals and targets’ in terms of gender policies.³¹

Overall, there is a need for a new narrative when it comes to advancing financial inclusion and equality: it is not enough to address the issue with businesses solutions of “pink marketing” (marketing targeting female clients), “pink products” (offerings targeting female clients) or “pink teams” (female teams focusing on female clients). Instead, there is an immediate need to reconsider the entire value chain of the business, to make it more appealing (and functional) for women: both outside-in (making it attractive for female clients to engage with businesses) and inside-out (making it more attractive for women to join, grow and remain within organisations).³²

Promoting and improving gender equality policies in the financial and business sectors is not only a social and moral issue, but can also have a significant positive impact on boosting gross domestic product (gdp) growth. According to the 2020 European Investment Bank’s report “Funding Women Entrepreneurs”, promoting gender diversity ‘could lead to a potential increase of 26% of the annual global gdp and US$ 160 trillion of human capital wealth’ as well as improving business performance by 15%.³³

When creating a new narrative on financial equality, three main questions arise: what would the financial industry look like if it focused on women? What is the true cost of pay gaps and funding gaps? Isn’t it time for fewer words and more action?

Thus, gender equality represents one of the biggest challenges and opportunities for every country. The following sections highlight the barriers women are currently facing and the steps that can be taken to boost financial literacy and, consequently, financial equality.

3 Barriers to Gender Equality in the Financial World: What Are We Talking About?

What are the main barriers to gender equality? The five most common are: (1) pay gaps – the long-term impact of lower earnings on wealth gaps and pension gaps; (2) career discontinuity – when women take time off to care for family members; (3) flexible work – particularly in Switzerland, where the percentage of women working part-time is higher than in other European countries;³⁴ (4) longevity – if women live 5 to 7 years longer than men, statistically, their (more modest) wealth has to last longer, impacting their quality of life; and (5) and risk appetite – aggregate statistics show that women tend to sit on more cash and fixed income investments than men do, which means they compound their wealth over decades at a low interest rate.³⁵

A simulation of a lifetime wealth curve was carried out in the 2017 study “ubs Wealth management research: Taking action”. The study showed how the cumulative impact of the above-mentioned factors can prevent women from being able to accumulate the wealth needed to sustain their longevity.³⁶

The overall picture is not very encouraging: according to the “Global Gender Gap Report 2020” of the World Economic Forum, ‘it would take 257 years for women and men to reach pay parity’.³⁷ This should be coupled with the findings of the ubs research, which shows that a 10% gender pay gap alone can lead to a 38% gender wealth gap, while a 20% pay gap can lead to an 85% wealth gap.³⁸ For example, in Switzerland, the pay gap between male and female full-time employees stands at 19%, according to the Federal Statistical Office.³⁹

In light of this analysis, we need to reflect on the broader meaning of risk when we talk about women and financial participation. Conventional notions of risk relate to stock market risk or volatility; and a lack of financial confidence can lead women to shy away from investing. However, the real risk that women need to assess is whether they will be able to afford to maintain their quality of life after retirement, especially if they do not capture the compound, long-term benefits of investing.

The above-mentioned ubs report shows that a woman’s life ‘circumstances, financial confidence, and attitude to investing can actually make it harder for her to achieve her financial goals’.⁴⁰ And indeed, one factor that has been consistently underestimated is the role that gender can play in the investment decision-making process.⁴¹ Women and men build up and invest their wealth differently; accordingly, finding the right investment approach can make a big difference by improving women’s financial well-being as well as their quality of life.⁴² For example, women tend to make investments in businesses that have a meaning and purpose for them.⁴³

There are several steps than can be taken to reduce the impact of the gender pay gap on women’s wealth: focusing more on the financial goals of women, and defining and recommending portfolios accordingly; and, above all, helping women feel more confident about investing.⁴⁴

This leads to the issues of financial literacy and financial equality, which are discussed in the following section.

