Sustainable and Responsible Investing
The scandal facing Activision Blizzard since last July has not gone unnoticed, even by responsible investors. The video game company, famous for Warcraft and Call of Duty, is being sued by California state authorities for repeated acts of sexual harassment and wage discrimination against female employees. The Federal Securities and Exchange Commission (SEC) has subsequently also looked into the matter. The alleged offences are particularly appalling as they have been repeated over a period of several years, reflecting a toxic corporate environment encouraged at the highest level (“frat boy culture”), according to the initial investigations. In addition to a rapidly tarnished reputation, the scandal has cost the company its head, together with a 15% drop in share price in a matter of days, an internal revolt and financial penalties that have yet to come.
Also in the summer of 2021, the same SEC announced new regulations for the 3,000 technology companies listed on NASDAQ. At least one woman is now required to sit on the board, along with another member representing minorities (racial or LGBTQ). Should companies fail to meet this target, they are obliged to communicate the reasons why. A previous NASDAQ survey found that 75% of all listed companies failed to meet this diversity target at all in 2021. The predominance of white men in top management is of equal concern to other bodies such as the Bank of England and the UK Financial Conduct Authority.
Both of these two short stories respectively highlight a bleak picture of the situation, but also a growing awareness of society as part of the “#Me Too” movement.
According to the 2020* WEF Global Gender Gap Report, it would take another 100 years to achieve gender equality in the corporate world, based on current dynamics. COVID-19 slowed progress that was gradually taking shape before the pandemic, with women over-represented in the sectors that suffered most from the crisis. Equileap, an organisation that specialises in gender analysis for investors, found that, in a survey of 3,700 listed companies worldwide**, women hold only a quarter of the seats on boards of directors. A (small) increase compared to previous decades. Switzerland is just about average in the world with 25% of the board and 10% of management bodies, which is less than many European countries, some of whom being subject to regulation. The picture is even bleaker when we look at the persistence of pay inequalities, the lack of anti-discrimination policies and measures to promote work-life balance.
* World Economic Forum (2020), Global Gender Gap Report 2020
As with many other prominent ESG issues, the response of responsible investors is a mix of sustainability convictions and pragmatism. Beyond the ethical values of inclusion and diversity closely associated with ESG, the interest of sustainable finance in these areas lies in the fact that their promotion contributes to the health of their portfolios. A 2020 McKinsey study of 1,000 listed companies worldwide clearly establishes the link between diversity and financial performance: companies in the upper quartile of gender diversity are 28% more likely to achieve superior financial results than their peers (25% for companies with a female executive committee). ***
In 2019, the product offering (equity and fixed income funds), with a strong focus on gender, reached a record high of USD 2.4 billion. In line with growing demand from institutional and private investors, ESG research, which is used to create these tools, has developed considerably in recent years. Key diversity and inclusion issues are measured and assessed in detail by the companies themselves in their CSR reports or in ESG data provided by specialised agencies: equal pay, diversity among employees, working conditions and work-life balance, percentage of women in leadership positions, etc. Indices of leading companies on these issues have been created by specialised organisations, such as the Solar Equileap Global Gender Equality 100 Leaders. These indices are used both for individual stock selection of pioneering companies such as NVIDIA, L’Oréal or Diageo, but are also replicated by several passive funds (ETFs) such as the UBS ETF Global Gender Equality.
In 2015, the New York Times concluded that “fewer large companies in the United States are run by women than by men called John”. Fortunately, the situation has since moved in the right direction, if only in this area.
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