Published on 08 July 2018

SUSTAINABLE FINANCE

What the #METOO movement means for company financial risk

The massive American pension fund, CalPERS, which manages $355 billion in assets, is asking management companies to disclose their ongoing and past harassment cases. The goal is to avoid financial and reputational risk, since from the start of the #MeToo movement, accusations of sexual harassment have brought down the prices of the companies involved.

Since the #MeToo movement began, several pension funds and management companies have advocated for greater transparency in sexual harassment cases.
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CalPERS, the largest American pension fund, which manages $355 billion in assets, is tackling sexual harassment. It asks management companies – those responsible for their financial management or those in which it holds a stake - to set up a "#MeToo-compatible" policy, named after the movement that was launched on social networks to denounce sexual harassment and sexual violence.

The challenge for businesses is to become fully transparent about ongoing or past sexual harassment cases. It's not surprising to see CalPERS leading the way in the demand for transparency,' said Erika Karp, founder and CEO of Cornestone Capital Group, to Bloomberg. “They have in the past been very proactive and progressive," she added.

A proactive approach to #MeToo

"Regarding sexual harassment, it took the #MeToo movement to trigger a pro-active approach on the part of investors," said Jade Dusser Afonso, head of market analysis at the Novethic research centre. Sexual harassment is now considered a systemic financial risk, as was the case with climate five years ago.

LACERA, Los Angeles County Employees Retirement Association, which manages $56 billion in assets, has also added sexual harassment risk in its management contracts. "This is the best way to protect our investment, from a legal point of view," Jonathan Grebel, an investment manager, told the Financial Times. This fund requires duty of vigilance and prevention for all company systemic risks, including sexual harassment.

Financial and reputational risk

Examples of the consequences already exist, such as the bankruptcy of the studio founded by Harvey Weinstein. As the first target of the #MeToo movement, the producer was accused of rape and sexual assault by multiple actresses. Other cases followed, including one against Steve Wynn, head of Wynn Resorts, who resigned in late January due to charges of sexual harassment. The group fell 16% on the stock market. When Paul Marciano, CEO of Guess, left on 13 June for the same reasons, the price of the brand plummeted by 21%.

"Companies that tolerate such behaviour could pay for it in a variety of ways, from consumer boycotts to lower revenues and profits," added the website Impact Investing Change. According to them, 2018 will be the year that responsible investors take sexual harassment into account in their company policies.

Marina Fabre @fabre_marina


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