Insights

Gender Lens Investing: Why Is It Important?

By December 9, 2019 No Comments
By Julia Bailey
Julia Bailey

Melior believes that we can help build a better future by investing in companies that are aligned to the United Nation’s Sustainable Development Goals (SDGs) which seek to achieve a fairer, more resilient and sustainable world. Goal 5 aims to achieve gender equality and empower all women and girls. Women and girls make up 50% of the world’s population and therefore providing them with equal access to education, health care, decent work, and representation in political and economic decision-making processes, will fuel sustainable economies and benefit societies and humanity at large.

Gender equality is also a key tool in addressing the climate emergency that population growth is contributing to. Policies such as making family-planning services available and providing education to young women are proven measures of strengthening human rights while lowering the impacts of population growth on GHG (Greenhouse Gas) emissions and biodiversity loss. 1

1 https://science.sciencemag.org/content/361/6403/650

By Julia Bailey

The multi-dimensional impact of gender equality

Melior believes that we can help build a better future by investing in companies that are aligned to the United Nation’s Sustainable Development Goals (SDGs) which seek to achieve a fairer, more resilient and sustainable world. Goal 5 aims to achieve gender equality and empower all women and girls. Women and girls make up 50% of the world’s population and therefore providing them with equal access to education, health care, decent work, and representation in political and economic decision-making processes, will fuel sustainable economies and benefit societies and humanity at large.

Gender equality is also a key tool in addressing the climate emergency that population growth is contributing to. Policies such as making family-planning services available and providing education to young women are proven measures of strengthening human rights while lowering the impacts of population growth on GHG (Greenhouse Gas) emissions and biodiversity loss. 1

Where do the inequalities lie?

The World Economic Forum’s (WEF) 2018 Global Gender Gap report on 149 countries found that although many countries have achieved important milestones towards gender parity such as across education, health, economic and political systems, there is still much to be done. The largest gender disparity relates to political empowerment followed by economic participation.

Source: World Economic Forum and Harvard Business Review

An important measure of gender equality is the female to male pay gap and a significant contributor to the pay gap is the lack of women occupying senior or higher paying roles. A recent survey of 3000 global companies by Credit Suisse found that only 5% of companies have female CEOs. In Australia, Chief Executive Women’s 2019 ASX200 Senior Executive Census found women hold 6% of ASX200 CEO roles and that women make up 25% of ASX200 executive leadership teams.

These figures are echoed by Melior’s proprietary ASX300 gender benchmark (discussed in more detail below), which finds that only 6% of ASX300 companies have female CEOs and that women make up 23% of ASX300 senior management teams.

Australia’s WEF Global Gender Gap Score – ranked 39th out of 149 countries

Source: World Economic Forum

Australia’s progression towards gender equality

The Sustainable Development Report2, 2019 found that “significant challenges remain” for Australia to achieve gender equality Goal 5. The indicators in most need of improvement are:

  1. Pay gap. Australia’s national pay gap was 14% in May 2019. Another important indicator of gender equality is the Super Gap. Australian women currently retire with 47% less superannuation than men. This is a significant contributing factor to 40% of older single retired women living in poverty.
  2. Seats held by women in national parliaments. As of October 2019, women held 37% of seats in the Australian national parliament, still well below 50% proportional representation.
  3. Gender gap in time spent per day doing unpaid work. Australian women continue to undertake a much higher proportion of unpaid domestic and care work with the 2016 Census showing that 33% of women spend more than 15 hours per week on domestic work, compared to 12% of men.

How does Australia compare globally?

Australia ranks 39th in the World Economic Forum’s Global Gender Gap score. Encouragingly, Australia ranks very highly for education and health. However, for economic participation and political empowerment, Australia ranks 46th and 49th respectively.

The Melior Australian Impact Fund and Gender Lens Investing

Gender lens investing (GLI) is an opportunity for investors to promote gender equality on a global scale. GLI is defined by the Criterion Institute as “the incorporation of gender analysis into financial analysis in order to make better investment decisions.”

The Melior Australian Impact Fund is one of the first Australian / NZ listed equities funds to apply a gender lens to its investment process.

Corporate Australia has a key role

Melior believes that large ASX300 companies have a significant role to play in addressing gender equality. Melior applies a GLI assessment on companies that employ more than 10,000 people and/or >5,000 women. There are currently ~35 companies in the ASX 300 that meet these criteria with Woolworths, Wesfarmers, Ramsay Health Care and CBA amongst Australia’s largest private sector employers. These ~35 companies collectively account for ~10% of workplace participation in Australia.

Melior has developed a proprietary gender benchmark for listed companies where we assess companies’ relative ASX300 performance on a number of gender focused factors including:

    • Achieving or targeting gender balance via 40% women, 40% men and 20% either, both at senior management and board levels.
    • Disclosing female to male pay gap data.

Large companies that score strongly across these factors are assessed as being aligned to SDG 5: Gender Equality and are then considered further for investing using our ESG and financial proprietary assessments. We also advocate for all companies to raise ambition around addressing gender equality.

Melior also seeks for the fund to outperform the ASX300 on a number of gender focused KPIs including women in management and women on boards.

Source: ABS, Melior Research

Gender diversity correlates to superior financial performance

In addition to the unequivocal societal and environmental benefits from greater gender equality, there is a growing body of academic and empirical evidence showing the correlation between gender diversity and financial performance. Key recent reports include:

  • McKinsey’s Delivering Through Diversity report3 using data from over 1,000 companies in 12 countries found that companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability (EBIT margin) than companies in the fourth quartile.
  • A major study from Cornell University4 found that board diversity leads to lower returns volatility primarily due to diverse boards adopting less risky financial policies, plus investing more in R&D and producing more and better innovation.
  • A study by S&P Global Market Intelligence5 that looked at 6,000 companies on the Russell 3000 over the last 17 years. The study found that within the first 24 months of appointing female CFOs, companies saw, on average, a 6% increase in profits and an 8% better stock return, compared to performance under male predecessors.

Melior walking the talk

At Melior we have a female CEO and a gender balanced team. On an FTE basis, Melior has:

  • 63% female employees
  • 46% females in our investment team
  • Strong flexible work practices with a third of our team (including our CEO) working flexibly.

We believe this not only contributes to a more inclusive workplace but also greater diversity of thought and talent, and subsequent outperformance potential.

This content is for general information only. In preparing and publishing this content, Melior Investment Management Pty Ltd (ACN 629 013 896, authorised representative no. 001274055) does not seek to recommend any particular investment decision or investment strategy and has not taken into account the individual objectives, financial situation or needs of any investor. Investors should consider these matters, and whether they need independent professional financial advice, before making any investment decision.