Published on 30 April 2019

SUSTAINABLE FINANCE

Gender equality: the next challenge in sustainable finance

Thematic funds on gender equality are starting to emerge within companies. And it's not an easy task! Women continue to experience difficulties in attaining corporate leadership roles. The management company Mirova has just created a fund that goes against current statistics, by investing in companies where women have the power. Though this remains a small investment universe, the management company hopes to see it grow.

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Gender equality in top management has become an investment theme for management companies.
@BulatSilva

The world of sustainable finance wants to move away from the "Old Boys Club", seen as a club reserved for white men of a certain age. Investment funds with a corporate gender equality theme are beginning to emerge, to allow investors to put their money towards more inclusive societies. The most recent is Mirova's Women Leaders Equity Fund, which will invest in approximately 50 companies in which women are well represented in top-level management. A few weeks earlier, Nordea Asset Management also launched the Global Gender Diversity Fund.

This trend is continuing to grow. "I don’t see analysts questioning any of these topics,” says Astrid Panosyan, the Executive Director for commercial real estate specialist, Unibail Rodamco Westfield.  "I can see it in climate and carbon footprint issues, not just specialized investors, but I would like to see more external pressure on the subject of gender equality."

Gender equality leading to financial outperformance

The issue of profitability for these thematic funds is no longer questioned. "Today there is much literature demonstrating the link between financial performance and gender equality," says Mathilde Dufour, Head of SRI Research at Mirova, the subsidiary management company of Natixis group.

Created in March 2006, Amazon Euro Fund, a pioneer of the gender equality theme, even tested the investment theory. "Since the creation of the fund, we have surpassed our EuroStoxx 50 index benchmark ten times in thirteen years," said Nicolas de Malézieux, an analyst at FerriGestion in charge of the fund. The Amazon fund invests in about thirty companies, mainly European, taking into account the gender balance of executive committees. Analysts also note the hierarchy of positions occupied by women: the higher their positions, the better the rating.

At Mirova, the fund will focus on companies in which the executive committee is made up of at least 30% women, with a woman CEO or CFO. The gap between the number of women in the overall workforce of the company and in management positions must be less than 15%. The management company will also adhere to proactive policies that promote gender equality in the company, or the placement of women in key positions.

Eligible companies few and far between

This investment universe is still difficult to access for many investors. Bloomberg, which publishes a Gender Equality Index, has certainly seen the number of women in management positions increase by 40% between 2014 and 2017. The Bloomberg Gender Equality Index is composed of 230 companies for 2019, more than double the number in 2018. While 36% of the global workforce at Mirova is women, that figure is only 5% at the top management level.

"Our investment universe is made up of 240 companies in total. This is not a lot," admitted Soliane Varlet, Manager of Mirova's Women Leaders fund.  "Initially creating a fund specific to Europe, but there was not enough net financial value, so we took it to the global level." Mirova's teams will choose approximately 50 of the 240 companies to build their funds.

The global financial interest for gender equality should move companies to action. In any case, this is Mirova’s objective after having implemented a shareholder engagement policy to challenge all the companies in which it invests on gender equality. This is also the goal of the Japanese government, which wants to develop women's employment to fight against the aging workforce currently threatening the country. The Japanese Pension Fund (GPIF) has invested several billion dollars in the MSCI Japan Empowering Women Index in hopes that it will aide in Japan’s company transformation.

Arnaud Dumas @ADumas5


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