4 Financial Literacy and Financial Equality: Where Do We Stand?

Financial literacy, namely the “ability to use one’s knowledge and skills to effectively manage financial resources”,⁴⁵ is important for everyone, not only for those working in the financial sectors, but also for the consumers of financial products to help them know how best to save and invest their money.⁴⁶

Research has demonstrated that financial literacy can actually help people plan their investments and savings better.⁴⁷ However, financial literacy is still a goal that has yet to be achieved for a large proportion of the population, A good overview is provided by the 2015 Standard & Poor’s Ratings Services Global Financial Literacy Survey, which builds on previous similar initiatives undertaken by the International Network on Financial Education of the Organisation for Economic Co-operation and Development (oecd)⁴⁸ and the World Bank,⁴⁹ as well as on several national survey initiatives.⁵⁰ The Standard & Poor’s Ratings Services Global Financial Literacy Survey represents the “first and most comprehensive global gauge of financial literacy to date”, based on interviews with more than 150,000 people in more than 140 countries. According to the findings of the survey, on average, only one in three adults worldwide are financially literate.⁵¹ In Switzerland, for example, financial literacy is 57% (meaning that roughly one in every two adults does not fully understand the impact of inflation, of diversification and of compound interest on their wealth accumulation over a lifetime), versus >70% in top scoring countries.⁵² And the numbers get worse when factors such as gender, educational level, income, and age are taken into account. In particular, according to the survey, ‘35% of men worldwide are financially literate compared with 30% of women’, and this average gender gap of 5% can be found equally in both advanced economies and emerging ones.⁵³

Together with the low rate of financial literacy, we should also consider the semantics around money and financial matters. Indeed, the language normally used by ‘investors, finance professionals and the media’ is still biased against women.⁵⁴ For example, a study conducted at the London Business School highlighted that women wishing to start an investment plan are usually asked mainly “about the potential for losses”, while men are asked “about the potential for gains”.⁵⁵

Also, the media is biased against women in its publications on financial matters.⁵⁶ In a linguistic study of 300 articles, Starling Bank highlighted huge discrepancies ‘in the way men and women are spoken to about money’. Around 65% of financial articles in women’s magazines define ‘women as excessive spenders’; on the other hand, in articles aimed at men, 70% emphasise the concept that making money is a masculine ideal.⁵⁷ Thus, there is a need for a new narrative to overcome the biased semantics around financial matters, which affect women’s access to capital and women’s involvement in managing money and investment.⁵⁸

Turning to the question of how engaged women are in financial matters, it is worth recalling that, according to the 2019 ubs “Own Your Worth” report, most married women worldwide tend to leave financial decisions to their male spouses. This is mainly because of “historical and social precedents to family, gender roles and confidence levels”.⁵⁹ The 2019 ubs report detailed the findings of a survey of about ‘3,700 married women, widows and divorcees in Brazil, Germany, Hong Kong, Italy, Mexico, Singapore, Switzerland, the United Kingdom and the United States’, on the question of ‘how women around the world engage with their finances’.⁶⁰

The findings highlight that women tend to focus more on short-term financial responsibilities and tasks, such as the daily household expenses. Only 23% of women are reported to have a say on long-term ‘financial planning decisions like investing and insurance’ (and this seems most common in Hong Kong and Switzerland). There are many reasons for this, including women’s belief that their male spouses know more about finance (82%), or are generally the ones earning more in the family (78%) or because women have never been encouraged (58%) or even discouraged (56%) from being involved in long-term financial planning and investing.⁶¹

Women often only grasp the risks of not getting involved in long-term financial management decisions when they divorce or are widowed: statistics show that 76% of widows and divorcees wish they had been more involved in long-term financial planning, while 77% urge others to become so.⁶² Indeed, when women are actively engaged in making long-term financial decisions with their male spouses, they feel more positive about their future financial security.⁶³

