Aliénor Legendre, Research Analyst at MainStreet Partners
The global wealth concentrated in women’s hands is expected to reach US$97 trillion by 2024 [1]. Last year it already represented 32% of global wealth. The asset management industry, motivated by shifting attitudes as well as the clear business opportunities, is responding to the growing number of female investors by offering more products focused on gender equality.
Client-led Demand
Various reports have found that sustainable investment, generally, is more important for women than for men (72% vs. 67% for men), and that within sustainable investment, gender equality is one of the most desired impacts for women, after environmental topics (climate change and pollution) and human rights.
It also makes financial sense. Other studies have shown that companies with greater gender diversity tend to have better financial performance. For instance, according to McKinsey’s “Diversity Wins” report [2], companies with diverse executive teams were 25% more likely to have above-average profitability. Companies that include 30% or more women on their Boards enjoy up to a 6% boost to their net margins, according to Ernst & Young (EY) and the Peterson Institute for International Economics .
Therefore, by targeting gender equality within portfolio holdings, asset management firms could not only attract more female investors but also potentially improve their financial performance.
Avoiding ‘Gender-Washing’
As with other ESG facets, detailed analysis and careful evidence is required to prevent ‘gender-washing’. SFDR’s Principal Adverse Impact indicators only require fund managers to publish the gender diversity percentage of the Board, along with the unadjusted gender pay gap at the fund level. While this is a positive step when it comes to fundamental ESG analysis of issuers, other criteria are too often ignored.
While many good practices related to gender equality are needed, we believe there are three key takeaways for asset managers:
- Go beyond regulation and cover different types of information related to gender equality;
- At product level, embed transparency and non-gender ESG aspects in the fund’s methodology;
- At operational level, concrete gender equality policies are still key for asset management firms.
Beyond Regulation
As an independent ESG research and analysis provider, we have
High scores are achieved if a company’s performance is better than peers, and the model also penalizes companies with negative news related to its gender equality behaviour. A solid framework based on SDG can definitely help investors to identify companies which are well positioned across their own universe.
Supply Chain Risks
One way in which asset management firms can target gender equality within portfolio holdings is also by addressing issues of gender inequality in their supply chains. Many companies rely on global supply chains to source materials and produce their products, and these supply chains can involve a range of social and environmental risks, both evident and more opaque to determine
The issue of supply chain management is one example of how gender equality is closely linked to other social and environmental issues that can affect the sustainability and financial performance of companies. Many companies rely on global supply chains, and these can involve a range of social and environmental risks, both evident and more opaque to determine.
Companies within the supply chain may use forced labour, violate workers’ rights, or contribute to deforestation or other environmental harms. Gender equality is closely linked to these issues because women are often disproportionately affected by social and environmental risks in global supply chains. For example, women are more likely to work in low-paid and precarious jobs in the garment and textile industry, where they may be subject to exploitation and abuse.
By addressing issues of gender inequality in their supply chains, companies can not only promote social justice and environmental sustainability, but also improve their financial performance by reducing risks and enhancing their reputation among consumers and investors, such as asset managers.
Diversity in Asset Management Firms
Finally, encouraging asset managers to hire more women in positions other than just the Board of directors is crucial for achieving gender diversity across the financial industry. Disclosing gender diversity measures at the product level is a step forward, and increasing the number of women on the Board (part of FCA disclosure requirements) is also an improvement.
However, asset managers need to target gender equality at all employment levels of their own companies to ensure that women are well represented and that the system sustains itself. To do this, policies on recruitment, training and prevention of gender-based discrimination are vital.
Such policies should be put in place with concrete objectives and tangible results and regular human resource monitoring. By creating more opportunities for women to hold leadership and decision-making roles, asset managers can foster a more inclusive and equitable work environment for social good, as well as benefiting from improved decision-making and improved financial performance
