As women in America struggle to get equal pay and rise up the ladder, companies that empower and promote female workers are being rewarded by impact investors.

Known as gender lens or gender equity investing, the idea is to invest for financial return, while promoting gender diversity. The theme is becoming more popular — although it still represents a small slice of the investment pie, according to Morningstar.

Assets in U.S. gender equity funds have doubled over the trailing three years to $1.3 billion, as of the end of February, Morningstar found. Yet those funds represent less than 0.01% of total equity fund assets in the United States, according to the firm.

But what exactly qualifies as gender lens investing, does it correlate to returns and can it make an impact?

Patricia Lizarraga first noticed what she calls “the female factor” about 15 years ago when she was working in investment banking. Her women CEO and CFO clients were getting tremendous results, she said.

These days she’s the managing partner of Hypatia Capital. In January, the asset management firm launched the Hypatia Women CEO exchange-traded fund (WCEO). The fund invests in all publicly-traded U.S. companies that have women CEOs, from small cap to mega cap. It’s down about 1% from its Jan. 9 debut, as of Thursday’s close. It has an expense ratio of 0.85%.

The fund is in the early stages and has about $1.5 million in net assets. It is sector weighted, which means the fewer women CEOs in any given sector, the more shares the fund has in the companies that do have female leaders. One of its top holdings is Occidental Petroleum, helmed by CEO Vicki Hollub, whom Lizarraga called “a visionary.”

“Women today outperform as CEOs because it is so much harder for a woman to become a CEO,” Lizarraga said. “The woman who makes it to the CEO spot has to jump through more hoops. If you can isolate that ‘female factor,’ there will be alpha.”

In fact, research shows that gender diversity boosts a company’s financial performance. S&P 500 companies that have more than 25% of female executives have a higher subsequent one-year return on equity than the rest of those in the index, according to research by Bank of America. The same goes for those who have more than one-third of women on the board, the firm found.

In addition, companies in the top quartile of gender diversity on executive teams were 25% more likely to experience above-average profitability than peer companies in the fourth quartile, a 2019 analysis by McKinsey & Company found.

Yet gender lens investing can be more than just investing in companies with female chief executives.

Funds may screen for a percentage of women on the board of directors and women in executive management roles, said Kenneth Lamont, senior researcher at Morningstar. They may also look at hiring, retention and promotion figures for women within a given company and gender pay gap data, if available.

“Every provider is going to give you a slightly different approach,” he said. “There is no absolute correct approach to tracking the gender theme.”

Some providers use research from data provider Equileap, which focuses on gender equality, to help determine holdings. The Amsterdam-based firm researches and ranks 4,000 public companies around the globe using 19 criteria, including the gender balance of the workforce, as well as pay gaps, career training, recruitment and female-friendly policies.

One of those who use Equileap data is Glenmede, whose Women in Leadership U.S. Equity Portfolio (GWILX) invests in large-cap companies with women in significant roles and tilts toward those that exhibit stronger gender equality policies and practices. It has about $21.4 million in assets under management, according to Morningstar, and it has an expense ratio of 0.85%.

“Women in leadership matters, but we need a more robust scorecard to assess gender equity,” said Julia Fish, vice president of Glenmede’s sustainable and impact investing team.

Glenmede Investment Management analyzed Equileap data and found on a sector-neutral basis, companies in the top quintile of gender balance in leadership and workforce experienced an average greater return and less risk than companies in the bottom quintile.

Yet those extra metrics on gender equity matter. Those in the top quintile of other proxies for gender equity — including pay equity, training and career development, access to benefits and diverse supply chains — also experienced greater returns and lower risk than the bottom quintile, the firm found.

The people who run these funds believe the investments can make an impact.

“What investors should also look for is the existence of shareholder engagement within these public market strategies — so the ability of a public market investor to use their shares to ask the company to go farther across environmental, social and governance features, but especially on gender-related issues,” Fish said.

It’s something activist investors have been doing, to some success. In 2018, Citigroup became the first big U.S. bank to agree to publish statistically adjusted equal pay for equal work numbers after Arjuna Capital’s Natasha Lamb pushed for it. The result was an increase in compensation for women and minority workers to bridge the gap.

For New York Life Investments, putting money toward fixing the gender gap is part of its mission. The firm’s IQ Engender Equality ETF (EQUL) donates a percentage of its management fee to Girls Who Code, a nonprofit that aims to boost the number of women in computer science. The fund is just over a year old, so while it grows assets, it is also augmenting its donations to the organization with additional contributions, said Wendy Wong, head of sustainable investment partnerships at New York Life Investments. EQUL has an expense ratio of 0.45%.

“They are trying to close the gender gap in technology. The pipeline isn’t growing as much as it should,” Wong said. “By not having a pipeline of women going into technology, that has really broad implications across everything.”

Those interested in investing in companies that promote and empower women should be cognizant of what holdings are in the fund and how companies are screened. Also, be sure to understand what fees are charged.

“A good story, or even a good moral story in some cases, shouldn’t blind you to the core fundamentals of investing,” Morningstar’s Lamont said.

Be aware of any biases that may exist with the funds. For instance, when tech stocks have done well, gender funds have tended to lag, he said. That’s because the global funds, generally, are underweight tech since those companies don’t tend to do well with diversity, Lamont said.

“Depending on how the fund that you’re looking at is built, it may have really quite explicit biases in it or risk factors that you should really understand before you invest,” he said.

Lastly, understand that more may be at play than gender diversity when it comes to returns, he said.

“I wouldn’t take all of the claims that are made about the performance benefits of having an extra female director on the board as gospel,” Lamont said. “If you believe in that, that’s great. But be prepared for that not quite materializing in the way you might expect.”

—CNBC’s Michael Bloom contributed reporting