It wasn’t that long ago that there were some who questioned whether diversity could be a determinant in a company’s long-term success. Many management teams now believe that it is a key source of competitive advantage and enabler of growth.1
Investment strategies focused on women have attracted over $2 billion in public and private assets in recent years.2 Growth in ‘gender lens investing’ is accelerating but remains a small percentage of total managed assets globally.
Among recently launched gender-focused strategies, investment managers have sought areas with the largest potential for positive impact on women’s lives. These include workplace equity, access to capital for businesses owned by women, and products and services designed to meet the specific needs of women and girls. In public markets, the substantive detail that managers seek on these topics is largely unavailable. As a result, many gender-oriented investment solutions focus on widely disclosed criteria such as the percentage of women on the board of directors and women in executive leadership. Many investors, however, believe gender analysis should be a part of a broader assessment of a company’s investment merits, often referred to as ESG (Environmental, Social, and Governance) analysis. Assets managed by firms committed to using these techniques now total $6.4 trillion.3
Analyzing gender issues as part of an investment process
Leadership and culture: A company’s culture starts from the top, so investors should seek out management teams that demonstrate a commitment to a diverse and inclusive workplace. In addition to representation of women on the board and in executive leadership roles, we look for evidence that diversity and inclusion are an integral part of company’s business strategy.
Workplace programs: Corporate policy is a critical way that management teams demonstrate their commitment. Best-in-class policies and practices help to attract and retain diverse talent. We look for business practices to support the advancement of women into leadership roles; training programs that raise awareness of unconscious bias in recruiting, promotion and pay decisions; and programs that support working parents.
Supply Chain Management: Women and girls are particularly vulnerable to labor rights abuses and, according to the International Labour Organization, represent 71% of modern slavery victims.4 Companies that do not engage with their suppliers to ensure fair and safe labor practices may represent a financial risk to investors either through reputational damage or fines. Factors in our assessment of firms include: a company code of conduct to encompass vendor relationships; training and support for vendors; and third party audits to ensure compliance with said policies.
Shareholder engagement and dialogue
Corporate reporting on gender is limited, which means that investors must speak directly with companies in order to gain a more complete picture of their policies and practices. Investors can use dialogue with companies to advocate for policies that promote gender equality. For example, at Wells Fargo we encourage companies to disclose information on pay equity.
Moving the needle on gender equality
Approaching gender equality and inclusivity from an investment perspective requires a long-term perspective and detailed analysis that goes beyond head counting. Direct engagement with companies helps us to understand not only the philosophy of the management team but the steps that have been taken to help ensure future progress on any stated goals. We continue to see best practices regarding gender issues evolve and improve, particularly as the number of women in the labor force and leadership roles grows. But as U.S. Supreme Court Justice Ruth Bader Ginsberg has said, “Change in our society is incremental… Real change, enduring change, happens one step at a time.”5
1Vivian Hunt, Lareina Yee, Sara Prince, and Sundiatu Dixon-Fyle. “Delivering Through Diversity.” McKinsey & Company, January 2018. Accessed online at: https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity
2“Investment Assets That Put Women First Surge Past $2.2 Billion”. Emily Chasan, Bloomberg. November 16, 2017.
3Annual Report, Principles for Responsible Investment, August 25, 2017.
4Global estimates of modern slavery: forced labour and forced marriage. International Labour Organization and Walk Free Foundation, 2017.
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