`Womenomics' stocks outperform, say Goldman strategists
Companies with a higher presence of female executives have historically rewarded their equity investors with better performance, said Goldman Sachs Group Inc. strategists as they unveiled a basket of European firms that employ an elevated number of women.
“Over more or less any period since the global financial crisis, having more women in senior positions as managers or on the board is associated with company outperformance relative to the sector,” the strategists led by Sharon Bell wrote in a note on Tuesday, while adding that this doesn't apply to all industries and that academic research isn't yet conclusive on this trend.
Goldman analysts rolled out a new basket of European companies with the most women at all levels, called Womenomics (GSSTWOMN Index), which includes firms such as LVMH Moet Hennessy Louis Vuitton SE, Swedbank AB, Nestle SA and AstraZeneca Plc. French and Nordic companies dominate the list, said the strategists, as France has a quota system for female board members while the Nordic region has historically had higher female labour participation.
Europe is beating the U.S. in its push to make women a more equal part of the workforce, and although the pay gap between men and women remains large in the region, it's smaller in all major countries in Europe than in the U.S., Canada and in Japan, according to Goldman. Workforce participation rates among women in Europe have been rising, while in the U.S. they've been flat since the late 1990s, said the strategists.
The research weighs in on the market debate regarding the importance of investing based on environmental, social and governance principles. Europe has been seeing a boom in appetite for such investing this year, with about 50 per cent of all new exchange-traded funds in Europe, the Middle East and Africa this year ESG-related, according to Citigroup Inc. data. That compares with US$3.8 billion for new nonESG funds.
Inflows into ESG-focused strategies may have contributed to the better equity performance among companies with higher female presence, Goldman said. “The price outperformance may be a function of flows into ESG funds targeting diversity metrics, rather than more women producing better outcomes or lower risks,” the strategists said. “But even if this were the case, we continue to believe investors will value higher social and governance scores for companies, so companies that do perform well on these metrics should continue to attract both flows and a premium.”