Why Gender Equality Should Matter to Investors and Companies

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By Mary Boyd - March 8, 2019

International Women's Day is an annual celebration on March 8 that's intended not only to raise awareness of women's social, economic, cultural and political achievements but promote a "gender-balanced world."

Hannah Herold and Francesca Albino, two research analysts on our Environmental, Social and Governance (ESG) and Investment Stewardship team, discuss what the increasing emphasis on gender-balanced workplaces and boardrooms may mean for investors and companies.

What is ESG investment analysis?

Hannah: In our ESG business, this analysis is part of our fundamental research and investment decision-making process. Francesca and I assess a broad spectrum of ESG issues. From gender diversity to climate change to corporate conduct, we try to gain a deeper understanding of the potential negative and positive financial impacts that these factors may have on the companies we're evaluating for potential investment.

Why is gender diversity gaining importance among investors and companies?

Francesca: The conversation around gender diversity has become increasingly important for both companies and investors. Investors are beginning to view gender diversity as a value driver in organizations. And academic research1 supports this viewpoint—data shows that companies led by gender-diverse management teams have historically been more profitable than those led by all-male management teams. As gender diversity plays a larger role in corporate strategy and performance, companies that struggle with the issue may risk losing opportunities for better performance and increased investment.

Has increased attention on gender diversity influenced the regulatory environment?

Hannah: Yes. Depending on where they operate, companies may face increased regulatory pressure to address gender parity, especially at the board level. For instance, California passed legislation last year that requires publicly traded companies with principal executive offices in the state to have a certain number of women on their boards. Those that don't follow the new law will face six-figure fines. We may to see more of this type of legislation in the future, particularly in developed markets. We're seeing added scrutiny regarding the gender pay gap as more companies in the U.S. are now disclosing that information.

Are you seeing a shift in the way companies think about women in their workforce?

Francesca: Yes. The conversation around gender diversity is beginning to expand beyond corporate governance and regulatory risks. It's opening more minds to broader ideas and discoveries about the value women add to the workforce. Increased regulation around gender quotas may no longer be the primary factor driving companies to hire women for particular roles. They may also be motivated by the realization that gender equality is a global movement.

What attracted you to American Century Investments?

Hannah: From the onset, I felt there was more diversity at American Century, and I was also impressed with how deeply rooted the company is in ESG. In my view, that gives even greater credibility to the work the ESG team is doing on the investment side of things.

Francesca: It was really ESG as a whole. I feel our business structure and ESG principles are uniquely progressive. The company distributes more than 40% of its dividends to the Stowers Institute for Medical Research  through its unique ownership structure. When I learned that during the interview process, I saw it as evidence of a commitment to doing good things beyond just making money for investors.

1 McKinsey & Company, January 2018 Study: Delivering Through Diversity  

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Francesca Albino
Francesca Albino
ESG Associate Analyst
Hannah Herold
Hannah Herold
ESG Associate Analyst
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    The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.