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Companies with more gender-balanced workforces outperformed their least-balanced peers by as much as 2 percentage points annually between 2013 and 2022, a BlackRock study of the MSCI World index has found.
The higher return on assets held true within countries and within sectors, and was especially marked for companies where gender parity was greatest in revenue producing, engineering and top-paying jobs, researchers at the $9.1tn money manager said in a report released on Thursday.
While other researchers have also sought to document links between gender equity and performance, this global study of roughly 1,250 big companies that report at least some gender data is one of the largest ever done.
Companies in the middle quintile for gender balance reported an average annual return on assets of 7.7 per cent, compared to 5.6 per cent for those with the highest share of men in their workforce and 6.1 per cent for those with the highest share of women, the study found.
“Human capital is very important to investment performance,” said Sandra Lawson, the BlackRock managing director who led the work. “It’s a pretty powerful correlation.”
BlackRock’s work comes at a time when the world’s largest money manager and its peers have been attacked for using environmental, social and governance factors in investing. Conservative critics claim that “woke” asset managers have strayed too far from their duty to maximise returns and have called for boycotts and new laws to prevent the use of ESG in investing.
This study will strengthen the case of investment firms that contend it is part of their fiduciary duty to consider gender representation and other social factors in the investment process.
The BlackRock study used return on assets rather than a measure linked to share prices because it is less affected by equity market movements, according to Ewelina Zurowska, one of the researchers.
While sectoral and industry differences accounted for nearly half of the variation in the representation of women in their sample, the link between return on assets and gender parity held up when the BlackRock team controlled for it. They also found that companies where the gender diversity in mid- and top-level management reflected the overall workforce tended to have lower employee turnover and provided higher returns.
The researchers also looked for links between personnel policies and financial performance and found that US companies where women took longer maternity leaves outperformed peers where leaves for childbearing were shorter.
Lawson said the maternity leave data appeared to be an indicator of employee-friendly policies, rather than the cause of performance differences. “A message is sent to the company as a whole that we value workers as individuals, not just as employees,” she said.
BlackRock embarked on this study after receiving questions from clients about the links between gender diversity and performance, according to Tanja Boskovic, another researcher.
Earlier studies by McKinsey, including one that looked at 1,039 companies in 15 countries, have linked gender diversity to above-average profitability. Bank of America found US public companies with more diverse boards had a higher return on equity and lower volatility in earnings per share than their less diverse peers.
Shivaram Rajgopal, a Columbia Business School professor who did not work on the BlackRock study, said: “If this ephemeral thing called culture becomes better and people actually feel like showing up to work, the fights go down. That’s how decision-making improves when you have some gender parity.”
