Stockholm (NordSIP) – “Time’s up for inequality,” according to UBS Asset Management’s Michael Baldinger, Head of Sustainable and Impact Investing and Valeria Piani, Strategic Engagement Lead, Sustainable and Impact Investing, in a recent “Insights” article.
At a time of rising societal concern with gender equality, UBS’s sustainability specialists argue the financial industry needs to keep up with the times. “With intense scrutiny on issues such as the gender pay gap and the importance of diverse representation at all levels within companies and organizations, it is important for us as investors to evaluate the impact of gender-related issues on investment decisions,” say the authors.
Research shows that there are substantial benefits to gender diversity for the economy as a whole and for financial returns in particular. The article highlights that on a three-year average, gender-diverse global companies exhibit higher profitability. This fact seems to hold regardless of whether the focus is on representation at the board, executive or managerial levels or for the firm’s whole workforce. A 2015 study from MSCI also finds that “companies that had strong female leadership generated a Return on Equity of 10.1% per year versus 7.4% for those without (on an equal-weighted basis).” At the same time, the same study found that “companies lacking board diversity tend to suffer more governance-related controversies than average.” The article points to a study from Morgan Stanley that shows that while women are well represented in the financial industry, leadership positions are overwhelming dominated by men.
“For us, gender diversity is already a key priority and UBS Asset Management (UBS-AM) is well placed to meet the growing demand for products and solutions that can harness the value of gender. In addition to products and solutions, as a firm, we’re putting our principles into practice,” say the authors.”We are a signatory to the Women in Finance Charter, we have an internal women’s network for advancing the interests of female employees and we have implemented clear plans to close the current pay gap between male and female employees.”
Guided by this commitment, UBS partnered with Solactive and Equileap to launch the Equileap Global Gender Equality 100 Leaders, designed to track the leading companies in sustainability and gender. UBS then launched the UBS Gender Equality ETF to give its clients exposure to this segment of the market. As of May 2019, the fund’s 12-month return was up 15.24%, 56bps more than the SP500. According to Baldinger and Piani, “a proportion of the management fee generated by the ETF is donated to the UBS Optimus Foundation in supporting the United Nations Sustainable Development Goal 5 – Empowering Women and Girls. One year on, flows into the fund have been strong.”
One of UBS’s focus is on engagement. “We are undertaking discussions with portfolio companies who missed out on inclusion in the Gender Equality 100 Leaders Index, but are within striking distance,” explain the authors. “In these dialogues, we run through the evidence supporting the business case for gender equality, explain the metrics they are being assessed on, and help them map out a plan for improving their performance, with the goal of being included in the Gender Equality 100 Leaders Index the following year or two.”
“In 2020, proxy voting decisions on Board director and nomination committee members will be informed by the success/failure of the engagement dialogue too,” concludes the article.
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