The business and social case for gender equity

October 20, 2022
ESG Insights

Gender Equity: The social case, the business case, the why. - By Robyn Parkin and Georgie Murray

Beyond the clear and undeniable social and equality reasons for responsible investors to advocate for gender diversity within our portfolio companies, there is also a raft of research to support the business case for improving diversity and inclusion.

A study by McKinsey & Company found that companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability Research by Macquarie has also shown that a diverse workforce increase productivity. A company’s ability to attract, retain and develop a diverse workforce enables companies to have cognitive diversity in team decision-making and is shown to improve problem solving (Macquarie Research - Australian ESG Equity Strategy – People Power – 2022 HCM Indicators).

It is clear then, that gender diversity is an important governance and investment consideration for all ASX listed companies and investors. J.P.Morgan also found that companies with more gender equitable policies tend to have higher ROEs vs those with fewer initiatives.

Still a long way to go:

Sadly however, there is still a very long way to go with gender equality in listed companies.

Whilst Australia is one of the few countries that mandates the reporting of disaggregated gender data, which has no doubt had a positive impact on corporate gender equality transparency, it is clear that ‘’attitudes are slower to change’’. Equileap’s 2022 report Gender Equality in Asia Pacific includes a research finding that 48% of Australian men felt ‘’fatigued’’ by the notion of gender equality at work, and also noted that there is ‘’room to grow’’ in both sexual harassment policies and gender pay gaps.

Additionally, the latest CEW report in September this year also found that gender equality in Australia’s top public CEO roles was 100 years away, on current trends, describing progress at the executive levels as moving at a “glacial pace” and as actually going backwards in 2022. There are now only 14 female CEO’s in Australia’s top 200 companies, and only 28% of all senior roles being held by women.

And, according to J.P.Morgan, despite these extensive reporting mandates that are in place in Australia, our pay gap (13.8%) remains stubbornly above the OECD average (11.6%).

Finally, according to the latest Financy Women’s Index (FWX) report, women will have to wait 23.4 years for the pay gap with men to close. This means that women are earning $263.90 less per week than men – and that if this continues for the next 23.4 years, women would be robbed of $321,113 each.

What has our own EPORA research found?:

Our proprietary in-house ESG - EPORA (Ethical Partners Opportunity and Risk Assessment) research of ASX companies reflected similar findings, in that while 93% of the ASX 300 companies studied are providing some gender disclosure or targets, there are widely varying levels of commitment to wider gender equality, as well as to cultural, racial and disability equality, on which we also engage companies. There is also a wide range of action on gender pay equity, gender equity enablers such as family friendly policies, harassment and discrimination action or initiatives such as proactive training and development opportunities for women.  

Gender equality across Ethical Partners portfolio

In a pleasing nod to the strength of our EPORA analysis and our engagement process on this issue, Ethical Partners is proud to report that several of our portfolio companies were among those ranked by Equileap as among the top 10 companies in Australia for gender equality, as well as being all within the top 100 companies globally. These included our portfolio companies Mirvac (ranked number one globally), Medibank, NAB and REA Group. J.P.Morgan analysis also found that four of Ethical Partners’ portfolio companies’ (Commonwealth Bank, NAB, Mirvac and ANZ) are in the top 20 Australian stocks for pay equity.

What else is Ethical Partners doing about gender equality?

Ethical Partners is also pleased to be a lead investor with the HESTA 40:40 Vision, which encourages companies to set and publicly report on progress against gender targets for executive leadership of 40% women, 40% men and 20% of any gender. As part of this collaboration, the ASX300 signatories pledge to achieve this gender balance declare medium and long-term gender targets for 2023 and 2027, make their plan public and to report annually on how they are tracking. Ethical Partners are the lead investor for six companies in this Initiative and are very pleased to note that four companies we have engaged with have now signed on to the initiative, including IGO, Mirvac, Bega and Westpac.

As ethical investors, we firmly believe that we have a very important role to play in ensuring that gender equality, diversity, inclusion, and pay equity are ‘’put on the table’’ in our engagements with all of our portfolio companies, and as such, these are standard engagement topics for us and discussed with the board and management of all companies that we meet. We have also written to all portfolio companies about our expectations on this issue regularly over the past few years.

We also firmly believe that it will require collaborative approaches between investors and companies working proactively together to be able to achieve the systematic change that is needed to create the dual business and societal benefits of gender equality. We therefore continue to have a strong engagement focus and commitment to engage deeply and work directly and continuously on this with all our portfolio companies moving forward.

Portfolio company example:

One example of a portfolio company exceeding in this area is Mirvac. As noted above, In early 2022 Mirvac was named the world’s most gender equitable company in the world by Equileap’s Global Report on Gender Equality.

Mirvac’s CEO & Managing Director says; “Gender equality has been an important focus for Mirvac for the past nine years and we are proud to be recognised as leading the way. This success is the result of prioritising our inclusive culture right across our business, championed from the Board down in a genuine and authentic way – it is not simply a case of stated quotas and policies, but actual implementation and change which is what we have achieved and continue to work on every day.”

Flexibility to enable gender equality is another key focus. “It’s very clear to us that lack of flexibility on site – the rigid 7.30am to 5pm six-day-a-week working hours – is a real deterrent for not only women, but people who can’t fit into that work schedule, so we’re very focused on flexibility. It is challenging, and I won’t pretend at all that we’ve cracked that one, but we’re having an open conversation around how we can work differently. We’re very focused on reviewing promotions and turnover data.” Susan Lloyd-Hurwitz said.

Mirvac also has an ongoing investment in women’s mentoring programs and pays close attention to its gender pay parity analysis, where it has maintained a zero pay gap for like-for-like roles for the past six years.

Finally, Mirvac state that they see that they have a leading role to play in the construction industry given that women comprise only 13% of the Australian construction workforce, but account for 40% of Mirvac’s workforce. Mirvac is also attempting to hire more women through initiatives such as university and school scholarships, targeted talent attraction and retention strategies, and leadership opportunities aimed at women.

It is this belief and ambition in their ability and responsibility to play a leading role in a traditionally male dominated area that signifies to Ethical Partners a leading ESG mindset at Mirvac, and we congratulate Mirvac again on these programs and their number one global rating for gender equality.

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