Gender Diversity Continues to Work

In today's update of our groundbreaking work on gender diversity launched earlier this year, we highlight that companies our model deems as gender diverse continue to have lower stock volatility than those that screen poorly. Further, generous paid maternity leaves have been rewarded in the US.

We launched a comprehensive quantitative framework to assess ~1,600 developed market companies on five themes related to gender diversity in our report Putting Gender Diversity to Work: Better Fundamentals, Less Volatility (02 May 2016).

We find continued evidence that gender diversity matters for stock price volatility in today's work. Among stocks ranked in the top quintile of our global stock selection model, those with high gender diversity have delivered much better risk adjusted stock returns than the rest over the past few months. With similar level of returns, high gender diversity stocks have exhibited lower performance volatility and had lower probability of experiencing a major drawdown. The diversity framework appears to be accretive to our current stock ranking model that focuses on common ranking areas like sentiment, revisions, valuation, technicals, balance sheet, and capital use.

Compared with the year-end 2014 figures reported in May, we found continued but small improvement on most of the diversity metrics through year-end 2015. The US is one of only three countries left in the world that do not guarantee paid maternity leave - the other two are Lesotho and Papua New Guinea. The share of companies that provide paid maternity leave benefits above and beyond local statutory requirements increased considerably in telecom, financials, technology and consumer staples during the course 2015. While the US companies (and US legal minimum requirements) are significantly behind the rest of the world in such benefits, we found that the market actually recognized the value of paid maternity leave benefits on talent recruiting and retention and generously rewarded the companies that have strong maternity offerings.

We implemented a new process to incorporate inputs from multiple reputable sources of ESG data (Thomson Reuters, Bloomberg, FactSet and BoardEx) as well as our fundamental analysts that further improved the quality of our data. We updated the gender diversity rankings for the constituents of MSCI World as of the end of July 2016. The turnover rates between the highest and lowest rankings are modest from our previous update.

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