Gender overlooked in ESG

Gender diversity is an overlooked element of environmental, social and governance (ESG) investing and will become a bigger part of responsible investing in the future.

A report from Research Affiliates found that climate change was the most important ESG theme to investors, with gender diversity ranking last.

Moya Yip, Active Super head of responsible investment, said climate change was the biggest priority for fund members but expected gender diversity to become a bigger priority in the near future.

“For us, climate change risk is the number one risk facing our members and it’s the one we get the most member inquiries about and feedback,” Yip said.

“But I find it interesting that gender diversity is at the bottom, but I think that is going to change over time. Black Lives Matter has been an American thing, but if we look at what has happened in the US, managers over there have picked up their game to look at diversity and inclusion.

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“It’s quite interesting to see and the more spotlight that’s placed on it, the more people will focus on it and do something about it.”

In its ‘Turning the tide – Impact 2020/21’ report, Active Super voted in 35 companies it invested in to improve board representation of women.

“Good governance is having greater gender and other diversity in leadership,” Yip said.

“Both in senior management and board level because in the long run it leads to better outperformance and valuation of security.

“We advocate for greater diversity, inside our policy we have a sustainable responsible investment policy.

“We want to show that by the way we vote; we have voting guidelines where we want to see action.”

Louise Watson, Natixis Investment Managers country head for Australia and New Zealand, said investors expected business to help solve societal issues.

“Gender is particularly pertinent in the social and governance aspects of ESG investing as investors look to social change, ensuring that women have access to adequate representation on company boards to affect that change,” Watson said.

“Conducted in April of this year, the Natixis Individual Investor Survey revealed to us that while investors took personal responsibility to fix societal issues through investments, their expectations on businesses and government were much higher with 76% agreeing it was the government’s responsibility to tackle societal issues including social change and inequality and 75% agreeing businesses should play a role in addressing societal issues.

“Interestingly, despite 75% of Australian respondents agreeing investors have a responsibility to hold companies accountable for their impact on society, 53% disagreed companies are accountable to shareholders only, not society.”

Watson said transparency and understanding of how a portfolio manager measured social outputs of its investments was fundamental to ensure gender was properly considered by advisers.

“Much can be done here from the ground level by fund managers,” Watson said.

“For example, our private investments affiliate, Flexstone Partners, operates on the belief that having a gender balanced team brings value. They are signatories of the Gender Equality Charter, which, requires specific quantitative gender balance objectives to be met by 2030.

“For Flexstone, they have set a target for women to represent 40% of the investment teams by 2030. This is in addition to ensuring that the team's global culture, workplaces, and HR policy also provide a safe and rewarding working environment for women in the workplace.”