Leveling the Playing Field: Investing with a Gender Lens

Key Points

• We believe that incorporating a gender lens in investment research may provide constructive insights into company strength, while also potentially bolstering societal and economic progress. 
• We live in a world today where gender biases and inequities still exist in many key areas of our society, including the systems designed to protect our health and wellbeing.
• We believe that if society fails to identify and value all factors that contribute to economic productivity, including unpaid labor, resource misallocations and labor imbalances could remain. 
• Investors can use the gender-lens approach when assessing potential investments, as a company that leverages the full potential of its workforce may reap stronger financial performance and stability.

According to the latest US census and the US Bureau of Labor Statistics, 50.5% of the US population[1] and 47% of the civilian workforce[2] is female. Yet our culture today in many ways still comes up short in recognizing women as relevant and productive members of society. Evidence of this can be found in product research, in methods for gauging economic production, and in traditional workplace systems and policies, all of which could be improved to effect better outcomes. “Women hold up half the sky,” as Mao Zedong so eloquently proclaimed, yet if we fail to design systems that acknowledge and support the needs and contributions of women, society’s potential may not be fully realized. We believe that incorporating a gender lens in investment research may provide constructive insights into company strength, while also potentially bolstering societal and economic progress. 

Gender Inequity Is the Norm

There are innate differences between men and women, from both biological and cultural standpoints. On average, men and women are built differently, with marked distinctions in anatomy and physiology. Yet historically, in many ways these differences went overlooked. We live in a world today where gender biases and inequities still exist in many key areas of our society, including the systems designed to protect our health and wellbeing.

Take, for example, automobile safety tests in the US and European Union. Regulators and car manufacturers have used crash test dummies (i.e., seat-evaluation tools) for decades in simulated car accidents to enhance vehicle safety. However, the crash test dummies used most frequently in these impact tests were designed to replicate the proportions of the average man in the 1970s. Despite the variations between men and women’s body composition, skeletal structure, height and weight, the world’s very first anatomically correct female crash test dummy was not introduced until just last year thanks to Swedish scientists.[3]

Consequently, there is a significant gap in information on how women’s bodies react during automobile collisions, as well as how seats, seatbelts and airbags could be designed to better protect a more diverse range of body types.[4] Perhaps owing to this incomplete knowledge and understanding of automobile safety, women are 17% more likely to die in a car crash[5] and 73% more likely to sustain serious injuries in front-end collisions.[6]

Similar examples of gender inequality can be found in our health-care system. For instance, cardiovascular disease (CVD) is a leading cause of death for both men and women worldwide. However, women with CVD are far more likely to be misdiagnosed or undertreated, and consequently have poorer outcomes and higher mortality rates than men.[7] One key factor in this disparity is the underrepresentation of female participants in research, as several meaningful CVD studies in the 1980s and 1990s overwhelmingly involved male participants. While these studies did not directly exclude women, eligibility criteria often disqualified women of reproductive age and/or people with other diagnosed medical issues, often affecting more women than men.[8]

This underrepresentation has contributed to a lack of awareness and understanding of CVD in women, which is especially problematic when you consider that heart disease presents differently across sexes. For instance, while chest pressure is a classic symptom of a heart attack in both men and women, women are more likely to also report sweating, nausea and vomiting, and pain in the abdomen, back, neck or throat. Additionally, men and women have different risk factors and require different diagnostic workups. For a suspected heart attack, a provider may order a cardiac troponin test, which measures circulating levels of troponin, a protein released in the bloodstream when heart muscle is damaged. However, the clinical threshold signaling a heart attack could be lower for women than for men. Providers have only recently begun to apply sex-specific thresholds for certain diagnostic tests.[9] 

Economic Implications of the Status Quo

In addition to physical distinctions, there are also differences in societal contributions between men and women. While progress has been made to narrow gender gaps both at work and at home, research reveals that disparities remain. Businesses that fail to recognize the demands on their employees outside work, and to acknowledge that men and women often shoulder different household and caregiving responsibilities, run the risk of losing out on the full potential of valuable resources. These companies may also risk making potentially flawed and damaging operational and executive-level decisions. Similarly, as a society, if we fail to identify and value all factors that contribute to economic productivity (including unpaid labor), resource misallocations and labor imbalances could remain. 

