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ISS ESG analysis supports the notion that increased corporate diversity and inclusion performance is associated with stronger performance and quality measures. This is great news for investors.

May 12, 2021

Gender Diversity and Performance – The Links Are There, But… #itscomplicated

Below is an excerpt from ISS ESG’s recently released paper “Gender Diversity and Performance – The Links Are There, But… #itscomplicated” The full paper is available for download from the Institutional Shareholder Services (ISS) online library.

KEY TAKEAWAYS

  • Linking EVA Margin (Profitability) and Quality (P-R) to a company’s level of gender diversity on the board can provide opportunities for additional alpha.
  • Avoiding companies with low Quality measures and a low ratio of women on the board can be a good risk management policy at the portfolio level.
  • Companies that have already achieved minimal – assessed as one third – female board representation also have a higher level of EVA Profitability and an overall higher Governance Quality Score (GQS).
  • While this analysis finds unambiguously that higher levels of female board representation are associated with stronger performance in terms of EVA Margin, the finding that levels just below 50% produce the best performance-related outcomes bears further research, as does the impact of sectoral influences on these results.

By Gavin Thomson, Integrated Portfolio Management, ISS ESG

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