Investing in Women is Smart Investing

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Why should you invest in women? Because it’s 2019. 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 202 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?

A Fund that Invests in Women

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 December 31, 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.

Making an Impact

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.

  1. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
  2. Credit Suisse, The CS Gender 3000: The Reward for Change, September 2016.
  3. Morgan Stanley, Putting Gender Diversity to Work: Better Fundamentals, Less Volatility, May 2016.
  4. Marcus Noland, Tyler Moran and Barbara Kotschwar, Peterson Institute, Is Gender Diversity Profitable? Evidence from a Global Survey, February 2016.
  5. RobecoSAM, Does corporate gender equality lead to outperformance?, September, 2015.
  6. Michel Lanel, “Why Gender Balance Can’t Wait,” Harvard Business Review, March 8, 2016.
  7. MSCI, Women On Boards: Global Trends in Gender Diversity on Corporate Boards, November 2015.
  8. IMF, Gender Diversity in Senior Positions and Firm Performance: Evidence from Europe, 2016.
  9. Visit Pax World’s Gender Research page for a list of studies on the relationship between gender diversity and corporate performance: https://paxworld.com/category/research/gender/
  10. The S&P 500 (Standard & Poor’s 500 Index) is an index of 500 stocks seen as an indicator of U.S. equities and a reflection of the performance of the universe of large capitalization companies.
  11. Catalyst, Women in S&P 500 Companies, June 2017. Pax Gender Analytics, 2017.
  12. The World Economic Forum, Global Gender Gap Report 2018, December 2018.
  13. The annualized returns for the Pax Ellevate Global Women’s Leadership Fund – Investor class as of 12/31/2018 were, 1 year: -7.74%, 3 year: 6.88%, 5 year: 5.06%, 10 year: 8.60%. The annualized returns for the Pax Ellevate Global Women’s Leadership Fund – Institutional class as of 12/31/2018 were, 1 year: -7.51%, 3 year: 7.15%, 5: year 5.31%, 10 year: 8.86%. The returns for the MSCI World Index as of 12/31/2018 were, 1 year: -8.71%, 3 year: 6.30%, 5 year: 4.56%, 10 year: 9.67%. The returns for the Pax Global Women’s Leadership Index as of 12/31/2018 were, 1 year: -6.20% and 3 year: 6.99%. A fund’s performance for short time periods may not be indicative of future performance. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For most recent month-end performance information, visit here. Total annual Pax Ellevate Global Women’s Leadership Fund operating expenses, gross of any fee waivers or reimbursements, for Individual Investor Class and Institutional Class shares are 0.80% and 0.55%, respectively, and 0.80% and 0.55% net of fee waivers, as of the 5/1/18 prospectus supplement. Fee waivers are contractual and will remain in effect until at least December 2019.
  14. UBS CIO Wealth Management Research, On the road to parity, Q1 2016.
  15. Sylvia Ann Hewlett and Andrea Turner Moffitt with Melinda Marshall, Center for Talent and Innovation, Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth, 2014.
  16. U.S. Trust, U.S. Trust Insights on Wealth and Worth®, 2017.
  17. Visit Pax World’s Gender Research page for a list of studies on the relationship between gender diversity and corporate performance: https://paxworld.com/category/research/gender/

As of 12/31/18, Gap Inc. was 0.03%, 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.

PEX000663

Joseph Keefe
Joseph Keefe
Joe Keefe is President and CEO of Pax World Funds (“Pax”) and President of its investment adviser, Impax Asset Management LLC, formerly Pax World Management LLC, as well as CEO of its majority-owned subsidiary, Pax Ellevate Management LLC. Under Joe’s leadership, Pax has become one of the leading innovators in the rapidly growing field of sustainable investing. He is Co-Chair of the Leadership Group for the Women’s Empowerment Principles, a joint program of the United Nations Global Compact and UN Women, and was honored at the United Nations with the Women’s Empowerment Principles Leadership Award in 2014. Joe has been named by Ethisphere magazine as one of the “100 Most Influential People in Business Ethics” five times, and the Financial Times named him one of its 10 “top feminist men,” for his work helping women succeed in business and beyond. In 2016, Joe was named the University of New Hampshire’s “Social Innovator of the Year” and received the Global Leadership Award from the World Affairs Council of New Hampshire.
Sallie Krawcheck
Sallie Krawcheck
Sallie L. Krawcheck's professional mission is to help women reach their financial and professional goals. She is the CEO and Co-Founder of Ellevest, a digital investment platform for women. She is the Chair of Ellevate Network, a many-thousand-strong global professional woman’s network, and she was a founder of and is currently a consultant to Pax Ellevate Management, investment adviser to the Pax Ellevate Global Women’s Leadership Fund, which invests in the highest-rated companies in the world in advancing women’s leadership. Sallie is the author of Own It: The Power of Women at Work, released in January 2017. She has been named among the top ten of Fast Company’s “100 Most Creative People” list. Before becoming an entrepreneur, she was CEO of Merrill Lynch Wealth Management and of Smith Barney.