ESG Issue Brief: Gender Equality

Investors are increasingly including environmental, social, and governance (ESG) into their existing investment frameworks, causing firms to take notice and make sure their investment policies and practices align with the priorities of their investors or potential investors. We’ve put together a series of ESG issues investors are concerned about to help you speak to these concerns and adjust your practices accordingly.

Background

Gender equality is a human right. Achieving equality would benefit the economy, prevent violence against women and girls, and stimulate social progress. Unfortunately, inequality is a global plague. At the current pace, it would take another 40 years for women and men to be represented equally in national political leadership, and in many countries, only 57% of women are making their own informed decisions on sex and reproductive healthcare.

Gender inequality has been deeply ingrained into human society for nearly 8,000 years. As a result, philosophies that disenfranchise women and girls permeate into every facet of our lives - from the social norms that guide our daily interactions, to the way women and girls approach new opportunities. To create a prosperous global economy, all humans must be treated equally and afforded the dignity and respect they innately deserve.

ACA’s Data & Analytics Solution, Ethos ESG, provides a comprehensive framework for understanding how companies and funds impact the broad cause of gender equality, which includes the sub-causes of equal pay and opportunity, LGBTQ+ equality, and no violence against women. This issue aligns with United Nations Sustainable Development Goal 5.

Discussing gender equality

As with all issues covered in our ESG Issue Briefs, the importance of gender equality has both ethical and financial elements. As we advocate for a more holistic approach to financial health, we want to encourage investors to look at both sides as they, along with their advisers, craft the best strategy for them.

Financial case

A McKinsey study from 2015 found that $12 trillion could be added to global GDP by 2025 by advancing women’s equality. That figure amounts to adding 26% to total GDP and is roughly equal to the Chinese and American economies put together.

In 2014, Google released a report on diversity in the workplace, and the findings were not great. Only 30% were women. This prompted Margaret Neale, an organizational behavior professor at Stanford to ask the question: Do investors actually care about gender diversity?

What the study found was that yes, investors do care. They analyzed shareholder reactions to nearly 60 gender diversity announcements made in the tech and finance industry between 2014 and 2018. They found that stock prices rose more if a company revealed more gender diversity, particularly if it bested an industry leader.

American Water Works is a prime example of a company that has benefited under female leadership. Since taking the job in 2014, the CEO, Susan Story (since retired), along with CFO Susan Hardwick, delivered a 295% rate of return vs 72% for the S&P’s 500-stock index.

Neale’s study revealed that investors saw more diverse companies as a better bet. What is interesting are some of the “value judgements” behind this thinking. Study participants felt that more diverse companies were: More ethical, more likely to think outside the box, less prone to political conflicts, and less likely to attract negative attention.

Statistics on LGBTQ+ inclusion and its effect on a company’s finances is more challenging to find. However, some statistics regarding overall diversity and inclusion are important to point out.

A 2020 study by Catalyst found that 35% of an employee’s emotional investment in their work and 20% of their desire to stay is directly linked to inclusion. Furthermore, when companies establish inclusive cultures and policies, they have been shown to report a 59% increase in creativity, innovation, and openness, as well as a 39% better assessment of consumer interest and demand.

It is clear that equality matters, both from financial and emotive points of view. There is still a lot of work to be done, but investing in companies that promote diversity and inclusion is both good for the bottom line, and for the employees that work there.

Ethical case

With the recent Supreme Court decision on Roe v. Wade, gender equality, long a controversial issue, becomes even more contentious. This decision opens up the possibility that other long-standing rights might be taken away, including the right to contraception and same-sex marriage.

According to the most recent 2020 census, women make up 50.5% of the population, and according to a Gallup poll, members of the LGBTQ+ community comprise 7.1% of the United States population. Historically speaking it has been easier to marginalize certain communities, but with recent events we are witnessing rights being rolled back for what amounts to a majority of the population.

The moral and ethical case for equality is incredibly strong. The societal ills associated with gender violence, harassment and discrimination are well documented and ought to be taken into consideration when an individual is deciding where to invest their money.

Fortunately, the last few years have seen gender become a more important issue for investors, from shareholders requesting pay audits, to asset managers withholding votes from all-male boards. But much work needs to be done.

How we help

ACA's new ESG platform, which combines our Ethos ESG acquisition with our advisory services, integrates in-depth, transparent ESG data into your portfolio construction. It can help firms easily conduct ESG risk and impact diagnostics and benchmarks to understand how investments map to widely accepted sustainability frameworks, including: 

• Evaluate investments by their sustainable resource use score, an aggregation of over 300,000 data points related to metrics such as sustainability disclosure shareholder actions and ethical sourcing of minerals.
• Use Impact Stories to show investors how investments in funds or companies make a direct impact on addressing our resource use.
• Use screens such as single-use plastic, or deforestation financing to understand a company or fund’s relationship to sustainable resource use

To learn how we can help your firm, please speak to your ACA consultant or contact us.

Contact us

Read our other issue briefs

• Climate Action
• Sustainable Resource Use

Other gender equality resources

• Homepage - Altiorem
• THE 17 GOALS | Sustainable Development (un.org)
• How advancing women's equality can add $12 trillion to global growth | McKinsey
• Resources on education and gender equality (unesco.org)

 
This content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this podcast constitutes a solicitation, recommendation, endorsement, or offer by ethos ESG or any third-party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.