Of ripple effects and boardrooms: Capturing the economic power of women

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      By Erica Lasdon, ESG Senior Analyst, Calvert Research and Management

      Washington — Numerous studies link a greater inclusion of women in the workplace with material financial benefits for businesses, countries, capital markets and the world writ large. According to the World Economic Forum (WEF), closing the economic gender gap across countries by 2025 could increase global GDP by $5.3 trillion.1

      Ripple effect

      It's not just the flap of butterfly wings that spans continents.2 Because capital markets are interconnected, influences are often felt globally. S&P Global research forecast that increasing female participation in the U.S. workforce to the same level as other advanced economies has the potential to add $2.87 trillion to U.S. stock market value - and $5.87 trillion to global stock-market value - by 2027.3

      Calvert Blog 3-6-19a

      Mind the gap

      So what does the U.S. workforce look like currently and where are the largest gaps to be closed? As many would suspect, research indicates the greatest underrepresentation of women is in the boardroom and among the higher executive ranks of corporations. These gaps persist despite women's attainment of higher education, which is greater than men's, in terms of college and advanced degrees earned.

      Calvert Blog 3-6-19b

      A wide range of studies indicate that a lack of women at these higher echelons can impact financial results and may also lead to a disconnect with a company's consumer base. Women, after all, represent half the U.S. population and control greater household and consumer purchasing power than ever before.

      Boosting corporate value

      In an early study from 2004-2008, Catalyst examined the U.S. Fortune 500 and found that companies with sustained, higher numbers of women on their boards outperformed those with lower representation on return on sales, return on invested capital, and return on equity.5

      In 2016, the Peterson Institute for International Economics published research that analyzed approximately 22,000 firms globally, finding a significant link between higher levels of females in C-suite management and firm profitability.6 In 2018, McKinsey surveyed over 1,000 companies across 12 countries; its results also affirmed the link between more diverse leadership and measures of profitability and long-term value creation.7

      Under pressure

      Investor pressure in the U.S. and abroad to increase gender parity on boards has gained momentum in recent years. Proxy voting has been one visible measure of this trend, especially in the area of votes on corporate directors. In Calvert's investment research, proxy voting and engagement efforts, we have long made gender diversity and inclusion a priority. In our view, the value of diversity, to both companies and society, appears indisputable.

      Bottom line: Reducing gender disparities in the workplace can bring material, financial benefits to corporations as well as help drive global economic growth. Calvert seeks to invest in companies with greater boardroom and workplace diversity. These type of companies have been shown to have a competitive advantage - influencing reputation, investor confidence and financial performance.