Why should you invest in women? Because it’s 2018. Because it’s the right thing to do. Because you want a better world for your daughter. And not least because there is a strong business case for investing in women.
Yes, the research shows that where women are better represented on corporate boards and in senior management, companies simply perform better.
A Credit Suisse study found that companies with higher percentages of women in senior management outperformed companies with lower percentages over a five-year period in terms of share price and higher return on equity (ROE)1.2 Similarly, a Morgan Stanley report found that companies with greater gender diversity delivered higher ROE and lower volatility than their low diversity peers.3 A February 2016 Peterson Institute survey of nearly 22,000 firms from 91 countries found that the presence of female executives is associated with unusually strong firm performance as measured by both gross and net margins.4 And in 2015, a RobecoSAM paper noted that gender diversity and equality contribute to better corporate performance and investment returns.5
Sodexo, in its own company-wide study of the effects of gender balance in management, found that business units with greater gender balance had higher client retention rates and customer satisfaction ratings.6 MSCI reported in late 2015 that companies in the MSCI World Index with strong female leadership generated ROE of over 10% per year, compared with 7.4% for companies with all-male boards.7 The International Monetary Fund documented a positive association between gender diversity among senior managers and financial performance of 2 million companies in Europe.8
These studies buttress an already robust body of research establishing a link between gender diversity in corporate leadership and financial performance.9 Simply put, gender diversity and competitive financial performance go hand in hand.
Yet women still hold only about 5 percent of CEO positions and 21 percent of board positions among S&P 500 companies,10 and only about 17 percent of senior management positions globally.11 At the current rate of progress, it will take 170 years to achieve global gender parity.12
This is unacceptable.
It’s time to ask ourselves: what can we do to close this gender gap?
Well, we did ask ourselves this very question. Having seen the research demonstrating that companies with gender diverse leadership teams perform better than their less diverse peers, we decided that it was time to invest in these companies.
In June 2014, we launched the first mutual fund that invests in the highest-rated companies in the world for advancing women’s leadership. We wanted to prove in real time, with real money, that companies with more women in leadership can deliver better investment returns. We wanted to offer investors the opportunity to invest in these companies, and to benefit from their vision and their success. And guess what? The strategy has been working. The Pax Ellevate Global Women’s Leadership Fund (PXWEX) outperformed the MSCI World Index for the one-year and three-year periods ending September 30, 2018.13
This outperformance isn’t an anomaly. The team from UBS CIO Wealth Management Research conducted a regression analysis of returns over a six-year period to independently assess whether more gender-balanced S&P 500 companies outperformed the broader market.14 What did they find? You guessed it: Companies with greater diversity tended to outperform.
It’s also worth noting that women want to invest in other women. In fact, 77 percent of women want to invest in companies with diverse leadership teams, according to the Center for Talent and Innovation.15 And according to a recent survey of high net worth investors by U.S. Trust, 34 percent of women are interested in impact investments.16 For many women investors, it’s no longer about earning a fair return OR having a positive impact; it’s about a fair return AND a positive impact.
So, women want to invest in gender diverse leadership teams and gender diverse leadership teams have delivered better financial performance.17 Sounds like a winning proposition to us.
When it comes to advancing gender diversity, we believe investors can make an impact. They can put their money to work by investing in companies that are forward-looking on this front.
This includes companies like Gap Inc., which is a signatory to the UN Women’s Empowerment Principles and where over forty percent of executive management, including CFO Teri List-Stoll, are women. Or American Water Works Company, where women comprise half of the company’s board of directors and Susan N. Story and Linda G. Sullivan serve as CEO and CFO, respectively. Or Accenture, which has set a goal to achieve a gender balanced workforce by 2025 and has implemented numerous programs aimed at attracting, advancing and retaining women, including a sponsorship program. Companies like these—all holdings in the Pax Ellevate Global Women’s Leadership Fund – are leading the way when it comes to advancing gender diversity and women’s leadership.
The fact of the matter is that we can close the gender gap, and we can close it by becoming more conscientious investors. We can make a difference. We just need to put our money to work.
As of 9/30/18, Gap Inc. was 0.04%, American Water Works was 2.1%, Accenture was 0.5% and Sodexo SA was 0.2% of the Pax Ellevate Global Women’s Leadership Fund.
Effective February 26, 2018, the name of the Pax Ellevate Global Women’s Index Fund changed to the Pax Ellevate Global Women’s Leadership Fund.
Risks: Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The Fund does not take defensive positions in declining markets. The Fund’s performance would likely be adversely affected by a decline in the Index. Investments in emerging markets and non-U.S. securities are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation, intervention and political developments. There is no guarantee that the objective will be met and diversification does not eliminate risk.
The statements and opinions expressed are those of the author of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security.