At Pax World, we believe that investing in companies that invest in women is a smart investment strategy. Holding back half of the world’s population through unequal educational and job opportunities, unequal wages, let alone violence and oppression, is not only morally reprehensible, it’s bad economics. Businesses that ignore what women can bring to the table are handicapping themselves and will eventually fall behind in the emerging global economy. Conversely, those that invest in and empower women will be advantaged. These latter will show themselves to be stronger companies and better long-term investments.
There is a significant body of research suggesting that companies that are successful in promoting women to the most senior levels of business tend to perform better than those companies that do not. A 2007 Catalyst study on board diversity and financial performance1 found that those companies with the highest proportion of women on their board of directors outperformed those with the lowest percentage of women by 66% on the basis of return on invested capital. A study by Francoeur et al. in 2007 found that “firms operating in complex environments do generate positive and significant abnormal returns when they have a high proportion of women officers,”2 whereas Adams and Ferriera found that firms facing greater variability in stock returns have lower female representation among board members.3 Several other studies have likewise found that those companies with higher percentages of women on their boards or in senior management outperform those that lag in gender diversity.4
There is also evidence that companies that are attentive to women as consumers do better: a 2007 paper by Goldman Sachs identified 30 companies—termed the “Women 30” index—that sell products primarily to women. This Women 30 index “has outperformed significantly over the past 10 years: total returns were three times greater than for global equities.”5
Gender equality in employment also boosts economies, as Goldman Sachs noted in the aforementioned study:
“Closing the gap between male and female employment would have huge economic implications for the global economy, boosting US GDP by as much as 9%, Eurozone GDP by 13% and Japanese GDP by 16%.”6
In all of our mutual funds, Pax World seeks to avoid investing in companies that we determine are involved in the exploitation and trafficking of women, whose products demean women or that use negative stereotypes in their advertising, promotion or marketing. Similarly, Pax World endeavors to avoid investing in companies that fail to provide a safe work environment for women by encouraging or tolerating harassment, as well as companies that have a history or pattern of discrimination or mistreatment of women, or other gender-related controversy.
Pax World addresses gender issues, including board diversity, through its proxy voting policies as well. For example, when voting on director elections, Pax World has a policy of withholding votes from, or where possible voting against, all slates of director nominees that do not include women. Pax World then registers its concerns with the company through a follow-up letter explaining the reason for our opposition to the all-male slate and encouraging the company to take steps to promote gender diversity and add women to its board of directors.
We also engage in shareholder activism initiatives aimed at promoting gender equality and women’s empowerment. For example, Pax World is co-leading an engagement with signatories to the United Nations Principles for Responsible Investment aimed at engaging companies around the globe on board and management diversity.
Global Women’s Equality Fund
In addition to the above gender criteria and initiatives, Pax World offers investors a specific fund, the Global Women’s Equality Fund, focused on investing in leading companies around the world when it comes to gender equality and women’s empowerment.
The Pax World Global Women’s Equality Fund (the “Global Women’s Equality Fund”) seeks to invest in companies that take affirmative steps to attract, retain and promote women, and to advance gender equality and women’s empowerment in the workplace and beyond. Specifically, the Women’s Equality Fund seeks to invest in companies that promote gender equality through internal policies and programs, transparency regarding the effectiveness of those policies and programs and accountability among employees to assure implementation and observance of those policies and programs. Examples include:
- Promotion of women to top executive positions and compensating them accordingly,
- Representation of women on the board of directors and in senior management
- Strong support from senior executives for workplace equality
- Career development, education and training programs for women employees
- Hiring and promotion policies and activity to promote gender equality
- Programs to address work/life balance concerns, including in particular women’s health, safety and childcare responsibilities
- Programs to address discrimination against women and to protect women from harassment and violence
- Positive images of women in their advertising, promotion and marketing
- Use of women-owned companies as vendors and service providers
- Accountability and transparency to employees, investors and the communities in which they operate
In addition, Pax World favors companies that embrace or aspire to embrace the best practices embodied in the Women’s Empowerment Principles, a joint initiative of the United Nations Development Fund for Women (UNIFEM) and the United Nations Global Compact.
We believe we are at a tipping point. Eliminating gender inequality and empowering women are finally being recognized, on a global basis, as urgent moral and economic imperatives. We believe gender equality must become an investment concept – a key driver of business success, economic growth and investment returns. In our view, companies that integrate gender diversity and women’s empowerment into their business models will be more successful than their less enlightened competitors. We want to invest in those companies, and we want our shareholders to benefit from their success.
The issues highlighted above are illustrative and do not necessarily reflect the full range of gender empowerment issues Pax World may consider in analyzing a particular security for investment.
Past performance does not guarantee future results.
1Catalyst, “The Bottom Line: Corporate Performance and Women’s Representation on Boards,” 2007.
2Francoeur et al. “Gender Diversity in Corporate Governance and Top Management.” Journal of Business Ethics (2008) 81:83-85.
3Renee N. Adams and Daniel Ferriera, “Gender Diversity in the Boardroom,” August 2004.
4See, for example, David A. Carter, Frank D’Souza, Betty J Simkins and W. Gary Simpson, “The Diversity of Corporate Board Committees and Firm Financial Performance,” Department of Finance, Oklahoma State University, March 15, 2007; and Niclas L. Erhardt, James D. Werbel and Charles B. Shrader, “Board of Director Diversity and Firm Financial Performance,” Corporate Governance (11:2), April 2003.
5Kevin Daly, “Gender Inequality, Growth and Global Ageing,” Goldman Sachs Global Economics Paper No: 154, April 3, 2007: 16.