Consider, for instance, the neoclassical approach to calculating gross domestic product (GDP). This widely accepted theory of economics centers on the concept of supply and demand as the driver of market activities. However, unpaid work—including household duties, such as cooking and cleaning, as well as caring for children and the elderly—falls outside the laws of supply and demand. Therefore, despite being a critical function in a productive society, unpaid work is largely excluded from GDP calculations. 

Globally, women spend a disproportionate amount of time on unpaid care work, at a rate of two to ten times more than men.[10] In the US, on any given day, 49% of women perform housework, such as laundry or cleaning, compared to 21% of men.[11] If women in the US earned the minimum wage for all their 2019 unpaid household and caregiving work, according to estimates, they could have collectively brought home $1.5 trillion.[12] While unpaid care and domestic work is currently unaccounted for in our economy, the International Labour Organization estimates that the total value of this unpaid labor could fall between 10% and 39% of GDP.[13]  

Discounting unpaid labor, which is crucial in supporting economic production, contributes not only to the miscalculation of economic growth but also to how compensation—and hence wealth creation—is determined. This may be reflected in the gender-biased income disparity that exists today. While progress has been made over the years in the corporate world, particularly in increasing diversity and providing services that support women in the workplace, there is much more work to be done.

Why Now?   

The Covid-19 pandemic upended our daily lives, both at work and at home, and highlighted the challenges facing many people in the wider workforce. Data has shown that the pandemic had a disproportionate impact on women, especially those with children under ten years old.[14] In 2020, women made up approximately 39% of global employment but accounted for about 54% of overall job losses.[15] The reasons for this were probably twofold: women were more likely to assume the increased amount of unpaid care responsibilities, and a greater number of women worked in service industries (e.g., restaurants, hospitality, travel, education and health care) that were more directly affected by the crisis than other sectors.[16] Accordingly, the pandemic had a pullback effect on the progress women have made in the workplace. However, with these setbacks to gender equality and economic growth come opportunities to deliver solutions to alleviate productivity limitations and societal headwinds.

When people choose to leave their jobs, or even take a step back in the workplace, they face near-term and long-term financial and economic implications. People experience lost wages, social-security payments and long-term income, which is particularly problematic when you consider that women, who are leaving in greater numbers than men, tend to live longer. There is also a true economic impact on the companies losing these experienced women employees. These companies need to increase spending in hiring and training new individuals to replace more seasoned personnel.

On the upside, the Covid-19 crisis facilitated the growth of remote and hybrid working arrangements. This flexibility could provide longer-term benefits to employees, particularly to women who more often need to pause their careers to accommodate family needs. This ability to work from home, without the fear of jeopardizing a career, has the potential to be beneficial and truly empowering for many women.

Investing in Women, Supporting Positive Change

Recognizing and working to narrow gender biases in the workplace can result in better economic and societal outcomes for collective benefit. To achieve this, we believe company systems and policies should acknowledge and support outside demands on their employees, recognizing that the needs of their female staff may differ from those of their male counterparts. Empowering women to continue in their careers should not only benefit employees but their employers as well, granting companies access to the full potential of resources available to them.

This gender lens can also be used by investors when assessing potential investments, as a company that leverages the full potential of its workforce may reap stronger financial performance and stability. Research has shown that an equal-weighted portfolio of public companies ranked among the Fortune 100 Best Companies to Work For® earned an excess return of 2.0 to 2.7% annually, and the result was even higher during times of financial crisis.[17] In our view, the implication here is that employee satisfaction is positively correlated with financial performance. 

For this reason, we believe human capital can be an important factor when assessing potential investments. Employee satisfaction ratings can flag potential issues within an organization that could affect financial returns. In addition, we prefer companies that promote diversity within leadership positions. Companies without diversity in their leadership positions, whether at the board or executive level, can risk excluding valuable perspectives with relevant implications. In fact, public studies show that companies with no representation of diversity on the board tend to underperform those with at least some representation.[18]

Companies offering support services to women may sway them to remain in the workforce while juggling the unpaid responsibilities that have grown in importance over the last few years. Analysis in the aftermath of the pandemic indicates that the benefits women desire include flexible and remote work options, as well as paid family leave. Further analysis reveals that some of the key practices in promoting progress toward gender equality include emergency backup childcare services and personal leave for mental health care, along with various training opportunities and career development programs.[19] In our view, practices that provide for more gender-equitable opportunities can positively influence financial performance over the long term.

