Heather Smith
Senior Sustainability and ESG Analyst

David Loehwing
Head of Sustainability and ESG, North America

For many years, Impax has researched the link between gender balanced leadership teams and company performance, resulting in the creation of our Impax Gender Score and Global Women’s Leadership Index1 (GWLI). The team behind this pioneering work is our Gender Analytics Team.

In this Q&A, I’ve interviewed two of our gender lens investing experts, Heather Smith and David Loehwing, to discuss the evolution of gender lens investing.

What’s the role of the Gender Analytics team at Impax and has the team and its scope changed since its inception?

Heather Smith: The Gender Analytics team is responsible for conducting research to identify companies that are leaders in gender equity and selecting constituents for the Impax Global Women’s Leadership Index (GWLI). As part of that work, the team follows research on the links between gender diversity and company performance, as well as trends around equity, diversity, and inclusion (E,D&I), to help inform our investment process and engagement efforts.

I think what makes the Gender Analytics team unique is the experience we bring to the table and the dynamic nature of our work. We regularly evaluate new gender-related indicators that may yield additional insights, and constantly assess the state of company disclosures. Our team of five research analysts averages nearly 20 years of industry experience and 12 years at Impax, and our work has evolved over time as more data becomes available. For example, we’ve expanded our research coverage from exclusively looking at the gender composition of companies’ leadership profiles, to also include an assessment of their diversity policies, programs and disclosures.

I think what makes the Gender Analytics team unique is the experience we bring to the table and the dynamic nature of our work.

— Heather Smith

How is the Impax Gender Score determined, and how is it used?

HS: The Gender Analytics team completes an annual assessment of a global universe of approximately 1,600 companies. We collect and analyze the gender indicators internally using a combination of primary research, gender data directly disclosed by companies, and data from third-party providers of gender and ESG data. In 2014, we developed the Impax Gender Score to systematically identify companies that we believe are well positioned to benefit from the gender diversity advantage. We assess companies using multiple criteria of gender leadership and assign them a proprietary Gender Score.

When we first launched the Gender Score, we primarily focused on the representation of women on the board and in management, because that was what the research indicated mattered most to company performance. Also, we could reliably gather that data on a global universe of companies. Over the last few years, we’ve seen disclosure from companies on diversity indicators become more comprehensive. In 2019, we added additional factors into our scoring model that focus on company policies and programs to advance diversity, including indicators related to pay equity, the talent pipeline, and goals and targets.

David Loehwing: Consistency is an important aspect of our gender analytics scoring. We are not just looking at companies at one point in time, but instead use multiple years of data because we want to identify companies that are consistently demonstrating gender leadership. Companies that have a declining representation of women in leadership roles, or have stepped back from commitments around pay equity or talent pipeline, for example, will fall in the overall gender rankings and may eventually fall out of inclusion in the Index. Companies are analyzed relative to the overall investment universe, (MSCI World Index2) and, as the “leadership” bar continues to be raised each year, some companies may be removed from the Index if they do not continuing to evolve and improve.

Gender Score Explained

The Impax Gender Score broadly seeks to measure a company’s performance on issues related to gender diversity and equality. The Impax Gender Analytics team conducts in-house gender research and assigns the Impax Gender Score, a rating for each company in the MSCI World Index universe, that is based on the following gender leadership criteria: representation of women on boards of directors and in executive management, the hiring, promotion and retention of women, gender pay equity, a company’s ability to proactively issue and/or meet gender goals, or be a signatory to the Women’s Empowerment Principles (a joint initiative of the UN Global Compact and UN Women), as well as a company’s transparency about gender diversity data. These criteria are given different weights, with representation by women on boards and in management receiving the highest weightings. The final gender ranking is calculated by blending the scores over time to capture consistency of gender leadership.

HS: I would add that the Gender Score is not only used to identify companies that are leaders, but also to identify companies with areas for improvement that may benefit from engagement. To that end, we use the Gender Score to prioritize engagements with companies on various aspects of their gender diversity profile.

The Gender Score is used as part of the investment process in our gender lens portfolios and is also available to all investment teams at Impax, for idea generation for large cap companies within developed markets.

