Junwei Hafner-Cai and Olaf Martin, managers of the RobecoSAM Global Gender Equality Impact Equities fund, talk to Katrina Lloyd about their new fund and why companies need to encourage more diversity in the workplace.
Why did you decide to launch the RobecoSAM Global Gender Equality Impact Equities strategy?
We found investing in a high gender equality portfolio outperformed the lower gender equality portfolio over the last ten years. As a group, we have been focused exclusively on sustainability investing (SI) for over 22 years, and have been selecting financially material ESG data since 1999.
For assessing companies on gender equality performance, we partnered with EDGE Certified Foundation in 2012 to further develop the gender diversity and equality criteria in the RobecoSAM Corporate Sustainability Assessment (CSA), the research backbone for the Dow Jones Sustainability Indices (DJSI).
We found a gender-balanced workforce supports corporate performance in terms of share price, profitability or risk reduction. After realising that companies which scored high on these metrics had outperformed lower-scoring ones by 11% between 2004 and 2014 and outperformed the broader market, we launched a gender equality strategy in 2015.
We found an institutional investor (AP4 – The Fourth Swedish National Pension Fund) that liked our investment idea and supported the launch of the strategy. Also in 2015, we started building up our impact investing suite of products.
How can gender equality enhance corporate performance?
Gender equality enhances corporate performance in many ways: recruiting and retaining the best talent, having stronger customer orientation, enhancing corporate reputation and improving decision-making.
For instance, if corporates manage gender equality issues well, they will be able to gain access to a bigger pool of talent and enjoy a good reputation as employers.
Gender diversity also fosters innovation and creativity through a greater variety of problem-solving approaches and perspectives.
Studies have shown that companies with gender diverse boards generally perform better than companies with no female representation.
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However, this is not limited to boards as we are convinced that a diversity of perspectives and opinions throughout the entire firm has a positive impact on a company’s capacity to innovate and enhances decision-making processes.
How do you assess gender equality and select names for the portfolio?
The fund invests globally in companies that are leaders in promoting gender diversity and equality. Through this strategy, we aim to drive change at companies, ultimately creating a positive societal impact.
The strategy has a concentrated portfolio of high-conviction stocks and seeks to outperform the MSCI World index. (The RobecoSAM Global Gender Equality Impact Equities strategy launched in 2015 and has returned 11.72% (in euro, net of fees, for the retail share class with retrocession (B)) since then compared to its MSCI World index benchmark return of 11.21%).
The starting point for the strategy is our in-depth Corporate Sustainability Assessment (CSA). Each year, approximately 4,500 companies are evaluated based on a broad range of general and industry-specific criteria, including gender-related topics.
Each company receives a Gender Score based on questions from the CSA that specifically address gender equality and diversity issues.
In addition to the gender diversity guidelines for the board of directors and executive management, we also takes into account the much more relevant questions, including how well the company manages to retain young female executives for example.
Do the employees receive the same remuneration, both base salary and variable compensation? Are there programs to promote employee satisfaction and work-life balance?
What measures does the company have to foster employee health and well-being, flexible working, child care and elderly care, etc.
Combining the resulting Gender Score with fundamental research, the investment team constructs a high conviction portfolio of approximately 40-80 attractively valued companies that are leaders in promoting gender diversity and equality while exhibiting strong business fundamentals.
What level of engagement do you have with companies?
Exercising our shareholder rights is an effective way to influence company behavior. Together with our colleagues from the Robeco Governance & Active Ownership team, we vote and engage with portfolio companies to enhance positive social impact.
Within the Gender Equality Impact Equities strategy, our engagement focuses on persuading companies to take advantage of the benefits associated with gender diversity, including better utilizing their talent pools, improved decision-making, as well as oversight and ultimately also financial performance.
Source: Investment Week