Conclusion

In today’s post-pandemic environment, there are many signals that could raise concerns regarding our outlook for economic growth, as well as social wellbeing. In our view, in addressing these concerns, it is vital to level the playing field for all people who choose to participate in the workforce.

Women are a growing economic force, earning the majority of college degrees today[20] and representing a group of consumers with increasing influence and buying power.[21] Women controlled $31.8 trillion in global spending as of 2019, influencing 83% of all consumption in the US.[22] Worldwide, they are forecast to influence 75% of discretionary spending by 2028.[23] Taking a gender lens to decision-making and providing women and girls with the tools to succeed has the potential not only to enhance individual circumstances, but also to improve the economic and social conditions for those around them.

[1] U.S. Census Bureau. As of March 22, 2023. https://www.census.gov/quickfacts/fact/table/US/LFE046221

[2] US Bureau of Labor Statistics. Last modified September 8, 2022. https://www.bls.gov/emp/tables/civilian-labor-force-summary.htm

[3] World Economic Forum. December 7, 2022. https://www.weforum.org/agenda/2022/12/female-crash-test-dummies-road-safety-gender-equality/#:~:text=Vehicle%20crash%20tests%20are%20only,the%20male%20and%20female%20anatomy

[4] World Economic Forum. December 7, 2022. https://www.weforum.org/agenda/2022/12/female-crash-test-dummies-road-safety-gender-equality/#:~:text=Vehicle%20crash%20tests%20are%20only,the%20male%20and%20female%20anatomy

[5] National Highway Traffic Safety Administration. May 2013. https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/811766

[6] University of Virginia. July 10, 2019. https://news.virginia.edu/content/study-new-cars-are-safer-women-most-likely-suffer-injury

[7] Harvard Health Publishing. October 15, 2020. https://www.health.harvard.edu/blog/gender-differences-in-cardiovascular-disease-women-are-less-likely-to-be-prescribed-certain-heart-medications-2020071620553

[8] Time. April 1, 2019. https://time.com/5499872/women-heart-disease/

[9] Brigham and Women’s Hospital. March 27, 2023. https://give.brighamandwomens.org/7-differences-between-men-and-women/

[10] OECD Development Centre. December 2014. https://www.oecd.org/dev/development-gender/Unpaid_care_work.pdf

[11]US Bureau of Labor Statistics. June 23, 2022. https://www.bls.gov/news.release/atus.nr0.htm#:~:text=%2D%2DOn%20an%20average%20day%2C%2021%20percent%20of%20men%20did,with%2049%20percent%20of%20women.

[12] The New York Times Magazine. February 22, 2021. https://www.nytimes.com/2021/02/17/magazine/waged-housework.html#:~:text=A%20year%20ago%2C%20Oxfam%20circulated,have%20been%20almost%20%2411%20trillion

[13] The OECD Forum Network. September 10, 2022. https://www.oecd-forum.org/posts/redefining-reality-the-truth-behind-the-unpaid-care-economy

[14] McKinsey & Company. May 8, 2021. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/seven-charts-that-show-covid-19s-impact-on-womens-employment

[15] McKinsey & Company. July 15, 2020. https://www.mckinsey.com/featured-insights/future-of-work/covid-19-and-gender-equality-countering-the-regressive-effects

[16] McKinsey & Company. July 15, 2020. https://www.mckinsey.com/featured-insights/future-of-work/covid-19-and-gender-equality-countering-the-regressive-effects

[17] Financial Analysts Journal. Last revised July 27, 2022. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3933687

[18] The Pipeline. December 7, 2022. https://execpipeline.com/women-count/women-count-2022/

[19] McKinsey & Company. October 18, 2022. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace#/

[20] National Center for Education Statistics. May 2022. https://nces.ed.gov/programs/coe/indicator/cta/undergrad-degree-fields

[21] Nielsen. November 2022. https://www.nielsen.com/insights/2022/a-marketers-trifecta-women-the-world-cup-and-holiday-shopping/

[22] Nielsen. November 2022. https://www.nielsen.com/insights/2022/a-marketers-trifecta-women-the-world-cup-and-holiday-shopping/

[23] NIQ. November 7, 2019. https://nielseniq.com/global/en/insights/commentary/2019/brands-its-time-to-wise-up-to-women/

Authors

Julianne McHugh

Head of sustainable equities

Karen Miki Behr

Portfolio manager