How does the team analyze companies when they don’t report equally on the same topic or when some markets require certain disclosures that others don’t?

DL: There is no universal reporting standard for many indicators related to gender leadership, so it’s important that our team has a structured process in place to interpret and record data consistently across the universe of companies.

There is no universal reporting standard for many indicators related to gender leadership, so it’s important that our team has a structured process in place to interpret and record data consistently across the universe of companies.

— David Loehwing

The lack of information provided by a company can also be an important data point. It may show that a company either is not tracking data relevant to the indicator or is not being transparent, and that’s an important thing for us to consider as part of our scoring.

HS: The UK gender pay gap reporting is probably one of the most visible and structured required reporting mechanisms related to pay equity in the world. Despite having a strong framework in the UK, disclosure on the topic varies widely in other markets, and from one company to the next. We see many companies disclosing the minimum information required in order to meet the reporting requirements, while others are more thoughtful and providing a greater depth of disclosure. We try to identify companies that are leaders using the highest reporting standard within the UK framework, and that also use that framework to report on their entire global workforce.

What would you say to gender lens investing skeptics?

DL: I would say that we acknowledge that gender is just one dimension of diversity, and that research has shown that organizations benefit by having teams that have a variety of diversity, including racial and ethnic diversity. However, there are some challenges — and in some cases obstacles — to systematically incorporating this information in a global portfolio. The definition of racial or ethnic diversity differs from one market to the next and in some countries it’s illegal to ask employees for this information.

HS: To David’s point about managing a score that is used on a global, systematic scale – while some elements of diversity cannot be meaningfully incorporated right now, we have seen research that indicates that companies in some markets that have gender diverse leadership teams tend to perform better on other metrics of diversity, like racial or ethnic diversity. They also tend to have better human capital management with greater employee satisfaction, productivity and motivation; all things that contribute to a company’s culture.

How do you see gender lens investing evolving over the next couple of years?

DL: I think that companies are looking beyond diversity and are considering equity and inclusion more comprehensively. This is driving companies to analyze the most effective ways to improve ED&I in their organizations, as well as consider what kind of disclosures promote accountability and meaningful progress. I think it will be important to pay close attention to gender diversity for the foreseeable future. While we have seen encouraging progress towards gender equity, there is still more work to be done.

I think it will be important to pay close attention to gender diversity for the foreseeable future. While we have seen encouraging progress towards gender equity, there is still more work to be done.

— David Loehwing

HS: The pandemic has challenged women’s, participation and advancement in the workforce, particularly women who are racial and ethnic minorities, and brought to the forefront the systemic, structural barriers that have hindered equality. At a time when companies are at risk of losing diverse talent, they also have the opportunity to create lasting change and a better workplace for everyone. How companies respond to these issues will shape the trajectory of their talent pipelines; companies that fail to evolve and lose out on diverse talent will likely not be as resilient or innovative in the years to come.

Learn more about Gender Lens Investing

1The Impax Global Women’s Leadership Index is a customized market capitalization-weighted index created and licensed by Impax Asset Management (“IAM”) consisting of equity securities of issuers organized or operating in countries around the world that demonstrate a commitment to advancing and empowering women through gender diversity on their boards, in management and through other policies and programs, and an understanding of the potential business advantages associated with greater gender diversity, as rated by the IAM Gender Analytics team, with final approval by the IAM Women’s Index Committee. In addition, the companies comprising the Women’s Index meet certain environmental, social and governance (ESG) or sustainability thresholds, as rated by MSCI ESG Research. Inception date of The Index is 28 February 2014.​

2The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Performance for the MSCI World Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax.​ One cannot invest directly in an index.​

The investment techniques and decisions of the investment adviser, including the investment adviser’s assessment of a company’s ESG (Environmental, Social and Governance) profile when selecting investments or company engagements, may not produce the desired results relative to other investment products that do not consider ESG factors or come to different conclusions regarding such factors.

The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Impax Asset Management (Impax) associates. Actual investments or investment decisions made by Impax, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate.

Kelly Baldoni is a registered representative of Foreside Financial Services, LLC.


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