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The gender pay gap is informing investment strategies

As diversity and inclusion data disclosure improves, how does Refinitiv portfolio analysis show that companies with no gender pay gap perform better than companies with one?

  1. As the gender pay gap gains more attention corporations are disclosing data around diversity and inclusion at increasing rates.
  2. Pressure is coming from investors, customers, government regulation and the desire to improve ESG scores.
  3. In our analysis, we found outperformance from portfolios of companies with no gender pay gap when compared with portfolios consisting of companies with gender pay gaps.

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The gender pay gap has been a persistent issue in the labour market over many decades.

Currently, the median weekly earning for U.S.-based women who are full-time wage and salary workers is $789 – 81 percent of the $973 median for men, according to the U.S. Bureau of Labor Statistics.

As society places an increased focus on inequalities, corporations are working to resolve pay inequities based on gender, race or other demographic factors.

The investment world is taking notice. Investors are increasingly looking at incorporating environmental, social and governance (ESG) metrics into their strategies, in areas such as sustainability, diversity and gender equality.

The gender pay gap metric was added to the Refinitiv ESG database a few years ago. Our recent analysis shows that companies with no gender pay gap outperform companies with pay gaps between male and female employees.

Dig deeper into our research in our report: The Gender Pay Gap and Your Investment Strategies

Improved reporting

Data disclosure is improving – more companies are reporting gender pay gaps, due to pressure from investors and customers, government regulation or efforts to improve their ESG scores.

The UK has made it mandatory to report gender pay gaps. Despite a slight delay due to the global pandemic, we should be seeing more disclosure from UK firms by October.

The Refinitiv ESG database shows that company disclosure continues to rise.

Portfolio analysis

To create our portfolios, we pulled the gender pay gap percentage for five FTSE Russell indices: All World, Asia Pacific, Europe, North America and Developed.

We then sorted the initial universe to filter for companies with a negative pay gap for women and companies that report no gender pay gap. This resulted in five portfolios with five benchmarks (all equal weighted).

When we looked across the board, we found outperformance for our portfolios against their benchmarks, with a good spread between the two.

For instance, the FTSE All World portfolio has a 58.16 percent spread, with analysis based on the date range from 1 January 1 2016 to 27 February 2021.

Positive gender pay gap

Within the FTSE indices, we found several constituents who disclosed a positive gender pay gap towards women.

With this small sample, we compared the portfolios with no gender pay gap against the portfolio of companies with a positive female pay gap. Our results speak to the role of equality, with all equal pay portfolios outperforming those with a disparity in pay between genders.

Dig deeper into our research in our report: The Gender Pay Gap and Your Investment Strategies

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