A Conversation With Abigail Ingalls

Gender lens investing

Ribeiro: What’s the business case for tying gender equality into investment decisions?

Ingalls: In a 2015 report, Diversity Matters,^[1] McKinsey found that if gender inequality were eliminated, total global economic output would be $28 trillion higher. McKinsey also tied improved corporate performance with the elevated presence of women in the workplace.

From an investing standpoint, GLI seeks to capture that potential in the form of investment returns.

Another dimension of GLI is its potential to advance issues related to gender equality and diversity, equity and inclusion (DEI). DEI is an essential part of overall best practices with human capital management, and a key aspect of attracting the best and getting the best from employees.

It’s difficult to quantify, but we believe that the more we shine a light on these critically important topics, the more progress we’ll see and over time, the better off society will be. For example:

• In 2018, in Delivering through Diversity,^[2] McKinsey found that companies in the top quartile for gender diversity at the executive level were 21 percent more likely to generate above-average profitability compared to firms in the lowest quartile.
• Morgan Stanley, in its August 2019 report, The Rise of the SHEconomy, found that globally, companies that have taken a holistic approach to equal representation outperformed their peers by 3.1 percent per year over an 8-year period.
• The World Bank found that total global wealth could increase by 14 percent if women reached earnings parity with men.

So, we have plenty of evidence that attracting, hiring, retaining, developing, supporting and promoting women so as to gain from their full contributions is not only the right and fair thing to do but also a smart business strategy. And that’s something all investors can gain from.

Ribeiro: Those astounding numbers beg the question: Why haven’t we made more progress on this if there’s so much to gain from an investment, company and societal standpoint?

Ingalls: Fundamental, meaningful change tends to be hard for organizations that often have well-entrenched ways of operating. Pertaining to women’s slow progress in representation in senior leadership, one key finding in McKinsey’s 2020 Women in the Workplace annual study is that the ‘broken rung’ holding women back from greater gains in leadership is at the first managerial level. For every 100 men promoted to become managers, only 85 women are promoted. And that gap is greater for Black, Indigenous and People of Color (BIPOC) women: Only 58 Black women and 71 Latinas are promoted for every 100 men.

That means there are fewer women available to potentially advance to senior management. That’s one reason why this continues to be an issue that corporate management must address and why we, as concerned investors, who see the value of greater representation of women, will continue to monitor and advocate for more progress.

Determining Success In Gender Lens Investing

Ribeiro: What are the most critical factors that you believe determine success in gender lens investing?

Ingalls: Among the key criteria are the percentage of women on the board of directors and having a woman as CEO. Equally important, and more challenging to measure, is the positive impact of initiatives like women-friendly and family-supportive policies, creating clear accountability for progress on gender equality, and closing the gender wage gap. We consider these and numerous other factors in making our investment decisions through a gender lens.

Ribeiro: How is Breckinridge advocating for greater progress on gender equity issues among bond issuers? And how are you evaluating progress on these issues?

Ingalls: Our overall investment process integrates environmental, social and governance (ESG) analysis in our security selection decisions. DEI and gender equality are essential elements of ESG analysis. Each year, we aim to have meaningful ESG engagement meetings with issuers of corporate, municipal and government bonds addressing a range of topics, including but not limited to human capital management and DEI. In 2020, we spoke with over 100 issuers on various ESG topics.

During our engagements, we discuss best practices and any efforts that issuers are undertaking to advance these issues.

Ribeiro: Could you walk me through what we are seeing in terms of demand from investors and advisors?

Ingalls: The term gender lens investing (GLI) dates back as far as 2009. More recently, interest in GLI is growing rapidly. According to Veris, a leading consultant in impact investing, asset growth in gender lens investing products jumped by 40 percent from 2018 to 2019 to a total of $3.4 billion in June 2019. As a further sign of the increased focus on evaluating diversity and inclusion, Boston-based investment consultant Meketa Investment Group recently launched its Annual Diversity & Inclusion Questionnaire in an effort to hold asset managers more accountable for efforts to promote diversity, equity and inclusion within their organizations.

In addition to integrating diversity into our overarching ESG analysis, we also offer a values-aligned mandate known as the “Gender Lens Investing Mandate”. This mandate promotes policies and results that are consistent with the Women’s Empowerment Principles, which are principles developed by the United Nations Global Compact and UN Women that offer guidance to business on how to promote gender equality and women’s empowerment in the workplace and community This provides clients who wish to elevate the importance of gender a way of expressing their values via their portfolio allocation.

Addressing COVID-19 Challenges Posed On Gender Equity

Ribeiro: Could you address the tremendous challenges posed by the disruptions created by COVID-19 over the past year and the impact they are having on gender equity?

Ingalls: It’s no surprise that women have had to shoulder more than their fair share of stress during this challenging time. Working mothers in particular have had to do double duty and even triple duty, picking up the slack created by home schooling or hybrid home/classroom learning situations while maintaining their work responsibilities and normal load of housework and maternal care giving. McKinsey found that mothers are more likely than fathers to worry that their performance is being negatively judged due to their increased caregiving responsibilities, which can include being relied on by aging parents and in-laws as well as one’s children.

Further, women in senior leadership, who are often surrounded by men at that level, typically feel the unrelenting pressure of always having to be on. As a result, we’re seeing greater increased burnout among women. So, we’re at risk of seeing recent far-reaching successes in gender equity wiped out.

Ribeiro: What should employers be doing to address these critical issues?

Ingalls: The general common-sense answer is to be more sensitive to and supportive of the needs of all female employees, especially working mothers, women in senior leadership, and women of color, who have always had to fight for equity on more than one level. These are six good ideas from McKinsey:

1.) Make work more sustainable. That could mean giving parents extra time off to help prepare for the new school year, for example.

2.) Reset norms around flexibility. Look for ways to help reset boundaries around work and the rest of people’s lives.

3.) Rethink performance reviews. Assess whether pre-pandemic performance criteria still apply. Think creatively within the current context with a goal of preventing burnout and anxiety.

4.) Take steps to address and reduce gender bias. Organizations should ask questions like: Are women being held to higher performance standards? Are they judged more harshly? Are mothers penalized for taking advantage of flexible work options?

5.) Adjust policies and programs to better support employees. Make sure employees are fully aware of all the benefits available to them, including mental health counseling.

6.) Improve employee communication. Open and frequent communication can go a long way to reduce anxiety and build trust, which can improve morale, retention, and productivity.

Ribeiro: What about the special challenges faced by BIPOC women?

Ingalls: BIPOC women have always faced additional challenges in the workplace, whether overt racism, systemic imbalances, or a sense of not being fully supported. At this time, there needs to be a clearer and more explicit level of commitment and support from companies, which can include greater recruitment efforts, mentorships, and sponsorships, as well as a culture that more openly supports and values BIPOC women.

Ribeiro: Do you have any final thoughts to share?

Ingalls: Our analysis expresses our view that if companies effectively tap into the talents, skills and perspectives of promising women, they are better positioned for long-term success. And the statistics I cited earlier underscore this. At the same time, we are striving to make a difference at Breckinridge by enhancing DEI assessment within our own walls.

There is so much to gain – for investors, shareholders, employees, management and society – through meaningful progress on these issues.

1 “Diversity Matters,” McKinsey & Company, February 2015

2 “Delivering through Diversity,” McKinsey & Company, January 2018