The new report from Glenmede provides more evidence around what we already know about gender-lens investing, namely:
- Companies that take meaningful steps to improve the lives of female employees and workers outperform their peers; and
- Changes to the status quo are taking too long.
These two themes are related and explain the dilemma that investors struggle with: Not enough companies are making meaningful strides toward promoting equity for women, including women of color, even though companies that promote gender equality outperform those that do not. What’s more, even though gender-focused products consistently yield at least the same risk-adjusted returns as their peers, the proportion of capital directed toward gender lens investments is still negligible.
In fact, these themes underpin Women of the World Endowment’s (WoWE) thesis – and why we believe our work is vitally important.
First, as an investor at the intersection of gender and some of the biggest problems of our time and an advocate for positive impact for women and girls, I have long believed that innovation in financial markets can and must be harnessed to improve their lives and those of disenfranchised groups of people.
At the same time, I am a realist who knows that investors will only act when they can make money. It is exciting, then, to have advised on a report that points to more data showing there is money to be made by prioritizing positive change for women. In this report, Glenmede ranked companies according to gender equity by focusing on five key areas: pay equity; access to benefits; training and career development opportunities; anti-harassment policies and diverse supply chains.
The companies in the top 20 percent of gender equity had greater returns – 2.3 percent more – compared to the bottom 20 percent of companies based on the same criteria. In addition, the top 20 percent of companies managed through 0.8 percent less risk than those at the bottom.
This is consistent with our returns at WoWE, where our gender focused public markets portfolio, has consistently performed above its benchmark – MSCI World.
These data points demonstrate that doing right by women employees is connected to doing right by shareholders and stakeholders.
Change is happening too slowly
While these findings are encouraging, the Glenmede report also identifies significant work that needs to be done to foster change.
When it comes to management ranks in U.S. companies, more than 40 percent reported they set gender diversity targets for senior management, but only one-third do so at the junior level. It is no wonder, then, that while women and men enter the workforce in roughly equal numbers, men outnumber women nearly two to one when they reach the first step of the ladder into management.
What this means is that in 2019, women earned 82 cents for every dollar earned by men, indicating an annual compensation gap of $10,122. Compounded over the course of a career, women’s pay gaps can amount to nearly half a million dollars – and this pay gap worsens when race is factored in. Black, Native, and Latina women suffer a career earnings gap closer to $1 million.
More depressingly, this disparity in earnings has health and life consequences: The gap in life expectancy between those in the top one percent of wage-earners, compared to the bottom one-percent, is approximately 10 years.
Gender-lens investing can lead the way
Without significant intra-company diversity and equality efforts, as well as innovation in product development, the rate of change at companies will be too slow to have measurable benefits to the lives of women and girls. Currently, just over 20 percent of public gender-lens investment (GLI) products focus on broader measures of gender equity, including reducing the pay gap, increasing women’s representation in mid-level and junior roles, facilitating work-life balance, and expanding women’s access to benefits, according to the Glenmede report.
That is why at WoWE, we are putting our money where our collective mouth is and co-prototyping innovative products, structures, and methodologies that seek deeper positive impact for women and girls.
We are building our endowment so that it does two things simultaneously: first, it invests all of the capital in its corpus at the intersection of gender and some the biggest challenges of today; and second, plans to grant its income to ecosystem builders seeking to alleviate gender inequality through large-scale solutions.
We can and must innovate within the GLI space, specifically to provide more and deeper products for investors who seek financial performance and measurable benefits on the lives of women.
For more information on WoWE’s progress, please check the WoWE website for updates and follow me on LinkedIn.