The Case for
Gender Balance

Investors have more of an incentive than ever to push for gender diversity, as companies that promote gender balance have produced better returns on equity.

Report published on July 9, 2018

For the full report, head to

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Investing in Gender Diversity

Whether it’s in the boardroom, creative industries or access to education, the debate surrounding gender equality continues to gain momentum. Campaigns such as #timesup, ONE’s #povertyissexist and 2020 Women on Boards have all helped to highlight how gender equality still has a long way to go, with the impact moving beyond headlines to feeding into government policy and the culture of the workplace. Global financial institutions and asset managers are also starting to sit up, pay attention and consider these issues in their approach to corporate responsibility (CR) and Environmental, Social and Governance (ESG) factors. Sustainable investment mandates and strategies have become increasingly popular in recent years as the assets under management in these strategies grow. At the same time, research is pointing to the positive impact a gender balanced workforce and management team can have on a company’s performance. This report from J.P. Morgan’s Research team takes a closer look at gender balance in the private and public sectors and how it’s increasingly being incorporated into ESG investment decision making.

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Gender Diversity Factors

As pressure grows for companies to focus on governance and diversity factors, a growing number of firms are making efforts to prioritize gender equality in both recruitment and senior leadership. But even with this added focus, collecting data on a company’s performance in terms of gender diversity remains a challenge due to the lack of consistent data from companies. Of the 96 metrics used to judge the Governance pillar in the most widely used ESG data set, the MSCI ESG, only two relate to gender. The current, most popular factors to assess gender diversity performance include the ratio of women on corporate boards or executive positions and the establishment of policies promoting gender equality. Others, including transparent reporting of gender-related statistics along with voluntary compliance and engagement in sponsoring equality are also becoming popular social factors used to measure firms. While much of this kind of data still takes some time to gather and statistically demonstrate significant change, negative news flow and the reporting of controversies around diversity issues can serve as a dynamic and fast reacting factor in measuring a company’s business conduct regarding gender diversity. These types of data are usually coupled with negative screening in financial indices to penalize companies that are failing to update their business conduct to match the shift towards a more gender balanced workplace. Looking at the main indices that track how gender diversity has evolved and where we are currently, a few trends have emerged:

1. Public Sector Behind Private Investment Entities

Public investment entities have fallen behind their private counterparts in promoting women to senior management positions. Central banks have actually experienced a decline in female senior staff in 2018 on average according to the latest Official Monetary and Financial Institutions Forum (OMFIF) Gender Balance Index (GBI). In contrast, the private services sector welcomed more female decision makers into management teams and boardrooms.1 The average percentage of women on private sector boards2 increased over the past year, with 35% of companies increasing senior female presence.

Central banks saw a decline in female senior staff in 20183

Source: 1. as measured by the Bloomberg Financial Services Gender-Equality Index (BFGEI) 2. Of BFGEI eligible companies, 3. The OMFIF GBI uses a scale between 0 to 100% to measure gender balance, with 100% indicating a perfectly gender-balanced senior management team.

Women on boards

2. Europe is Leading the Way

Europe is ahead in terms of achieving gender diversity milestones by moving at a faster pace to promote or hire more women into senior management to meet upcoming legislative compliance dates.

In Europe, Norway became one of the first countries to adopt a board gender quota in 2008. They are targeting at least 40% women and in 2017 they reached 38%.

Within the public sector, the U.S. hit the 20% milestone for women on corporate boards in 2017, three years ahead of the target date set out by the 2020 Women on Boards campaign.

3. Sector Disparities

The disparity of gender balance profiles among industry sectors continues to persist, with financial services leading in terms of gender equality. A comparison between the Bloomberg Financial Services and the Ex-Financial Gender Balance Indices shows senior female presence in non-financial sectors declined on average in 2017.

Only 27% of companies are making progress in advancing gender balance on a senior level, compared to an overall increase in the financial services sector.

Outside of Finance Sector, only 27% of

sector-disparities-graphic Created with Sketch. 27%

companies are advancing gender balance on a senior level

Source: the Bloomberg Financial Services and the Ex-Financial Gender Balance Indices

The Gender Pay Gap

As investors evaluate company policies on gender diversity, the issue of gender pay is receiving greater focus. When discussing the pay gap and gender pay equity, the pay gap refers to the raw difference in the mean and median compensation of men and women without consideration of factors that typically influence compensation such as position, role, tenure and location. Gender pay equity assesses and accounts for factors including role, tenure, seniority, business area and geography.

The U.K. introduced gender pay gap reporting regulations last year applying to all public, private and voluntary sector organizations with more than 250 employees, highlighting the issue further. Initial results show that the financial/insurance and education industries reported the largest pay gaps depending on the measure used. In the U.S., the gap has stagnated over the last five years. Data shows women’s median hourly earnings were 81.8% of median male earnings in 2017, reflecting a gap of 18.2%.

