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THE BOTTOM LINE

Gender diversity key to improving corporate governance

GENDER diversity has become an increasingly relevant topic in the international corporate governance arena where good governance has always been correlated with strong organisational performance. Research shows that a gender-balanced workforce positively supports corporate performance in relation to company profitability, risk reduction or share price. It has been proposed that women's different sensibilities and perceptions counterbalance prevailing attitudes and "group-think" tendencies. This can lead to richer debates, better decisions and ideas, and ultimately, better results.

Globally, women are under-represented on corporate boards, particularly in Asia-Pacific. According to McKinsey, across the region, only one in five people in leadership positions is a woman. Even in developed economies, few women are represented at a senior level. In Japan, there are no female CEOs in the top 100 public companies. In Australia and Singapore, the share of women CEOs in 2016 was only 6 per cent and 5 per cent respectively.

Additionally, global data on gender pay gap shows that women earn 40 per cent less than men for comparable work. Even after controlling the factors that lead to certain justifiable pay gaps, an unexplained wage difference disadvantaging women still remains.

GENDER LENS INVESTING - AN EFFECTIVE TOOL

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Thus, gender lens investing (GLI) is becoming one of the most rapidly growing segments of sustainable investing. GLI uses the capital markets to enhance gender equality and diversity by targeting investments in companies and projects only when specific gender-based criteria are met. Attracting attention and assets from both retail and institutional investors worldwide, assets in gender-based investment vehicles more than doubled from 2017-2018, reaching US$4.65 billion, of which US$2.4 billion was devoted to public market products.

For investors seeking gender parity and financial returns, there are many approaches to GLI. At RobecoSAM, we invest in a global universe of companies with overall strong ESG performance which lead in promoting gender equality. This is not only at the board level, but includes gender equality throughout firms, while at the same time, they display strong fundamentals and growth potential.

Gender equality performance is based on criteria and data from our proprietary Corporate Sustainability Assessment. RobecoSAM's Global Gender Equality Impact Equities Investment Strategy, which is now entering its fourth year, has consistently outperformed the benchmark (MSCI World TRN) since its inception. Gender equality is an indication of a well-managed company fully utilising its talent and human assets to make better decisions that lead to better results. It makes sense that this gives them an edge over their peers.

Equality and diversity can't work without the right attitude and atmosphere. With this in mind, we look beyond compulsory metrics towards underlying cues of the overall culture. Our gender equality criteria have been designed to capture a comprehensive picture of the workplace, including whether employers have the right structures in place to measure pay, opportunities, talent retention as well as whether employees feel supported in terms of work-life balance, job satisfaction and overall well-being.

The Strategy also stresses support and leadership at the top, acting to nurture talent in the middle and at the bottom. Our criteria on companies' recruitment and talent retention seek to reveal just how well companies are embracing equality and diversity throughout the organisation. The Strategy's objectives also contribute to the United Nations' SDG No 5 (Gender Equality) which aims to eliminate gender-based discrimination, empower all women and girls, and provide equal opportunities at all levels of public and business life.

Women's growing economic power means that by 2020, they are expected to hold 32 per cent of all private wealth worldwide. Typically interested in social causes that create a better society and future, as an investor segment, they tend to be patient and risk-averse, leading them to be naturally drawn towards investment products promoting fairness, inclusion, diversity and equality. This is especially so when positively correlated with low volatility and strong long-term performance.

Institutional investors are also elevating diversity through their voting and engagement agendas, issuing strong ultimatums to companies which are failing to act and calling for stronger market standards for reporting and disclosure.

Regardless of the means, improving corporate governance and corporate performance is in everyone's interest, whether through eliminating systematic discrimination, tapping the wealth of latent talent or improving economic opportunities for half the world's population. Gender lens investing adds to the mix, using the power of the financial markets to make a positive impact, while generating a financial return.

  • The writer is Portfolio Manager for the Global Gender Equality Impact Equities Strategy at RobecoSAM