Measuring Gender Equality Progress

As we celebrate International Women's Day, it is time to incorporate and measure gender diversity targets to demonstrate that the issue of women's empowerment is not limited to only one day per year. The investor and finance communities are eager to support these initiatives, and we are seeing the most ambitious companies already linking their financing directly to gender and diversity-related metrics.

In Citi's most recent Global Perspectives & Solutions report (Financing a Greener Planet), we note how the investor community is increasingly moving from a headline Environmental, Social and Governance (ESG) approach to pursue more granular ESG goals. Moving to this thematic level will be an important shift in order to better tie the allocation of investment capital to the desired changes in corporate behaviour being sought by asset owners.

While equity investors have the ability to influence corporate behaviour by voting and active engagement with boards and management, bonds and loans can contractually build in metrics for selected E, S and G goals, providing a more direct route to creating positive changes. In 2020, we saw USD $8.5 billion in Key Performance Indicator-linked bonds issued, and since the beginning of this year, KPI-related discussions have quickly become the new norm.

An increasing number of companies are incorporating ESG KPIs into their financing structures, most commonly goals linked to environmental targets. But just as companies align their climate efforts to the Paris Agreement, they should consider setting aspirational social targets as well. For example, the Women's Empowerment Principles, published through a joint effort by UN Women, ILO and the European Union, may help companies to align on metrics around equal pay, sexual harassment, family-friendly policies, childcare and gender-responsive procurement, among other key action areas. In Western Europe, the most commonly used gender diversity target is the percentage of female representation in senior management level positions, and we see potential to broaden the scope further.

During the Covid-19 pandemic, the impacts on women were exacerbated, experienced especially by those working as primary caregivers, health workers, migrant workers and in the informal industry. The Word Bank recently highlighted there is a risk that gender gaps could widen and that progress made in wealth and economic empowerment over the past decades could be reversed.

Finland ranks as a top country for equality in the workplace, with women represented in 37% of management positions – one of the highest in the world. Large multinational companies have the means and the global footprint to support women, and by doing that, they also lower their cost of capital and become more attractive investments for global ESG-focused asset owners. This is a true win-win situation and Finnish companies are uniquely positioned to lead the way.