Green bond growth is encouraging, but investors should take care to look beyond the “green” label when purchasing bonds.
In today’s complex and turbulent world, pressing issues seem to be multiplying more rapidly than ever while paths to solutions seem ever more varied and elusive. But amid this noise, important patterns have emerged.
One of the most discernable patterns today is the growing focus on women’s empowerment. To be clear, women’s empowerment is about far more than seeing women in positions of power. Empowering women matters not only because it creates a more inclusive, equitable world, but also because it leads to greater economic prosperity. Recent research suggests that companies as well as societies stand to gain economically when women are able to thrive.
In particular, McKinsey & Company found that “companies in the top quartile of gender diversity [are] 15 percent more likely to have financial returns that [are] above their national industry median.”1 Representation of women in executive roles matters as well. A 10 percent increase in gender diversity within a company’s executive team leads to a 1.6 percent increase in the company’s operating margin. Additionally, a 10 percent increase in gender diversity within the company’s board of directors leads to a 0.7 percent increase in operating margin. In general, other studies agree that an engaged female workforce leads to a range of business benefits for companies.2
Societies also stand to gain from empowering women. According to separate research efforts by the McKinsey Global Institute, advancing women’s equality could add $12 trillion in annual GDP globally by 2025. This is a relatively conservative estimate, which assumes that countries will merely match their best-in-region country in terms of progress toward gender parity. The full-potential assessment estimates that bridging the gender gap would lead to an added $28 trillion in annual GDP by 2025.3 In the United States alone, $2.1 trillion in annual GDP could be added by 2025 if the majority of states match the progress of leading states with respect to gender parity.4
In our own investment research, we continue to find that thoughtful management of gender-related issues is often aligned with strong business management and corporate sustainability policies. We integrate gender factors into our standard analysis of environmental, social and governance (ESG) factors and offer a gender lens investment strategy informed by the United Nations-backed Women’s Empowerment Principles. Over time, we have maintained keen interest in the latest research pertaining to areas such as women in leadership, women-friendly workplaces and other ways in which issuers we cover can take part in enabling and accelerating women’s empowerment.
To deepen our commitment to gender lens investing, in late 2016 we undertook a comprehensive review of our gender lens strategy. While we are continuing to use the Women’s Empowerment Principles as our primary framework for examining women’s issues, we decided to expand our assessment of corporate issuers in a number of areas in order to reflect our most recent thinking and the highest-quality metrics.
In expanding the range of issues that we believe to be material with respect to women’s empowerment, both in the workplace and in society at large, we structured our corporate gender lens analysis into four key pillars: (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. In our assessment of Women-Friendly Workplace, we prioritize issues such as the percentage of women in entry-level and manager roles, as well as the quality of policies for working mothers. Our assessment of Employee Diversity & Well-being comprises metrics that capture employee diversity, health and safety and general quality of employee management. Lastly, we reward companies that are signatories to the UN Global Compact, Women’s Empowerment Principles and the UN-backed HeForShe.
While there are myriad questions to consider when it comes to women’s empowerment, we believe our analytical framework enables us to prioritize those areas that have emerged as most significant and timely for the types of high-quality companies in which we invest. Our goal is to evaluate leading Fortune 500 companies on a spectrum that illuminates areas of real differentiation among them. For instance, our analysis found that top financial services companies are highly committed to increasing the pipeline of women leaders, even if their current executive ranks contain relatively few women.
Overall, in our analysis of companies across the four key pillars, 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. And this is where much work remains.5
Our focus on gender lens investing is rooted in our strong belief that empowering women creates societal as well as economic value. In our view, companies that are able to effectively tap into the talents, skills and perspectives of promising women are better positioned for long-term success. Targeting these types of companies, in turn, enables investors to achieve an impact toward women’s empowerment in a way that is economically prudent and compelling over the long term.
 “Diversity Matters,” McKinsey & Company, February 2015.
 “The Rewards of an Engaged Female Workforce,” Boston Consulting Group, October 2016.
 “The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth,” McKinsey Global Institute, September 2015.
 “The Power of Parity: Advancing Women’s Equality in the United States,” McKinsey Global Institute, April 2016.
 “Women in the Workplace,” McKinsey & Company and LeanIn, 2016.
DISCLAIMER: The material in this document is prepared for our clients and other interested parties and contains the opinions of Breckinridge Capital Advisors. Nothing in this document should be construed or relied upon as legal or financial advice. Any specific securities or portfolio characteristics listed above are for illustrative purposes and example only. They may not reflect actual investments in a client portfolio. All investments involve risk – including loss of principal. An investor should consult with an investment professional before making any investment decisions. Companies mentioned are provided as illustrative examples and do not necessarily represent past, current or future portfolio holdings. This document may contain material directly taken from unaffiliated third party sources, including but not limited to federal and various state & local government documents, official financial reports, academic articles, and other public materials. If third party material is included, it is believed to be accurate, and reliable. However, none of the third party information should be relied upon without independent verification. All information contained in this document is current as of the date(s) indicated, and is subject to change without notice. No assurance can be given that any forward looking statements or estimates will prove accurate or profitable.