Unlock the Editor’s Digest for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
Companies with a more gender-balanced workforce outperformed their least balanced peers by as much as 2 percentage points annually between 2013 and 2022, according to a BlackRock study of the MSCI World Index.
The higher return on assets held true across countries and within sectors, and was particularly notable for companies where gender parity was greatest in revenue-generating, technical and highest-paying jobs, researchers at the $9.1 trillion money manager said in a report. report published Thursday.
While other researchers have also attempted to document links between gender equality and performance, this global survey of approximately 1,250 major companies that report at least some gender data is one of the largest ever conducted.
Companies in the middle quintile for gender balance reported an average annual return on assets of 7.7 percent, compared to 5.6 percent for those with the highest share of men in their workforce and 6.1 percent for those with the highest share of women. study found.
“Human capital is very important to investment performance,” said Sandra Lawson, the BlackRock director who led the work. “It’s a pretty powerful correlation.”
BlackRock’s work comes as the world’s largest money manager and its peers are under attack for their use of environmental, social and governance factors in investing. Conservative critics argue that “woke” asset managers have strayed too far from their duty to maximize returns and have called for boycotts and laws to prevent the use of ESG in investing.
This study will strengthen the arguments of investment firms that argue that it is part of their fiduciary duty to consider gender representation and other social factors in the investment process.
According to Ewelina Zurowska, one of the researchers, the BlackRock study used return on assets rather than a measure linked to stock prices because it is less affected by stock market movements.
Although industry and industry differences accounted for almost half of the variation in women’s representation in their sample, the link between return on assets and gender equality held up when the BlackRock team checked. They also found that companies where gender diversity in middle and top management reflected the overall workforce tended to have lower turnover and higher returns.
The researchers also looked for links between human resources policies and financial performance and found that US companies where women took longer maternity leave performed better than peers where leave to have children was shorter.
Lawson said the maternity leave data appeared to be an indicator of employee-friendly policies rather than the cause of performance gaps. “It sends a message to the company as a whole that we value employees as individuals, not just as employees,” she said.
BlackRock began this study after receiving questions from clients about the link between gender diversity and performance, said Tanja Boskovic, another researcher.
Previous McKinsey studies, including one that was looked at 1,039 companies in 15 countries, have linked gender diversity to above-average profitability. Bank of America found that U.S. publicly traded companies with more diverse boards of directors had higher returns on equity and lower earnings per share volatility than their less diverse peers.
Shivaram Rajgopal, a professor at Columbia Business School who did not participate in the BlackRock study, said: “When this ephemeral thing called culture gets better and people actually feel like showing up to work, the fights go away. That is how decision-making improves when there is some gender equality.”