ESG

Impact of Gender Equity

What is ESG

• Environmental, social, and governance (ESG) criteria measures a company’s progress toward achieving social goals in addition to creating shareholder value
• 5 Ways of Value Creation

Source: McKinsey

Investors are pushing for ESG focused investment

ESG in Philanthropy

• ESG provides a way to express institutional values.
• Employees, volunteers, donors, and stakeholders take notice of the companies you favor and those you don’t, especially in the area of investing.

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• ESG focus can help nonprofits avoid long-term risks (e.g., climate)

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• Fidelity to ESG demonstrates commitment to diversity, equity, and inclusion.
• For many donors, ESG matters a lot.
• Several national grants are only awarded to nonprofits that invest in ESG funds

Sources: Forbes1, Global Giving, Board Effect, Forbes2

Gender and ESG

• S (social) aspect of ESG aligns with Gender Equity and Diversity

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• Investor concerns
• Impact of discrimination and harassment incidents
• Prioritization of gender issues in corporate engagements

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• Investors are increasingly incorporating assessments of companies’ gender diversity and equity to determine how they might respond to ESG risks and opportunities.
• Companies are facing external pressures from institutional investors, activist shareholders, and potential employees and customers to increase the representation of women on corporate boards, in C-suite positions, and across executive leadership, as well as equal compensation and mobility for women and people of color.

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• Gender lens investing: Practice of investing in companies that show a commitment to putting women in leadership, including the board of directors and all levels of management.

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Sources: Fidelity, Sustainalytics, S&P Global

Double click image to open research paper

Gender and ESG (1/2)

• G (governance) aspect of ESG aligns with Gender Equity and Diversity

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• Increased gender diversity leads to enhanced ESG standards that leads to stronger corporate performance
• Tracking metrics including gender parity will enable businesses to set appropriate goals, manage risk, design effective initiatives, demonstrate D&I successes to stakeholders, and engage their workforces – resulting in better business outcomes.

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• Higher proportion of women in business leadership—including on boards of directors and in senior management—lead to better overall company performance

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Sources: Investopedia, International Financial Corporation, Grant Thornton

“Over a five-year period (2011–2016), U.S. companies that began the period with at least three women on the board experienced median gains in return on equity (ROE) of 10 percentage points and earnings per share (EPS) of 37%

In contrast, companies that had no female director as of 2011 experienced median changes of -1 % point in ROE and -8% in EPS over the study period” Wisdom Tree

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Gender and ESG (2/2)

• Covid-19 and renewed focus on ESG globally has meant leaders now see inclusion measurement as more of a priority
• In prevailing hybrid work environment ESG related D&I metric being used to ensure & track workforce engagement
• Remote work environment and other social pressures have created new obstacles to building connection and engagement

Sources: Grant Thornton

Regulatory Landscape

• The European Commission has announced new proposals that will require firms with more than 250 employees to report information on their gender pay disparity.
• Sparked by the COVID-19 outbreak, includes pay transparency measures such as salary information for job seekers, a right to know the wage levels of individuals doing the same job, and gender pay gap reporting duties for large corporations. The proposal also enhances workers' access to legal support and boosts their options for asserting their rights.

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• While not yet mandatory in the U.S., more companies are reporting gender pay gaps, due to pressure from investors, customers, and government regulation in an effort to improve their ESG scores
• Mandatory in many jurisdictions (CA, CO, CT, MD, NV, RI, WA, NYC) to advertise salary with job posting

Sources: Conservice ESG, PEquity

Closing the Gender Equity Gap with ESG

• Sustainability, diversity, and gender equality are becoming more prevalent social issues as corporations and investors aggressively incorporate stronger ESG
• Companies are striving to address pay disparities based on gender, race, and other demographic characteristics as consumers and investors focus more intently on these inequalities
• ESG improve D&I that in turn lead to
• Committed Employees
• Greater Innovation
• Stronger performance

Sources: Conservice ESG