Another noteworthy finding is that the involvement of women in long-term financial decision-taking is less today than for the previous generation.⁶⁴ According to the 2019 ubs report, nearly 60% of women under 50 years old defer long-term financial decisions to their male spouses, compared to 55% of women over 50 years old.⁶⁵

Accordingly, finance needs a profound transformation; in particular, the narrative around financial participation should be focused on life goals, purpose and impact, instead of just evaluating clients’ risk profiles. A new narrative should also emphasise that every investment decision is actually a reflection of values, such as in the case of “impact investing”, which is “an investment strategy that aims to generate specific beneficial social or environmental effects in addition to financial gains”.⁶⁶ And, indeed, according to a recent report of the Boston Consulting Group (bcg), 64% of women tend to take into account ‘environmental, social, and governance concerns’ when making investment decisions.⁶⁷

Financial literacy should be on school curriculum for all age groups, from primary through university. This will enable a new narrative to be built up around finance – and reaching financial equality – starting from the younger generations, as discussed further in section 5.

5 Building up a New Narrative around Money for the Younger Generations

Financial education needs to begin at a young age, especially for girls, to build up financial confidence as early as possible.⁶⁸ In 2015, a study from the University of Washington revealed that by the age of 5 years, ‘children have a sense of self-esteem comparable to that of adults’,⁶⁹ and money habits are largely shaped by the age of 7 years. This is why it is important to start a conversation about finance with children quite early.⁷⁰ Research shows that pay gaps start with pocket money: by the age of 10 years, many girls are already facing pocket money pay gaps that range between 10% and 30%.⁷¹ And this is happening partly because of the above-mentioned biased semantics around financial matters, that permeate not only our business lives but our family lives, too. This needs to change if we want to empower the next generation of girls to enter the labour force, access capital and manage wealth on equal terms with men. This underpins the need for a new narrative around money and finances that would encourage girls and women to deal positively with earning and investing, boosting financial literacy and financial equality.

Financial literacy can and should start at home, by teaching children the value of money, the ways in which they can start earning and, importantly for girls, training them to negotiate their pay for a given job. Financial training should also include teaching children that every financial decision has an impact on our world. In this way, they will soon learn that every spending decision or investment decision they make has a social and environmental impact.⁷² It is essential to bear in mind that “when spending your pennies, you want to know where your money ends up, and which companies care: do they care about forests and oceans and seas? Do they care about saving the birds and the bees? […] By spending your money, you are using your voice”.⁷³

6 Concluding Remarks

On 31 January 2002, the French Presidency of the Council of the European Union organized a high level conference on “The Economic Empowerment of Women: Key to substantive gender equality”, which gathered the EU ministers for equality along with the European Commissioner for Equality. This was one of the first conferences organized by the French Presidency at the very beginning of its 2022 semester, with the aim to “formulate concrete solutions to support women’s economic empowerment”.⁷⁴

The interest in this conference by the EU and its member states follows a number of similar international initiatives – as we have recalled in the above paragraphs – that have been calling for increasing action for achieving financial equality. Indeed, enhancing financial literacy and facilitating economic gender equality is a huge opportunity for all countries and the “gender mainstreaming” approach to fiscal policies is a commitment that countries have been making in international fora for decades.

However, advancing women’s economic empowerment in the financial sector is not only a matter of making the full range of financial instruments available to women; it is also a matter of financial education. As this chapter has illustrated, we need a new narrative for financial equality to effectively address the barriers that women are still facing.

Indeed, finance has usually been a male-dominated field: it is quite telling to recall a research carried out in Sweden in 2018, based on interviews of finance professionals, where “interviewees pointed to a masculine and unwelcoming culture as the main reason for why there weren’t more women in certain fields of finance”.⁷⁵

Starting to develop a new narrative around financial matters at an early age – both in the family environment as well as at school, with dedicated finance literacy programmes to be included in the relevant curricula since primary schools – can help to successfully address the gender gap and enable girls and women to build up and reinforce their financial confidence. Indeed, “[i]t’s time to make money equal”.⁷⁶