Companies that fail on gender equality tend to underperform financially, display poorer decision-making and could now lose investor funding under a new push from Australian superannuation company Verve Super.
The women-led fund is launching Australia’s first gender equality investment index, which will see it allocate investments based on how companies perform on four gender equality metrics.
These include gender pay parity, promotion of women into leadership, formal commitments to provide flexible workplace practices and drive change inclusivity and anti-sexual harassment and workplace safety policies.
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And it wants other super funds to follow in its footsteps.
“We want to drive better returns for our members. As a superannuation fund, our primary purpose is to deliver better returns to members, and we absolutely believe this will,” Verve Super CEO Christina Hobbs told Yahoo Finance.
“Beyond that, what we really want to do is start driving other super funds to take this into consideration.
“Australian super funds control half of the Australian stock exchange, so they’ve got huge power as investors, but at the moment we’re not seeing any of that energy directed towards trying to promote better gender equality and inclusion.”
Prioritise equality and inclusion: The data backs it up
Companies that have gender diversity on their executive teams are 21 per cent more likely to experience above-average profitability, a 2018 McKinsey & Company study found.
At the same time, those with a poor representation of women and other minority groups on the leadership team are 29 per cent more likely to underperform on profitability.
The Centre for Ethical Leadership in 2013 found that companies with more diverse workforces experienced greater productivity, creativity, employee engagement and improved decision-making.
And Verve analysis found that the companies it selected for the gender equality index outperformed the ASX200 by nearly 100 per cent over the last three years.
“We were super surprised… that no one’s really taking gender equality and inclusion seriously in their investment approach,” Hobbs said.
“We haven’t seen any ethical funds seriously look at divesting from companies that don’t treat women well in their workplaces, and don’t have good policies and processes that support flexibility and diversity and inclusion.”
She said super funds should also be looking at equality and inclusion from a risk perspective.
“We know that where companies fail to perform on diversity and inclusion, where they don’t have policies and processes that promote leadership, they also have financial ramifications.
“It seems like a huge missed opportunity in the financial services sector.”
How does it work?
Verve Super will use standardised data from private sector organisations that submit an annual report to the Workplace Gender Equality Agency (WGA) to inform its investment decisions.
Some trends are already becoming clear, with companies that employ more women in general doing better.
Medibank Private is the top company in the Verve Super ranking so far, while Stockland, SEEK, Suncorp and Telstra also performed well.
“There’s also the interesting ones: one of the top performers in the consumer services sector was carsales.com - that wasn’t something we particularly expected,” Hobbs said.
“It’s reflective of companies reporting to the WGEA and taking that reporting seriously, and they’ve implemented policies and processes in light of the expectations.”
At the other end of the spectrum, Hobbs identified Fisher & Paykal as a company she expected would have done better, given that many of its products are targeted at women.
However, some companies simply don’t report at all. Verve Super can’t include those companies in its gender index at all.
“[And] there are a couple of companies on the ASX who have the majority of their staff overseas, so they don’t report to the WGEA. That means we have to exclude them,” she said.
Hobbs hopes Verve will only be the first of many companies to begin investing based on gender.
“We hope that other funds start following suit and that as shareholders we can start putting pressure on Australian corporations that aren’t doing the right thing to start levelling up.”
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