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U.S. Gender Pay Gap

The difference between men's median weekly earnings and women's as a percentage of men's median earnings*, %

* Includes all full-time wage and salary workers

Source: Bureau of Labor Statistics, U.S. Department of Labor. The Economics Daily. A look at women's education and earnings since 1970s. December 27, 2017. Labor Force Statistics from the Current Population Survey.

U.K. Gender Pay Gap

In the U.K., pay gap data measures are based on hourly rather than weekly earnings to better account for the fact that many more men than women work full-time. Eurostat data from 2016 data showed an estimated U.K. gender pay gap of 21%, but U.K. data from 2017 showed an average difference in mean hourly pay rates of just 14.4%.

Employed men vs. women who work full-time

People pictograph Created with Sketch. 58% 87%

87% of employed men in the U.K. work full-time compared to 58% of employed women

Source: U.K. Office for National Statistics

7,520 firms reported gender pay gap statistics. The financial and insurance industry had the largest gender pay gap based on hourly pay reporting 26% on average

Source: U.K. Office for National Statistics

Men vs. women's hourly pay gap

hourgap Created with Sketch. 26% > Men Women

But in many other countries, the gap is larger. While the data may be explained by a number of complex factors and does not necessarily suggest that women are always earning unequal pay for equal work, the lack of data on earnings by gender has made it difficult to monitor whether gender discrimination exists at the firm or industry level.

EU Gender Pay Gap

The difference between average gross hourly men's earnings and women's, as a percentage of average gross hourly men's earnings* as of 2016; %

* All employees working in firms with ten or more employees, without restrictions for age and hours worked, are included. For some countries, provisional or estimated figures are provided

Source: Eurostat, Gender pay gap statistics, March 2018.

Although reporting requirements for some firms regarding pay by gender is voluntary, the increased interest in ESG from shareholders has pushed firms to report information on CR. Some 93% of the world’s largest 250 corporations and 75% of a worldwide sample of 4,900 companies report on their CR and sustainability performance according to a KPMG survey conducted in 2017. This marks a significant increase from reporting rates two decades ago - in 1993, just 12% of the 4,900 companies were reporting on their CR initiatives.

Better CR reporting frameworks with gender pay data requirements are coming into practice, including the updated, global GRI Sustainability Reporting Standards. Increased shareholder scrutiny on ESG performance also suggests investors could help to compel greater disclosure from corporations. Access to more of this kind of data will help improve frameworks for gender-based investing and allow for further growth in the area.

Women in Leadership

Over the past 10 years, investors have become increasingly focused on board composition, with specific emphasis on female representation. At the end of 2017, women represented 25% of corporate board seats across S&P 500 and Bloomberg Euro 500 companies versus 23% at the end of 2016, up from 15% five years ago. Gender diversity can help improve diversity of thought among boards, reducing the risk of groupthink and enhance the ability of boards to provide effective oversight of company management. But like other moves to boost gender equality in the work place, progress has been slow to date.

Women hold one quarter of corporate board seats at major U.S. and European companies

2017 2016 2012
S&P 500% 22% 20% 14%
Bloomberg Euro 500 29% 27% 15%
Combined U.S. + Europe 25% 23% 15%
Developed World 21% 21% 13%
Emerging Markets 11% 9% 7%

*iShares MSCI World ETF; ** iShares Emerging Market ETF Source: Bloomberg and company reports

The research team at J.P. Morgan has identified a few key structural impediments that are holding back progress including: low board turnover, a lack of female CEOs, and a perception that the talent pool is saturated and stretched.

With better data and transparency over time, the market will be able to better assess the influence of gender diversity on company performance. Looking at return on equity (ROE), of the 1000 companies in the S&P 500 and Bloomberg Euro 500 indices, those with 30% women or more on the board had a 2017 ROE of 23.9% versus 21.1% for those companies with less than 30% female board representation.

33% of directors of companies with a female CEO are women, while 22% of directors of companies with a male CEO are women

Source: U.K. Office for National Statistics

Similarly, a 2015 study published by MSCI showed that among MSCI World Index companies, those with “strong female leadership” (a company with a board that has three or more women, a company with more female board members than the country average or a company with a female CEO and at least one woman on the board*) had an average annual ROE of 10.1% compared to 7.4% for those without and an average price-to-book ratio of 1.76 versus 1.56.

*Source: Women on Boards: Global Trends in Gender Diversity on Corporate Boards, Linda-Elling Lee, MSCI, 2015

JPMorgan Chase's Approach to Supporting Women:

At JPMorgan Chase, women hold five of the 11 seats on the Firm’s Operating Committee.


of 252,000 employees worldwide are women


of firm's Operating Committee are women

Maternity Mentors Initiative

$17 million

in philanthropic investments to help women across the world in 2018

For more on how the firm is supporting women and the full report,
head to J.P. Morgan Markets

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