Does Gender Diversity Impact Investment Return?


Gender diversity and equality has become an increasingly important social concern that continues to gain global traction. Female participation in the workplace has increased significantly over the past few decades. For example, Credit Suisse reported that in 2005, only 41% of MSCI ACWI stocks had one or more women on their boards, but by the end of 2011, this number had increased to 59%.1

While it is true that much of the increase in gender diversity is a result of political and cultural demands, an overwhelming amount of evidence suggests that a gender-diverse workplace can enhance both company profitability and investment returns. Anecdotal literature has long implied certain benefits associated with women in the workplace as gender diverse teams often construct superior decisions, are more apt to innovate, and have better risk management processes.

Morgan Stanley’s Global Quantitative Research and Sustainable Responsible Investment (SRI) teams are striving to shift the gender discussion from speculative to empirical. As such, these teams collaborated to aggregate and analyze global data on over 1,600 stocks, using a three-pronged quantitative framework to score companies based on:

  1. Gender equality in the workplace
  2. Company policies on inclusion, and
  3. Company programs that accommodate the needs of women and working parents

The results? Including gender diverse companies in one’s investment portfolio is positively correlated with return on equity. You can learn more here, in Morgan Stanley’s 31-page report (March 31, 2016), “A Framework for Gender Diversity in the Workplace.”2 The Morgan Stanley analysts combined the percentage of women employees into a composite, “Equality in the Workplace,” and found that companies with the greatest level of female employees had a median ROE 0.7% higher than regional sector peers and 1.1% higher than companies with low female representation.

Credit Suisse conducted similar research and back tested 2,360 global companies over a six-year period, from 2005 to 2011. The results were as follows: companies with one or more women on their executive boards delivered superior average returns on equity, better average growth, higher price/book value multiples, and lower gearing. Credit Suisse concluded that while there is not one simple reason as to why gender diversity leads to outperformance, evidence suggests that board diversity leads to reduced volatility, and that this corporate performance stability manifests itself in the form of enhanced stock price returns.

Interestingly, Credit Suisse found that there was a difference in the implications of women board members pre- and post-2008. From 2005-2007, a period of healthy economic growth, there was little value-added from having women on the Board. However, the back test proved significant outperformance post-2008, during a volatile macroeconomic environment. Credit Suisse analysts concluded that gender diverse stocks are often defensive. Diversity on the board tends to have the most positive implication when markets are declining and such stocks exhibit lower volatility during rougher macroeconomic periods. “We can therefore conclude that relative share price outperformance of companies with women on the board looks unlikely to be entirely consistent, but the evidence suggests that more balance on the board brings less volatility and more balance through the cycle” (Credit Suisse).3

Global management consulting leader, McKinsey and Company, similarly proved that companies with a higher proportion of female board members often had higher valuation, above-average operating margins and a higher degree of organization. Additionally, a 2016 McKinsey Global Institute report4 concluded that advancing women’s equality and closing the gender gap could lead to $12 trillion in global GDP by 2025. In fact, in the best case scenario, which McKinsey calls the “full potential” scenario, global GDP could increase by $28 trillion. In this full potential scenario, women have an identical role in the workforce to that of men. The “best in region” scenario is the scenario by which $12 trillion is added to 2025 global GDP. Here, countries would match the rate of improvement of the fastest growing country in their geographic region, closing regional gaps worldwide. You can read more about this here.

With overwhelming evidence we can conclude that gender diversity is not only positive for company morale and team decision-making, but that gender diversity also enhances investment performance, manifesting in the form of superior employee productivity, greater risk management, talent retention, and employee satisfaction.

Gender Diversity and ESG Investing:

According to a 2014 report released by The Forum for Sustainable and Responsible Investment (USSIF), 213 investment vehicles were offered in 2014 with a diversity lens, and $578 billion of assets invested by U.S. institutional investors were through equal employment opportunity criteria.

Gender diversity has been proven to enhance “Employee Engagement,” which can primarily be determined by employee satisfaction, inclusion, and participation. Employee Engagement is widely agreed upon as a material ESG factor in certain sectors, including but not exclusive to: Financials and Technology, Retail, Apparel and Luxury Goods, Business Services and Leisure.

So, What Does This Mean?

Companies should increasingly consider gender diversity as they think about risk management, productivity, and turnover. Investors, particularly those committed to ESG Investing, must consider gender diversity as research proves that there is a correlation to outperformance. Moreover, lack of gender diversity can have serious negative consequences. Gender discrimination, even if solely perceived, has the very real potential of discouraging stakeholders from engaging with a company and damaging company reputation. By failing to include women, a company must spend more money on attracting talent and gender discrimination can often result in increased costs for a company. Gender discrimination can increase cost of capital if noticeable imbalances in hiring have any legal implications. Thus far, it seems reasonable to conclude that the majority of investors agree that gender diversity improves investment performance.


[1] and [3]



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Author Jennifer Ballen

Jennifer is the Global Manager of Packaging and Circular Economy for AB InBev and the Founder/Writer of, an editorial blog composed of narrative and economic analysis which demonstrate that profitability and environmental/social impact need not be mutually exclusive. Jennifer is also the Co-Founder of "Before It's Too Late", a virtual reality prototyping lab, highlighting climate change stories, simulations, and solutions, aspiring to change the climate narrative by closing society's empathetic distance from it. Jennifer's interests include impact investing, the greening of sports, renewable energy, and corporate implementation of sustainability. Jennifer started her career at Morgan Stanley Investment Management in New York City and is currently a Level III CFA Candidate. In 2014, Jennifer became trained as a Climate Leader with Al Gore's Climate Reality Leadership Corps, in Rio de Janeiro, Brazil, taking a global leadership position in climate advocacy. In 2016, the Center for Development and Strategy recognized Jennifer on its "30 under 30" global list of sustainability leaders for her expertise in Corporate Social Responsibility (CSR). Jennifer is the Co-Author of the 2017 MIT published Case Study "First Solar", and holds a B.S. in Finance and Marketing from Lehigh University (summa cum laude honors), and an M.B.A. from MIT Sloan School of Management.

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