There are ways for investors to promote workplace fairness that go beyond calling for more women on boards.
As the issue of sexual harassment rattles corporate America, there are ways for investors to make sure gender equality is a priority at businesses they back—beyond calling for more women on corporate boards.
One is through a relatively new form of debt called gender-equality bonds, whose proceeds go to businesses that are majority-owned by women or have women in leadership positions.
Australia is a leader. National Australia Bank sold five-year bonds in March that raised $400 million for NAB-backed companies cited as employers of choice by the country’s Workplace Gender Equality Agency. Australian insurer QBE issued $500 million of similar gender-equality bonds last month.
In March, International Finance Corporation—the World Bank’s private-investment arm—raised $500 million through its social bond program for financing female-led businesses.
Investors, such as those managing the $22.9 trillion allocated to socially responsible investing, are likely to have two questions: Do these bonds actually promote gender equality? And do they generate good returns?
Companies raising money with such socially responsible bonds are supposed to use the proceeds in accord with broad principles laid out by the International Capital Market Association. But these aren’t hard rules, backed by threats like a breach of covenant. To implement sustained change on gender issues, companies likely need other incentives such as tax credits or other measures that lower funding costs.
As for returns, the small sample size of gender-equality bonds makes it hard to generalize, though the NAB bonds yield 3.5%, on par with its other debt.
The example of “green bonds”—meant to encourage climate-friendly corporate practices—is encouraging. They’re becoming mainstream: Issuance in 2017 is expected to hit $120 billion this year, and green bond-specific credit ratings, exchanges, indexes and exchange-traded funds have all emerged over the past year. Companies including Apple and Fannie Mae have issued green bonds and mortgage-backed securities.
High demand has helped the S&P Green Bond index return 9.77% year-to-date, compared with 5.68% for the S&P 500 bond index. Investors may find it is indeed possible to do well by doing good.
Source: Anjani Trivedi, WSJ
Image Source: Small-business owners in the White House in March. PHOTO: ANDREW HARRER/BLOOMBERG NEWS