Deeper into Data: Gender Lens Investing Gains Nuance with Improved Data

Supported by Impax Asset Management and Veris Wealth Partners


Companies and asset managers have come a long way in terms of disclosing and gathering data around pay equity, women in senior management, and other gender-related issues. That is allowing investors and managers to take a far more nuanced and detailed approach toward gender-lens investing, which has helped the young ESG sector to grow rapidly in recent years.

Yet numerous challenges around data procurement remain, gender-lens investing practitioners say. That needs to change for this style of investing to really grow, and for companies and society to continue to move toward gender equality.

“Gender data is getting better and better as companies become more transparent about communicating with asset owners about what’s going on under the hood,” says  Deborah Christie, managing director at Cambridge Associates. The most readily available gender data has historically been the number of women on a company’s board or in senior executive ranks. But now, “companies are realizing that asset owners want to know how leadership is tackling workplace equality such as paternity leave policies or gender pay gap issues,” Christie says. “It’s slow going, but the quality of this data is getting better as transparency increases.”

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Gender-lens investing, or GLI, generally means investing in companies that are especially strong on women’s issues, through having more women in leadership positions, through pro-women policies, or other means. The subsector has grown rapidly, from eight products in 2014 to more than 50 today, with total assets of $3.4 billion as of last June, up from $2.4 billion just a year earlier, as CleantechIQ reported.

Asset managers have their own methods and methodologies to determine the best companies to invest in, of course, but it all starts with information — with data.

As Christie notes, the number of women on boards of directors is a commonly used GLI metric, and one that’s attainable from any public company’s SEC filings or from many data providers. Also relatively easy to attain is information on women in top corporate management positions, which also tends to correlate to better company performance, GLI proponents say.

Indeed, those two data points are key factors that Impax Asset Management uses as it constructs the Impax Global Women’s Leadership index that the Pax Ellevate Global Women’s Leadership Fund tracks. “We emphasize those factors in our scoring models because of the well-established body of research” that having more women in those roles correlates with improved company and stock price performance, says Heather Smith, v.p. of sustainability research at Impax.

But managers are also delving deeper, seeking more granular data points about a company’s actions and policies around gender issues.

In fact, today more than 20% of GLI products take into account deeper factors, Veris Wealth Partners says in new research. The sharper focus is on data points like “reducing the gender pay gap; increasing women in the workforce; lowering barriers to women working outside of the home; improving health and well-being; increasing employee engagement; and expanding products and services serving women,” Veris says.

There are several data providers who track such data points, including established providers like Sustainalytics, ISS, Bloomberg and MSCI. It can be harder to find providers of data on deeper measures. The leader among providers of these deeper data points is Equileap, but others are starting to crop up.

For GLI asset managers, it’s crucial that such “emerging providers” have “appropriate coverage of public sector companies,” says Julia Enyart, officer on the sustainable and impact investing team at the Glenmede Trust Co. “I would argue we’re still in early innings at this point.”

For its part, Impax tracks down a lot of gender-related data itself. “We have an internal team that collects data,” Smith says. For instance, “We spend time determining who are the senior decision makers, who reports directly to the CEO, who has direct profit-and-loss responsibility, et cetera.”

For the more granular data points, it’s often up to the companies themselves as to whether the information is shared with data providers and asset managers. And not everything is.

Erika Karp, founder and CEO of Cornerstone Capital, stresses the importance of getting those deeper data points. But, she cautioned while speaking at a recent CleantechIQ panel discussion: “When it comes to pay equity, most companies, certainly in the financial services industry, aren’t going to give you that data.”

Despite such problem areas, the overall quality of gender data has grown in recent years, somewhat keeping pace with investor dollars pouring into the GLI space, as companies respond to pressure from asset managers. “Companies now have a better understanding of the business case, which makes our engagement more robust,” Smith says. “We’re getting much better information from companies today.”

She goes on: “I’ve  been doing this since 2007, and the engagement, when we first started, was rather adversarial. Companies were a little defensive when we asked about gender issues, or they just didn’t respond.” Today, however, “It’s more collaborative.”

Still, data collection remains an imperfect science. “There are certainly gaps in the data,” Smith says, with those gaps getting wider the deeper you go.

Similar words come from Glenmede’s Enyart. “Moving beyond data at the board or senior management level is challenging,” she says. “Gender-lens investing funds will constantly battle expanding their coverage and market-cap range in a limited investment universe, though investor demand and shareholder engagement seems to be incentivizing more and more public companies to unveil data to address their pay equity, parental leave, and diversity policies.

There’s also a difference across geographies, with GLI data much harder to come by in the US than elsewhere. “US strategies will face an especially uphill battle in defining an investable universe until we see significant strides in disclosure,” Enyart says. “For reference, as of 2019, 78% of UK public companies and 50% of Italian public companies were publicly disclosing pay equity data; only 2% of US public companies are currently doing so.”

Another challenge, Smith says, is a lack of consistency when it comes to the deeper data points. “Data on board diversity is consistent, from market to market,” she notes. But on other data points, besides being harder to capture, “there are no standard definitions.”

Within the GLI space, there’s some talk of developing standards around data points, notes Joseph Keefe, president of Impax Asset Management. He’s not sure that’s really necessary, saying it’s likely the market will sort out such issues itself. “Our view tends to be that the market will work these things out over time.”

In fact, the market — that is, progressive-minded investors who are increasingly embracing gender-lens investing — is helping to drive the creation of more GLI products and, by extension, continued improvement in gender data disclosure, even though there remains plenty of room for improvement.

The situation is clearly improving; witness the new California law that companies based there must have at least one woman on their board of directors. And a new report from MSCI says that while progress is “still slow,” last year saw a “noticeable uptick” in female representation on boards: 20.0% of directors were women last year, MSCI says, up from 17.9% in 2018 and 17.3% in 2017. Also, MSCI says, “The number of companies with majority female boards doubled in 2019 compared with 2018.” That huge percentage jump was off a very small base, though, with just 22 such firms now — less than 1% of all the companies in the MSCI ACCI Index.

Still, progress is progress, no matter how small. That progress ought to continue too, since, as Enyart notes, public companies everywhere are increasingly realizing that “they may be excluded from certain strategies if they don’t diversify their leadership’s composition.”

Thanks to all this, she says, “We are seeing significant progress and an expanding product landscape in response to gender lens investors’ calls.” That landscape only looks like it will continue to grow, aided by investor demand and improved data.

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