Why corporate culture matters for gender equity – and returns

The old-fashioned notion that, by widening the talent pool, companies can be better led and run, and so enhance long-term value for their shareholders, is not one we have given up on. Nor will we, despite the politicization of corporate diversity, given the strength of empirical evidence connecting it with companies’ financial performance.

Increasingly, however, the conversation is moving beyond representation alone. The question is no longer simply who is at the table, but whether corporate culture enables diverse employees to contribute fully – translating varied perspectives into innovation, risk awareness and better strategic decision-making.

The backlash against equity, diversity and inclusion – with many companies moderating their initiatives – especially in the US, creates more opportunities for disciplined, data-driven investors to identify mispriced assets.¹ We believe approaches that recognize the value of gender diversity, as well as the organizational environments that allow it to prosper, remain as promising – and relevant – as ever.

Progress under threat

Until as recently as 2023, the trajectory for corporate gender diversity remained broadly positive. Board and executive teams were becoming more diverse, albeit far too slowly.² Meanwhile, corporate reporting of gender-related metrics was improving and regulators, in Europe and Japan at least, were pushing for better disclosures.

The narrative has since flipped, most notably in the US. Equity, diversity and inclusion programs have been recast as ‘ideological’ according to current political narratives. Amid culture war debates and the threat of legal action against affirmative action that may constitute ‘illegal discrimination’, many US companies have quietly scaled back their diversity-related programs and voluntary reporting and retreated from commitments.

This reversal is mirrored in wage and employment data. For the first time, the US gender pay gap widened for two consecutive years, in 2023 and 2024.³ More than 450,000 women meanwhile left the US workforce in 2025, with many citing caregiving burdens and the cost of childcare.⁴ Surveys indicate that women with young children – many of whom had benefited from pandemic-era flexibility – have left the workforce as office-based mandates are reintroduced.

Progress has also stalled at the board and executive levels. In Q3 2025, only 22.5% of new appointees to the boards of US-listed companies that comprise the Russell 3000 Index were women – the lowest percentage in a decade and down from 45% in 2021.⁵ Women meanwhile made up only 36% of senior leadership roles in the largest listed UK companies, falling short of a 40% target set for 2025.⁶

Source: Bloomberg, 27 January 2026. Based on regulatory filings and earnings transcripts.
“US” companies are those in the Bloomberg 500 Index; “Europe” = Bloomberg Europe 600 Index; and “Asia-Pacific” = Bloomberg APAC Large & Mid Cap Index

Why inclusive corporate culture adds value

At the macroeconomic level, the case for higher female employment and progression into leadership is clear-cut, especially. Higher female workforce participation expands the effective labor pool, increases household incomes and supports consumption in the economy.

IMF research on Japan and South Korea found that closing gender gaps, in both hours worked and career progression, could raise per capita GDP in Korea by up to 18% by 2035 and increase total factor productivity in Japan by 20%.⁷

At the company level, there is a robust empirical link between gender diverse leadership and performance. Our own analysis has found that, since 2014, companies rated in the top quartile for two factors, ‘Women on Boards’ and ‘Women in Management’, have delivered cumulative outperformance of 15.6 and 18.3 percentage points over their bottom quartile counterparts.

Past performance is not indicative of future returns

Source: Impax analysis, January 2026. Analysis period from 2 December 2020 to 28 November 2025.

Figures refer to the past and that past performance is not a reliable indicator of future results. This graph is intended to show the effectiveness of the Impax Corporate Culture Indicator when used as a screening tool to evaluate the performance potential of securities within the MSCI ACWI Index (ex-Energy) based on their culture scores. The companies are quintiled monthly based on corporate culture criteria and then an equal weighted average of the forward month’s return is used. There is no guarantee that these trends will continue and these scores are a single consideration in the investment process. This graph does not represent performance of any product or managed account strategy. No representation is being made that any account will or is likely to achieve results similar to those shown.

These long-term findings are consistent with a body of academic and industry research that has identified positive, long-term correlations between gender-diverse leadership teams and stronger company performance.⁸ However, in recent years we have observed increasing signal strength from indicators of corporate culture, as illustrated in the chart above.

Measures such as pay gap transparency and remediation, talent development practices and broader human capital management policies have begun to outperform more traditional leadership representation metrics, like female representation on boards and in management. As gender representation has improved over the past decade, despite recent slowdowns, it follows that the quality of the environment in which diverse talent operates – the cultural infrastructure that determines whether diverse perspectives translate into action – should become a more significant driver of bottom-line performance.

Our conviction in a long-term theme

Structural themes do not disappear when progress falters. We believe that, rather than undermining the rationale for gender lens investing, the recent reversal of progress on gender pay gaps, diversity in corporate leadership and disclosure reinforces it.

The current backlash against equity, diversity and inclusion creates dispersion in markets. As some companies scale back their transparency and deprioritize it, we think those that continue to recognize its importance can add significant financial value – and enhance corporate resilience – over time.

Importantly, our approach continues to evolve alongside the evidence. Increasingly, the differentiating factor lies in corporate culture – specifically, whether companies have built the governance structures, accountability mechanisms and human capital practices that enable employees to work effectively, with higher levels of motivation and productivity, and for diverse talent to influence outcomes. In our view, these cultural indicators are not a departure from gender lens investing, but its natural extension: they help identify where diversity is embedded in decision-making rather than merely disclosed.

Meanwhile, the current political climate means inclusive corporate cultures – of which gender-diverse teams are a critical component – will continue to be undervalued by many investors. For those willing and able to distinguish between leaders and laggards, we believe this creates opportunities to identify drivers of potential outperformance.

¹ Diversity can be defined as the presence of cognitive, cultural, demographic and experiential differences within a given context, such as an organization. Cognitive diversity is the range of expertise, experiences, information, perspectives, preferences, and ways of thinking within a team. Equity means people have fair access, opportunity, resources and power to thrive. The goal is to achieve greater fairness of treatment and outcomes. Inclusion can be described as the actions taken to understand, embrace and leverage the unique strengths and facets of identity for all individuals so that they feel welcomed, valued and supported. Source: UNPRI: Diversity Equity and Inclusion / Diversity Project
² MSCI, 2024: Women on Boards and Beyond 2024
³ National Women’s Law Center, January 2026: Wage Gap Data Widens for Second Consecutive Year, First Time Since 1960
⁴ Catalyst, January 2026: Caregiving pressures top factor pushing women out of the workforce
⁵ 50/50 Women on Boards, 2025
⁶ Almeida, L., 24 February 2026: Progress on gender equality at top of UK’s biggest firms ‘achingly slow’. The Guardian
⁷ IMF, 2024: Empowering Women Could Boost Fertility, Economic Growth in Japan and Korea
⁸ Impax, 2024: The business case for diversity and inclusion

References to specific securities are for illustrative purposes only and should not be considered as a recommendation to buy or sell. Nothing presented herein is intended to constitute investment advice and no investment decision should be made solely based on this information. Nothing presented should be construed as a recommendation to purchase or sell a particular type of security or follow any investment technique or strategy. Information presented herein reflects Impax Asset Management’s views at a particular time. Such views are subject to change at any point and Impax Asset Management shall not be obligated to provide any notice. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. While Impax Asset Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made.