Women and Sustainable Investing Part 2

By Julie Fox Gorte and Heather Smith—Julie is senior vice president for Sustainable Investing and Heather Smith is lead sustainability analyst at Pax World Investments.

Although gender diversity has long been promoted by institutional investors, in recent years, countries have launched a variety of policy initiatives to increase the number of women on corporate boards. These measures include the adoption of gender quotas and voluntary targets, stock exchange listing standards and corporate governance guidelines requiring varying levels of disclosure concerning board diversity policies, efforts and progress. Europe has made notable efforts on board diversity with nearly 10 countries having adopted gender quotas. Elsewhere, the Australian Stock Exchange has adopted “comply or explain” corporate governance guidelines requiring reporting on gender diversity and setting objectives for progress by listed companies, and the Hong Kong Stock Exchange recently adopted a similar provision. Yet investors still have a key role play in advancing gender equality and women’s empowerment, particularly in places where such aggressive regulatory action is unlikely, like in the United States. Here’s how they can:

Sustainable Investing

One of the tools available to anyone is sustainable investment, particularly investments that focus on diversity and women’s empowerment. There are many sustainable or socially responsible funds available to individual investors and on many retirement platforms, and many of those include criteria focusing on gender equality. A list of sustainable and responsible investment funds is available on the website of the US Forum for Sustainable and Responsible Investment website. At Pax World, we even offer a fund, the Pax World Global Women’s Equality Fund (PXWEX), that focuses on investing in companies around the world that are leaders in advancing women and promoting gender equality.

One of the easiest things investors who have their own portfolios can do is vote their proxies with an eye towards gender diversity. Rather than support the status quo, investors can withhold support from all male boards. At Pax World, we not only oppose corporate board slates that do not include any women, in most cases we require that at least two women be on the board before we consider supporting the slate, for the simple reason that the benefits women bring to boards are best realized when a critical mass of women are present. After withholding support for a board slate, we write directly to each company to explain the reason for our opposition and urge them to take concrete steps to diversify their boards. If you own a mutual fund, you can check its proxy voting guidelines to see if it has a policy that addresses board diversity, and you can also instruct your financial advisor to vote against all-male boards. Envision what might happen if a significant proportion of investors withheld support from board slates due to insufficient gender diversity—companies could no longer ignore the issue, and would have to be responsive to shareholder concerns.

Shareholder Advocacy

Investors can also join with other advocates of gender diversity to form a collective voice. With the formation of the Thirty Percent Coalition in 2011, institutional investors, national women’s groups, business leaders and corporate governance experts came together for the first time to press companies on board diversity. The Coalition, of which Pax World is a founding member, seeks to assure that women hold 30% of board seats across public companies in the US by the end of 2015. Representing over $1.2 trillion in assets under management, the Coalition has written to more than 160 companies in the S&P 500 and Russell 1000 indices that do not have any women board members. The effort has resulted in dialogues with nearly 40 companies, and some have amended their corporate documents to better articulate board diversity policies in response to the concerns raised by the Coalition. Since the Coalition began this campaign in the summer of 2012, we have learned from six companies that women were recently added to their boards.

How Are We Doing?

Shareholder proposals are another tool investors can use to advocate for greater board and management diversity. During the most recent proxy season, investors filed 24 resolutions on board diversity and over half were withdrawn based on agreements reached with the companies in question. Two board diversity proposals went to a vote in 2013, and a proposal filed by the New York City Pension Funds at CF Industries won 50.7% support, a very strong showing. For its part, Pax World filed and successfully withdrew board diversity proposals at Stericycle, Inc.* and Hospitality Properties Trust* after receiving positive responses from both companies in which they agreed to amend their corporate governance documents to include gender and ethnicity as criteria for selection of any new director, and to periodically review board composition.

Women interested in other aspects of sustainability can wield many of the same tools: voting proxies with an eye to sustainability, joining with other investors and advocates of sustainable investing, and using a financial planner or advisor who is knowledgeable about sustainable and responsible investing choices, or willing to learn about it in order to help clients. Financial advisors are particularly helpful to investors in sorting through the at-times overwhelming volume of information available on investment choices. But one piece of financial advice that women never have to listen to any more is “get married.”
______________________

*Stericycle, Inc. and Hospitality Properties Trust are currently held in the Pax World Funds. As of 6/30/2013, the Pax World Balanced Fund’s investments in Stericycle, Inc., and Hospitality Properties Trust comprised 0.4% and 0.4% of the fund’s assets, and the Pax World Global Environmental Markets Fund’s investments in Stericycle, Inc., comprised 2.8% of the fund’s assets. Holdings are subject to change.

RISK
Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. Emerging market and international investments involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principles, economic or political instability in other nations or increased volatility and lower trading volume.

You should consider Pax World Funds’ investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus by calling 800.767.1729 or visit www.paxworld.com. Please read it carefully before investing. Copyright © 2013 Pax World Management LLC. All rights reserved.

Pax World Funds are distributed by ALPS Distributors, Inc.
PAX003439 (7/31/2014)