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Blog Posts — May 17, 2019

Stora Enso, Fortum Helping Close Europe’s Gender Pay Gap

Stora Enso, Fortum and KPN are among companies helping to put Europe at the forefront of efforts to close the gender pay gap, according to Equileap, a leading organization providing data and insights on gender equality.

Enel and Redrow complete the top-five list of European companies that are making the greatest strides to close the gender pay gap, as reported by data recently disclosed by the research firm. Utilities, consumer cyclicals and communications are developed Europe’s most egalitarian industries when compensating male and female employees, a key factor in the field of corporate governance.

The gender pay gap is a growing societal concern but also a relevant factor among investors observing sustainable principles. According to Glassdoor, British men overall get paid 18% more than women.After adjusting the comparison for people with the same job title, employer and location, men get 5% more than women. The adjusted pay gap increases to 6.4% in Germany and 6.6% in the Netherlands.

Governments are also pushing to make companies more accountable for their pay standards. In the UK, all businesses with at least 250 employees must, since 2017, publish their gender-pay gap figures. Last September, France enforced similar disclosure requirements and now demands companies in the country report actions they are taking to eliminate shortfalls in women’s salaries.

“Europe is leading the way worldwide when it comes to pay-gap reporting, but we are just at the beginning of a movement towards full disclosure,” said Diana van Maasdijk, Chief Executive Officer and Co-Founder of Equileap. “We can’t change what we can’t measure — we need transparency to be able to reach gender equality faster.” 

“We will therefore see a lot more disclosure on gender pay in Europe,” she added. “Companies can no longer avoid this issue; they will have to act up either because of increasing demand from responsible investors or to comply with new regulations that will be implemented in many countries.”

Gender dividend

Using a gender lens to analyze investments goes beyond joining a fair, social cause. Leading investors have become interested in employment-diversity data because of a ‘gender dividend,’ or the returns premium identified by academic research in companies with a higher representation of female employees.The studies have explained above-average financial performance at these companies as a result of richer resources and talent, better understanding of markets, higher retention levels and other causes. These businesses also show lower risks and better safety records, research has found.

Almost $31 trillion in assets were managed under environmental, social and governance (ESG) strategies at the end of 2017,adding pressure on companies to improve and report on their employment and working standards. 

Europe ahead in gender parity

A few years ago, investors were mostly looking at whether there was any woman at the board to define whether a company was doing well in terms of gender equality. Equileap instead takes a holistic approach, assessing and ranking over 3,000 companies on gender equality based on 19 criteria, including gender balance from the board to the workforce, the gender pay gap, parental leave, supplier diversity and policies against sexual harassment. Every year, the research firm publishes a global report including unique key findings on gender equality globally, per country and sector.

European companies are doing more to address gender pay gaps than those in North America or Asia, Equileap said in its annual report last October, which didn’t provide details on single companies by individual criteria. Take just one example: a total of 69% of European companies in the Equileap universe meet international standards on paid parental leave for the child’s primary carer, compared to 46% in Asia-Pacific and 8% in North America. 

On other criteria, such as efforts to combat sexual harassment in the workplace, Europe lags the other two regions. 

Comprehensive gender scorecard

The Equileap Gender Equality Ranking is developed using an exhaustive approach that also incorporates an ESG-exclusion screen to remove businesses involved in controversial activities. 

The 19 criteria are divided into the following four categories:

   A. Gender balance in the overall leadership, management and workforce of a company

   B. Equal compensation and work-life balance

   C. Policies promoting gender equality

   D. Commitment to women’s empowerment, transparency and accountability.

In 2018, the Equileap Top 200 ranking was led by US carmaker General Motors, French cosmetics giant L’Oréal, and France’s Kering, one of the world’s leading luxury-goods manufacturer.  

Glassdoor, ‘Progress on the Gender Pay Gap: 2019.’
See Calvert Impact Capital, ‘Just Good Investing: Why gender matters to your portfolio and what you can do about it,’ Dec. 3, 2018. 
3 Global Sustainable Investment Alliance (GSIA), ‘Global Sustainable Investment Review,’ 2018.