QIC Inside Investor Relations Volume 31: Enterprise Sustainability Trends – Gender Equality and Diversity

CoCo Chuang 2021-09-10

"Companies that provide an inclusive environment supporting work life balance and flexible work arrangements will eventually succeed in retaining a talented workforce and gain a competitive advantage in a business environment that has been significantly altered, possibly forever," said Peter T. Grauer, Chairman of Bloomberg. Gender diversity and gender equality are not just a social issue, but more so an issue that has a significant impact on the development of business operations and competitive advantage.

There is also an abundant of research data that demonstrates the positive impact of promoting gender equality in companies. This is reflected in their financial performance and long-term shareholder value, including increased revenue, profitability, and return on assets and shareholders' equity. A BCG study suggests that adding one more woman in a company’s senior management or board while keeping the size of the board unchanged, drives 8-13 basis point higher Return on Assets (ROA).1 According to a study conducted by MSCI, companies that had at least three women on their board in 2011 saw a median change in Return on Equity (ROE) of +10 percentage points and in Earnings Per Share (EPS) of +37% by 2016, while companies with no women on the board in 2011 saw median changes of -1 percentage point and -8% respectively over the same period.2

More and more institutional investors are incorporating gender issues into their investment decision-making processes and stewardship policies. According to US UIF’s report, funds that considered gender lens issues increased from $470 billion in 2016 to $868 billion in 20183. BlackRock, the world’s largest asset manager, says that gender diversity is still a relatively nascent issue in Asia. BlackRock is mostly engaging Asian companies to better evaluate and encourage board diversity and quality. However, BlackRock had voted against either the Chairman or directors of the nomination committee at companies with all-male boards in Hong Kong, Singapore and Malaysia in the 2020-2021 proxy year4. Fidelity International also said that beginning in 2022, it will vote against management in developed markets where boards don’t have at least 30% female representation or 15% in all other markets5.

According to the 2020 statistics of the Taiwan Stock Exchange, the proportion of female directors on the board of listed companies in Taiwan is about 13%, and that of OTC listed companies is about 14%. 380 companies around the world included in the 2021 Bloomberg Gender Equality Index has an average of 3 female directors on the board, accounting for 29% of the board. This shows that the proportion of female directors in Taiwan's listed companies is still low. However, companies should not only focus on the number of women on the board but dedicate resources to promote and implement gender equality by providing equal treatment and opportunities at all levels of positions within the company.

The first step in implementing gender equality is to understand the extent of the gender gap within an organization and the causes of said gap, but this step is already a challenge for many companies. Many companies don't usually collect data or even know which indicators to track, so they can't accurately define what problems exist in implementing gender equality or develop strategies to address them.

For companies that have not yet disclosed relevant gender data and information, the Bloomberg Gender Equality Index framework and questionnaire provide excellent guidelines for companies to follow in order to understand which gender issues are of interest to be evaluated by investors. As more investors incorporate ESG data and information as part of their investment and risk analysis, companies' participation in the Bloomberg Gender Equality Index reveals their efforts and achievements in implementing gender equality. Making this information available to more than 300,000 professional investors worldwide through Bloomberg's terminal system allow investors to find targets that match their investment strategies and values, and by companies to effectively attract investors to invest.

Bloomberg Gender-Equality Index

Bloomberg launched the Bloomberg Financial Services Gender-Equality Index in 2016 to provide investors with a comprehensive perspective, including standardized statistics and company policies, on the efforts of companies in the index to create a gender-equal workplace. In 2018, Bloomberg expanded the coverage of the Gender-Equality Index to include industries such as communications, consumer goods, energy, finance, raw materials, and technology, then scored and screened companies across five categories with 60 indicators.

Source: Bloomberg

The 2021 Bloomberg Gender Equality Index covers 380 companies from 44 countries and regions, across 11 industries. Only five Taiwanese companies have been included in the index, namely AU Optronics (2409 TT), Cathay Holdings (2882 TT), China Life (2823 TT), King's Town Bank (2809 TT), and Yuanta Holdings (2885 TT), among them, four companies are in the financial industry. Although the issue of gender equality and diversity is still being established and promoted in Taiwan’s policies or the investment and voting policies of institutional investors for companies in Taiwan, Taiwanese companies should continue to refine and improve their sustainability goals and strategies towards gender equality to be in line with international standards.

Companies need to be well-prepared for the rise of sustainable investing by providing better disclosure of ESG information, increasing awareness and participation of the board of directors and management team, and improving communication with institutional investors. QIC has worked with many listed companies in Taiwan on improving their ESG communication and on attracting long-term focused investors. If you are looking for guidance in developing a successful ESG strategy, please reach out to us.

Contact: yvonnehuang@qtumic.com

Reference:

1) BCG, Gender Equality

2) MSCI, THE TIPPING POINT: WOMEN ON BOARDS AND FINANCIAL PERFORMANCE

3) US SIF, INVESTING TO ADVANCE WOMEN

4) BlackRock Investment Stewardship, A look into the 2020-2021 proxy voting year

5) Fidelity International, Sustainable investing voting principles and guidelines

CoCo Chuang

As an ESG Advisor at QIC, CoCo assists listed companies across various industries in Taiwan in enhancing their ESG performance. This includes improving ESG information disclosure, enhancing ESG rating performance, and tailoring ESG communication and engagement with investors. CoCo facilitates these clients' involvement in ESG beyond mere regulatory compliance, enabling them to create and realize value in the capital markets, including gaining more exposure and attracting investment. Additionally, CoCo aids clients in reviewing shareholder meeting agendas, analyzing voting policies and behaviors from proxy advisory firms and foreign institutional investors, and continuously assisting clients in improving corporate governance practices. In recent years, CoCo has also been involved in numerous major proxy contests in Taiwan, helping clients garner support from foreign institutional investors in the contests.