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March 8 was International Women’s Day and with March being Women’s History Month, it’s reasonable to assume advisors are sourcing more research regarding the intersection of women and investing.
Of course, advisors must be judicious in the research they consume because there are only so many hours in the day and other areas of a practice need tending to. On the upside, much of the research produced involving women and investing pertains to issues such as the potential benefits that an accrue to clients when capital is directed to women-led companies and/or those with above-average female representation on boards of directors.
Currently, the universe of US-listed firms with female chief executive officers is small. However, the number of women in other C-suite positions and on director slates is increasing. Hence, some gender lens investing strategies focus on more elements than just women CEOs.
For advisors and values-driven clients alike, the good news is that female representation on corporate boards is on the rise.
Data Confirm Good News
BNP Paribas Asset Management (BNPP AM) recently revealed some encouraging findings pertaining to female membership on corporate boards. The French bank evaluated the group of approximately 3,000 publicly traded firms in which it invests against the 17,800 in the Institutional Shareholder Services (ISS) database.
“On average, women hold 27% of board seats at companies in which BNPP AM invests; this is up two percentage points from 2021’s figure of 25% and exceeds the 20% average for companies in the ISS database,” notes the asset manager.
Not surprisingly, that theme isn’t linear on a geographic basis, which is to say companies in some regions have work to do when it comes to adding more women to their boards. Last year, 23% of North American firms had a woman on their boards up from 20% in 2021, based on ISS data. Latin America made impressive percentage strides, going to 13% in 2022 from 10% in the prior year.
“National disparities remain. In France, an average of 44% of board members are women at investee companies, compared to 40% for the ISS universe. In North America, investee company female representation levels in Canada and the US are substantially higher than for the ISS universe. Investee company rates in Asia are generally lower,” adds BNP Paribas.
With expectations and, more importantly, evidence in place that international equities may lead domestic stocks this year, regional differences regarding women on corporate boards is relevant to advisors and clients.
“Geographic differences should be viewed in the context of economic, socio-cultural and regulatory factors,” said Michael Herskovich, Global Head of Stewardship at BNP Paribas Asset Management,. “Companies with large market capitalisations tend to integrate diversity issues more easily than smaller companies. Similarly, the existence – or absence – of legally imposed quotas impacts the growth of female board membership.”
Why It’s Important
Obviously, there are myriad factors that go into the securities evaluation process and women being on a company’s board do not guarantee favorable outcomes for clients. That said, gender diversity can have a meaningful, positive impact on long-term returns.
For example, a 2020 McKinsey study titled “Diversity wins: How inclusion matters” notes that “Companies whose boards are in the top quartile of gender diversity are 28% more likely than their peers to outperform financially.”
That data underscores the utility of integrating companies’ gender inclusion statistics, which are readily available, in the investment selection process.
Related: ETF Focusing on Women-Run Companies Delivers Market-Beating Returns