Equal pay portfolios outperform those with disparity in pay: Refinitiv

Global companies with no gender pay gap have outperformed corporations with pay gaps between male and female employees, an analysis by Refinitiv, a part of the London Stock Exchange Group, has shown. The data can help investors in assessing risks and opportunities in their portfolios while affirming to environmental, social and governance (ESG) standards.

Refinitiv said that companies should disclose their efforts to close a gender wage gap. “Such action demonstrates corporate values of fairness and equality and increases the likelihood the company will attract a diverse and talented workforce. Further, it increases the chance the workforce will work efficiently together and dissipates the risk of legal action on equal pay/discrimination claims,” the financial market data provider said in a note.

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Refinitiv took several FTSE Russell Indices such as FTSE All-World, FTSE Asia Pacific, FTSE Europe, FTSE North America and FTSE Developed as a basis for the portfolio analytics.

To create the portfolios, Refinitiv pulled out the gender pay gap percentage for all five indices, then sorted the initial universe to filter for companies with a negative pay gap for women (where women get paid less than 100% of male counterparts) and companies that report no gender pay gap. This resulted in five portfolios with five benchmarks (all equal weighted).

Across the board, it was found that all the portfolios with no gender pay gap outperformed against their benchmarks.

For the Asia Pacific region, the analysis showed that companies in the FTSE Asia Pacific Index with no gender pay gap had cumulative returns that outperformed by a spread of 55.10% when benchmarked against all companies with a negative pay gap for women in the same index (graph below).

In terms of sector breakdown, technology equipment was the stand-out industry, accounting for 23.6% of companies in the FTSE Asia Pacific Index with no gender pay gap.

“Apart from strengthening a company’s ability to attract a diverse and talented workforce, our report also shows that companies with equal pay tend to outperform those with a disparity in pay between genders,” said Vernice Moh, managing director, Asean, data and analytics, London Stock Exchange Group.