Women have long been the catalyst for social change, leading some of the world's most well-known philanthropy initiatives like the Bill and Melinda Gates Foundation and the Chan Zuckerberg Initiative. But there's a growing number of young, higher-net-worth women looking to social entrepreneurship as a vessel for change.
The trend isn't altogether surprising, social entrepreneurship—a catch-all for business builders who look to change lives and promote social good through their entrepreneurial pursuits—is often steeped in empathy. And studies have shown women can be more empathetic than men.
But Cyndy Ranzau, a wealth strategist at RBC Wealth Management in Denver, says she suspects women are also more in-tune with the non-financial impacts of their wealth.
“Women are more thoughtful in their plans," she says. “If they're looking at starting a business they're asking 'what do I want this business to accomplish for me, what do I want this business to accomplish for my family, and what do I want to accomplish for my community?' "
Commissioned by RBC Wealth Management, The Economist Intelligence Unit (EIU) undertook a study of 1,051 high-net-worth individuals (HNWIs), including 365 respondents in the U.S., from March to May, 2018. The new face of wealth and legacy survey explores how the meanings of legacy and wealth are being redefined across regions, genders and generations.
According to The new face of wealth and legacy research, female business owners more often than men tout the importance of protecting the livelihood of their employees and their families (74 percent compared to 67 percent). These women also place more importance on the positive charitable impact their business has on the communities in which it operates (72 percent versus 65 percent for their male counterparts).
With women-led businesses performing twice as well as those run by men and outperforming their male peers by 63 percent when it comes to creating value for investors, the attitudes surrounding social entrepreneurship could drive a seismic shift in the way people view profit and philanthropy.
Good business is good business
The EIU research highlights several trends around women and entrepreneurship. Not only do women more often than men identify themselves as founders, co-founders or owners of a business, 36 percent of younger HNW women have amassed business-related wealth compared to just 12 percent of Baby Boomer women.
“Millennial women seem less inclined to lean on others. They want to take risks and create wealth in their own way," says Ranzau. “They are far more independent and far less likely to want to rely on someone else."
According to The EIU study, 75 percent of Millennial women globally say the value of a business is “more important in defining wealth than it was for people two generations ago."
Driven by impact
Ranzau says she suspects the trend toward social entrepreneurship is a mix of that independence combined with the drive to have an impact.
“We've seen a shift in mindset in terms of how we buy things … how we choose which companies to do business with," she says. “If you have two products and one of them gives back 10 cents of everything you buy and the other one doesn't, you might lean toward the one that gives a percentage of profits away."
According to The EIU survey, 48 percent of Millennial respondents in the U.S. say their spending aligns with the causes important to them.
Ranzau points out that there's a whole category of for-profit businesses defining themselves as Benefit Corporations (B Corps), as a way to give them a competitive edge. Since 2010, 34 states have passed legislation to allow for the creation of benefit corporations, with six more in the midst of the process. According to B Lab, social entrepreneurship B Corps are 28 percent more likely to have women and minorities in management.
Start-up resources for women still a challenge
According to The EIU survey, HNW Millennials, more so than Baby Boomers, see more potential for generating wealth when they have good access to startup resources (31 percent versus 24 percent)—with younger women placing more of an emphasis on these types of resources than men.
“One of the problems women face when starting up a business and getting venture capital, getting loans, is having to prove they're serious about the business, that it's not just a hobby on the side and that they have what it takes to make it successful," says Ranzau.
She says from her experience, women typically have to fight harder for what they want—especially when it comes to a newer concept like social entrepreneurship.
"A lot of people don't even understand what social entrepreneurship is and why you would do it," says Ranzau.
It's spurred many women entrepreneurs to find ways to transfer their success to other young entrepreneurs, by rolling socially-conscious programming into their own businesses. She points to a local, women-run company that makes running headbands and supports young entrepreneurs.
“They've started a program where you can subscribe and get a new one [headband] each month and they donate part of that subscription to fund women entrepreneurs in Africa or other developing countries," says Ranzau. “They wanted to create something they could specifically use themselves and give back by helping other women achieve their goals."
Life after entrepreneurship
The desire to do well by doing good exhibited by many female entrepreneurs seems to extend beyond the life of their business. Women selling their businesses are finding other ways to funnel their entrepreneurial energy beyond just mentoring, says Dean Deutz, vice president and a private wealth consultant at RBC Wealth Management in Minneapolis.
“We're seeing women that were business owners on their own or with their spouse and they've sold their businesses and now, the professional energy that they still have because they're young, is being directed toward passions that they care about," he says.
He points to a client, a woman entrepreneur who had sold her company and wanted to use her expertise to benefit others. So she poured her energy and expertise into improving access to technology for non-profits and helping them understand how to better use technology in their business.
The project quickly grew to the point where she had to decide whether to make it a public or private, personal endeavor. “Some people like what they do to be very public and they use it almost to challenge people to do more," says Deutz. “Other people want to be very private and it's about their decisions and how they—and their family—can impact people."
Deutz says he worked collaboratively with the entrepreneur and her advisors to refine her philanthropic mission.
Having a clear view of how your passion and need to help others fits within your own goals is key regardless of whether you're running a social enterprise or devoting your energy elsewhere after your business.
“The ones that are really successful really define what their message and passion are and what they want to change," says Deutz. “And they drive that over and over and they keep going back to that."
Social good, after all, is a personal decision. As for the changing approach, Deutz says women are, at their core, good at giving.
“Women really drive helping others," he says. “That spirit is there, it's growing and we need to enable and encourage and help people do that in a way that's meaningful to them."
In their research, The EIU surveyed respondents with a minimum investable wealth of US$1 million. The margin of error on the U.S. sample is 5.1 percent with a 95 percent confidence level.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.