Investor focus on social issues set to encourage gender equality progress

An increased focus on the ‘S’ or social pillar of ESG by investors and regulators should lead to greater scrutiny of companies’ gender equality progress and encourage better data transparency in this area.

This was one of several conclusions reached in a recent interview on gender equality data featuring Francois Millet, Head of climate and thematic business development at Amundi ETF, Indexing and Smart Beta and Diana van Maasdijk, co-founder & CEO of Equileap, an ESG data provider specialising in gender data.

According to Millet, momentum is now growing behind improved disclosure of social criteria, including gender equality. 

“We have seen a massive conversion of assets to ESG strategies over the last five years and a lot to environmental strategies, especially over the last two years. Social issues and the main component of the social ranking of companies, which is the management of human capital, have not been ignored, but insufficiently addressed.” he added. 

“When you look at the ESG rating of a company, the social pillar is actually number one, so it is generally more heavily weighted than the environmental and governance pillars, at typically 35%-45% of the global weighting. More than half of that is the management of human capital, the rest being the impact of products on social issues.”
“This situation is changing under the impetus of regulation, particularly in the European Union, which is pushing investment managers and distributors to improve disclosure on a number of criteria, including gender equality. They also need to test suitability for clients in terms of ESG preferences based on many criteria, including dealing with human capital and gender equality. Companies too will be submitted, through new corporate sustainability reporting directives, to the same sorts of obligations. We are confident this will grow in terms of momentum.”

Francois Millet

Head of climate and thematic business development at Amundi ETF, Indexing and Smart Beta

Diana van Maasdijk emphasised there is still a serious problem to address in terms of global gender equality but tackling this challenge can bring change and positive impact for everyone, not just women in the economy.

“The reason data is important is that it can be used by responsible investors who care about ESG to add a gender lens and choose companies that are doing better on gender equality,” she said. “This is an opportunity as what we have seen from our data, is those companies that have better gender equality scores also have better financial performance and lower volatility.” 
“We have a problem and we still need to close the gender equality gap but with the data, we get transparency, and that data can be used for products which are good, not only for the world, but also for your wallet.”

Diana van Maasdijk 

Co-founder & CEO of Equileap

Data gathering and challenges

In relation to gathering gender equality data, Van Maasdijk said progress has been made in recent years but there are still challenges to be addressed. Equileap currently analyses a universe of approximately 4,000 publicly-listed companies with a market cap of $2bn or above, listed in any one of 23 developed economies1 . It approaches companies for data they have published themselves, and then gathers data points using its proprietary Global Gender Equality Scorecard for each group. 
The Scorecard incorporates 19 data points, including the gender balance, at all different levels of the company, gender pay gap information, and policies including parental leave and flexible working. It also includes supplier diversity policies, so whether a company supplies from women-owned companies and if they have safety in their supply chains. Companies then get a chance to validate the data collected. 
Van Maasdijk said the biggest challenge they have faced is the lack of corporate transparency in many areas where they would like to see published data. For example, only 17% of the 4,000 companies they analyse publish their gender pay gap figures.   

“There are some companies that don't publish the percentages of men and women at workforce level, let alone at management level.” she added.

However, she said that Equileap pushes for change by enforcing transparency as a measure for moving forwards if companies want to see their gender equality scores improve and this has led to major improvements since Equileap began licensing its data in 2017. 

Utilising gender equality data

Amundi ETF has used Equileap’s gender equality data to construct its Gender Equality ETF, which launched in 2017 and is classified as an Article 8 fund, according to the EU SFDR regulation2.

The Lyxor Global Gender Equality (DR) UCITS ETF – Acc provides exposure to the top 150 companies based on Equileap’s Gender Equality Scorecard. It tracks the Solactive Equileap Global Gender Equality Net Total Return Index which applies an ESG filter based on a number of exclusions and ESG screening based on companies’ ESG ratings to eliminate the worst offenders3

Portfolio construction constraints include a weighting floor of 50%  of US companies and a 10% cap for other countries, and the portfolio is rebalanced based on an equal weighting methodology, which Millet says avoids an over-representation of ultra large capitalisations just making it to the top 150 by gender ranking . This construction method also leads to the portfolio looking very different from the MSCI World Index in certain areas.​​​​​​​

The ETF also has underweights in sectors like healthcare and energy and overweights in financials, communication services and consumer staples, which tend to have better gender rankings. In terms of risk factors, we are more weighted towards the smallest large-caps. Also, we have a bias towards companies which tend to have lower earnings viability and higher dividend payment policies.

​​​​​​​Future developments

Millet and Van Maasdijk also see further possible areas of expansion for gender equality data and how it could be used in the future, as ESG investing continues to evolve.

Van Maasdijk said: 

“People who are interested in ESG investing are asking for more ‘S’ standards within the products they want to invest in. So apart from expanding our research into companies in emerging markets, I would also like to look into small-cap companies.”
“When it comes to the issues of gender equality, it is also really important to look at the intersection of other social issues around discrimination within the workforce. This means addressing issues of ethnicity and acknowledging that although there is discrimination based on gender, the experience of a white woman will be different than the experience of a black woman within the workforce and leadership roles.”


Millet added: 

“I think we will have a larger set of reported data and a smaller set of estimated data, because there will hopefully be progress in mandatory disclosure obligations on corporates and also a better standardisation of the ratios that will be reported. 
“In terms of thematic investment, as people have completed the integration of climate-aligned strategies, they are now focusing on other thematic strategies which have been backstage in the last years. 
“Social issues are crucial, of which human capital is the essential pillar and gender equality is a big component of that. We see appetite for more pure social thematic products than we had in the past, where certainly the focus was diverted by global policies or the reporting obligations of our investors. Gender equality will continue to be a strong pillar for that.”


Past performance is not indicative of future returns.

1. Source: Equileap, as at November 2022​​​​​​​
2. SFDR: “Sustainable Finance Disclosure Regulation” – 2019/2088/EU. European Union regulation that requires, amongst other things, the classification of financial products according to their ESG intensity. A fund is referred to as “Article 8” if it promotes ESG characteristics in tandem with other financial objectives, or “Article 9” when it has a sustainable investment objective. Any fund that does not comply with the two previous categories is an “Article 6” fund.
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