Calvert CIO highlights link between female employees and market returns

Wealth managers may not be aware of it, but October 2024 highlights an important anniversary on Wall Street.

This month marks the 20th anniversary of the Calvert Women's Principles which were a forerunner to the Women’s Empowerment Principles (WEP) that the United Nations Global Compact introduced in 2010. The Calvert Women's Principles were the first gender-based investment principles focused exclusively on advancing, protecting, and investing in women in the workforce.

Despite their introduction two decades ago, however, research has shown that women still have a long way to go in their struggle for workplace equality – and are also an unheralded component for investing success.

Women lost C-suite seats in 2023 for the first time since S&P started tracking this data in 2005, dropping to a mere 12 percent of total C-suite seats. There was also a statistically significant decrease in the female to male earnings ratio last year with data showing that women now make about 82 percent of what their male counterparts bring home.

As to how this impacts business - and stock market performance - Jade Huang, CIO of Calvert Research and Management, says the research clearly shows that gender diversity is financially material for a company's performance.

“We've done extensive, proprietary research and have found that gender diversity is financially material to equity returns for US and developed large cap markets,” said Huang. “We measured this based on female representation, both at the board level as well as across the corporate structure. And we found that indeed the financial materiality was very evident in performance.”

The Women's Principles have seven different tenants, including employment and compensation, work-life balance, management and governance and career development. Another area is health, safety and freedom from violence.

“That's really a focus on health and wellbeing, not just for women, but the entire workforce and really creating a safe work environment. And that's not just physical safety but also psychological safety,” said Huang.

Looking at the current environment, Huang believes the Women's Principles are as relevant today as they have been in the past, if not more so, primarily because the talent pool is significantly more diverse than it was 20 years ago.

“Women make up more than half the population and are actually better educated than their male counterparts,” said Huang of the research.

“We believe at Calvert that these Principles represent a way to evaluate and measure human capital management and be able to understand how companies are performing. And all of this is important because it's financially material and can lead to better long term value creation,” said Huang.