Why can gender lens investment deliver better returns?

According to Morgan Stanley, written by Emily Thomas

Pham Phuong Linh introduced and edited

At the recent COP27 2022, Women in Finance Climate Action Group and 2X Collaborative issued a call for all relevant stakeholders in the climate finance value chain to make new commitments and initiatives to support gender-equal climate finance. What makes this "lens" attractive and necessary for the market?

Regulations and investors are changing corporate behavior

In the US, Nasdaq submitted a proposal to the US Securities and Exchange Commission (SEC) to adopt new listing rules related to board diversity and disclosure. This proposal was adopted in August 2021 and requires all companies listed on the US Nasdaq exchange to publicly disclose consistent, transparent diversity-related statistics about their board of directors.

In Vietnam, the 2007 Law on Gender Equality, amended and supplemented in 2020, regulates gender equality in all areas of social life, including economics, politics, society, culture, education, health, labor, family, and child protection and care. From a legal perspective, these regulations encourage businesses to change the way they operate to promote gender equality.

Gender equality is an important factor contributing to the success of a business

Studies show that gender diversity can help broaden perspectives and promote better decision-making in organizations of all sizes. In fact, diverse perspectives actually have the potential to increase your portfolio's returns.

Research by Morgan Stanley Research shows that a gender diverse workforce is closely linked to higher profits. When analyzing global companies, the research team found:

• Businesses aiming for gender equality were on average 1.2% more profitable per year than less diverse companies between 2011 and 2022;
• Gender diversity drives innovation, enhances adaptability and enhances brand reputation.

Benefits from gender diversity for businesses

• Enhance employee satisfaction: Diversity in general, including gender diversity, has been shown to correlate with superior performance in employee engagement. Happy workers produce more innovative products. Additionally, retaining talented employees is more cost-effective than finding replacements;
• Drive innovation: Greater diversity can improve organizational decision-making. If everyone sitting around the meeting room has similar experiences and opinions, it can unintentionally create blind spots in the decision-making process. Furthermore, gender diversity promotes creativity and innovation in products and services, helping businesses exploit new markets and increase revenue.;
• Recruitment advantage: Gender balance in recruitment gives companies an advantage, especially in countries with an aging and shrinking workforce.

Gender and investor regulations are changing business behavior in Vietnam in positive ways. The Gender Equality Law of 2006 and its amendments in 2015 required gender equality in recruitment, training, promotion and salary activities. On the other hand, gender equality is an important factor in ESG. Businesses with good gender equality policies will be highly appreciated and prioritized by investors. These changes are helping to increase women's participation in the workforce and leadership, reduce inequality in the workplace, and promote sustainable economic development.