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ESG

ESG Newsletter published on March 6, 2020

Gender Lens Investing Demands Continued Focus on Progress

More than a decade’s worth of research makes the case that societies and companies gain economically when women can thrive. Unfortunately, according to recent assessments, progress is slow when it comes to empowering women to create a more inclusive, equitable world, and to drive greater economic prosperity.

Dating to 2007, McKinsey & Company’s report Women Matter: Gender Diversity, a Corporate Performance Driver,1 identified a positive relationship between corporate performance and elevated presence of women in the workplace in several Western European countries. Its 2015 report, Diversity Matters,2 showed that global annual gross domestic product (GDP) could be $12 trillion higher if gender inequality were reduced — and $28 trillion higher if it were eliminated — by 2025. McKinsey expanded on its research in 2018 with Delivering through Diversity,3 which found that companies in the top quartile for executive team gender diversity were 21% more likely to experience above-average profitability than companies in the fourth quartile.

Further support for the beneficial influence of gender equality on business and economies includes:

  • On the corporate level, in its August 2019 report, The Rise of the SHEconomy,4 Morgan Stanley analysis found that, globally, companies that have taken a holistic approach toward equal representation outperformed less diverse peers by 3.1% per year over the prior eight years.
  • On the broader economic level, in its May 2018 report, Unrealized Potential: The High Cost of Gender Inequality in Earnings,5 The World Bank, focusing on a wealth-based measure of the cost of gender inequality as opposed to a GDP-based measure, found that human capital wealth globally could increase by 21 percent and total wealth by 14 percent if gender equality in earnings is advanced.

Yet, McKinsey, in partnership with LeanIn.Org, wrote in the Women in the Workplace 2019, “women continue to be underrepresented at every level” and identified “the biggest obstacle that women face is much earlier in the pipeline, at the first step up to manager.”6 The Wall Street Journal targeted the lack of women being given profit-and-loss responsibilities at corporations as a key roadblock to advancement to the chief executive officer (CEO) position in “Where are all the women CEOs,” February 6, 2020.7

Breckinridge’s investment research finds that thoughtful management of gender-related issues may be aligned with strong business management and corporate sustainability policies. We integrate gender factors into our environmental, social and governance (ESG) analysis when they are deemed material to the sector.

We also offer a gender lens investment mandate informed by the United Nations Women’s Empowerment Principles. Our gender lens mandate framework incorporates four key pillars to assess corporate issuers: (1) Women in Leadership; (2) Women-Friendly Workplace; (3) Employee Diversity and Well-being; and (4) Commitment to Global Principles.

In assessing Women in Leadership, we look at the percentage of women on the board and on the executive leadership team, and whether there is a woman CEO. Increasing the number of women on boards is an initiative for groups like the Thirty Percent Coalition and the 30% Club, globally. In our assessment of Women-Friendly Workplace, we prioritize issues such as the percentage of women in entry-level and manager roles, areas highlighted in the Four for Women Framework from the Wharton Social Impact Initiative.

From our analysis, we find that advancing women is an important area of focus for many leading companies, but that progress is varied. While there is a clear industry push to increase the number of women on corporate boards of directors, this commitment needs to translate into broader efforts to attract, retain and promote talented women at all levels. More importantly, women need to be fully engaged in order to reach their true potential and contribute significantly to their organizations. We acknowledge that much work remains.

Our consideration of gender lens investing is rooted in our strong belief that empowering women creates societal as well as economic value. In our view, companies that effectively tap into the talents, skills and perspectives of promising women are better positioned for long-term success. For investors seeking to direct assets to corporate issuers with median and above gender-related profiles, our gender lens strategy may provide a means to accomplish that goal.

 

This article was originally published on April 3, 2017 and titled "Why Gender Lens Investing Matters."

[1] “Women Matter: Gender Diversity, A Corporate Performance Driver,” McKinsey & Company, Inc., October 2007.

[2] “Diversity Matters,” McKinsey & Company, Inc., February 2015.

[3] “Delivering through Diversity,” McKinsey & Company, Inc., January 2018.

[4] “The Rise of the SHEconomy,” https://www.morganstanley.com/ideas/womens-impact-on-the-economy, Morgan Stanley & Co. LLC, September 23, 2019.

[5] “Unrealized Potential: The High Cost of Gender Inequality in Earnings,” The World Bank, May 2018.

[6] “Women in the Workplace 2019,” McKinsey & Company, Inc., October 2019.

[7] “Where Are All the Women CEOs,” https://www.wsj.com/articles/why-so-few-ceos-are-women-you-can-have-a-seat-at-the-table-and-not-be-a-player-11581003276?mod=business_minor_pos2, Dow Jones & Company, Inc., February 6, 2020.

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