Blog Posts — March 8, 2021

Celebrating Women’s Advancement and the Role of Financial Markets

As we celebrate International Women’s Day on March 8, the asset-management industry can take stock of its role in advancing women’s standing in the corporate world, and recognize how much more needs to be done. 

Gender equality has increasingly become embedded in corporate policies within the world’s largest firms, across all sectors. A handful of pioneering countries have imposed quotas for women at top management level and demanded gender pay gap reporting. With more information available, gender-related data has filtered down to mandates within socially-minded investors, and been integrated into large portfolios around the world.

In spite of that global progress, data show that we are only at the beginning of the gender equality journey. The pay gap between men and women in the European Union has shrunk every year since 2014, but it has done so at a modest pace: moving from 15.7% in 2014 to 14.1% in 2018.1 Only 4% of the 500 largest US companies have a female chair of the board, according to a report from Equileap last year.2 It has been reported that there are more chairmen named John in the US than there are chairwomen.3,4

The role of investors

Investors have played a pivotal role in forcing change within public companies. Today in many countries women are better represented in the private sector than they are in public agencies and elsewhere.

The growth of ESG strategies has accelerated this trend by shining the spotlight on female employment rights and putting the topic on par with popular campaigns such as climate action. ESG is no fringe strategy: assets allocated to funds with a responsible focus more than trebled in 2020 to $189.8 billion, after attracting a net $97.4 billion during the year.5

Within these asset pools, funds with a positive impact focus have gained noticeable traction. These are investments that allocate capital along measurable outcomes that bring solutions to social and environmental issues. They align themselves, for example, with principles such as the United Nations’ Sustainable Development Goals (SDGs), of which No. 5 is gender equality.     

With more assets under management comes leverage to drive change, and more and more companies are keen to engage and to meet generally accepted standards such as equal career possibilities. 

Norway’s oil fund, which owns almost 1.5% of the equity in the world’s listed companies, last month issued a position on gender diversity that will serve as the basis for discussions between the fund and its investee companies.6 The position calls for women to have no less than 30% representation on boards, and if not, companies should consider setting targets for gender balance and report on their progress. 

The emergence of exchange-traded funds and other listed vehicles7 with a gender focus means joining this campaign shouldn’t be limited to large sovereign funds. One of Qontigo’s indices, the iSTOXX® Global Women Leadership Select 30 Index, selects stocks from the STOXX® Global 1800 Index that have a relatively high proportion of women at board level, in addition to a high dividend yield and low volatility. This index has underlied over 15 structured products to date. 

Another one, the iSTOXX® MUTB Japan Empowering Women 30 Index, underlies an exchange-traded note in Japan, where former Prime Minister Shinzo Abe made ‘womenomics’ a topic of national interest.

In another development to help investors integrate gender data into portfolios, all of STOXX’s ESG indices, as well as many key benchmarks, now report on gender pay gap and female board member ratios.

The road ahead

Many investors have followed gender diversity strategies because of academic studies and empirical research that point to increased efficiency and productivity for gender-diverse boards. Many others do it simply for the social purpose of a fairer world.    

To continue building on what’s been accomplished, investors need corporate data that is global and comprehensive to be able to allocate capital to those companies leading the way. Corporate gender data is, to a large extent, exclusively obtained from medium-sized and large companies in developed markets. As always, regulation to require listed companies to do more will be welcome as long as the rules are practical and reflective of different realities. 

There is no better way to celebrate Women’s Day than to acknowledge how far we’ve come in only a few years — and to take courage to continue working towards full gender equality.

1 Justice and Consumers Directorate-General, European Commission, ‘Equal Pay? Time to close the gap!’ 
2 Equileap, ‘Gender Equality in the U.S.,’ December 2020. 
3 Maria Minor, ‘Did You Know The Total Number Of Female Chairs Of The Board Are Less Than Male Chairs Named John?’ Forbes, Dec. 21, 2020. 
4 For an in-depth look at the positioning of women across ranks at US companies, visit ‘Women in the Workplace,’ McKinsey & Co.
5 Data from TrackInsight.
6 Norges Bank Investment Management, ‘Diversity on the Board – Position Paper,’ Feb. 15, 2021. 
7 According to Veris Wealth Partners, assets in so-called Gender Lens Investing (GLI) products such as mutual funds, ETFs and bonds grew to $3.4 billion as of Jun. 30, 2019, from $2.4 billion in 2018.