Sustainable and Impact Investing: Equality in the Workplace & Why Investors Need to Care

Equality in the Workplace & Why Investors Need to Care

Gus Grefthen:
Hello, everyone, and thank you so much for taking time out of your busy end of year schedules to join us today. I know it's a pretty hectic time of year for everyone. This marks our fourth collaborative Sustainable Investing Webinar between Saturna, Green Century Funds and Impax Asset Management. For those who are interested, recordings of past webinars are available on our website. And just to set the stage a little bit, our first collaborative efforts began pre-COVID with in-person symposiums, really with the spirit of gathering our peers to progress the sustainable investing segment of our industry, share the unique expertise each of our firms have in ESG and impact investing, and help advisors have more meaningful conversations with their clients. We're hoping to continue these events once a quarter with fresh topics and new speakers. For those who don't know me or Saturna, my name is Gus Grefthen and I'm part of the Business Development and Advisory Relations team at Saturna Capital. Saturna has been managing socially responsible investments since its inception in the late eighties and began formally integrating ESG into our investment process in 2015. Considering the topic of today's presentation, "Equality in the Workplace and Why Investors Need to Care." I should mention we are majority women owned with a female president. A few quick housekeeping items I'd like you all to keep in mind during today's presentation. Please submit any questions as you think of them into the chat box down at the bottom there. We'll receive those and get those organized during the webinar and we'll make sure we leave maybe ten or 15 minutes at the end for Q&A to address any submissions. And I really do encourage you all to submit questions as it does make for a much more engaging and lively discussion for everybody. So with that, I will pass it over to a quick word from Erin Gray with Green Century. Thank you so much.

Erin Gray:
Thank you, Gus. And thank you all for joining us here today. I'm Erin Gray with Green Century Funds. We are the first family of diversified, environmentally responsible and fossil fuel free mutual funds in the country. And our mission is to provide positive environmental impact. And we do that through a three part strategy. First is by offering sustainable investment portfolios through our three mutual funds.The second is through our shareholder advocacy program, where we work with companies to improve their environmental performance. And we'll chat a little bit more about that later today. And then lastly, we were founded by environmental and public health, nonprofit advocacy organizations a little over 30 years ago. So just a bit more background on Green Century relevant to our discussion today, focusing on the importance of gender equality and diversity in the workplace. Green Century has been leading by example in this area throughout our history. We've always had a woman president throughout our 32 year tenure. Two of our three leadership team members are women, as is 69% of our 16 person staff. And in addition, our president, Leslie Samuelrich, is one of the few in the responsible investing industry to be named to this year's Barron's 100 Most Influential Women in US Finance. So we're proud of that legacy, and I look forward to our conversation today. And with that, I will pass it over to Emily.

Emily Lee:
Thanks, Erin. Hi, everyone. For those who don't know me, I'm Emily Lee, I'm the California based representative for Impax. Thank you so much for taking the time to join us today. A little bit about Impax if you don't know us. We are a specialist asset manager investing in the opportunities arising from the transition to a more sustainable economy. At Impax, we truly believe that capital markets are going to continue to be profoundly impacted by things like climate change, natural resource depletion, pollution, essential investments, needed and human capital and infrastructure. And at Impax we have a 25 year history of having the experience, the tools, the people to do this research in order to identify these opportunities and also to identify risks, things that pose long term risks to your portfolios. So we're very excited, especially to be on this webinar today because gender equality has been a focus of Impax and PAX world funds, as many of you know us going back to the seventies. For us for quite a while, we're actually really a leader in what's termed gender lens investing as we were the firm to launch the first women's fund back in 2006. So we launched and managed the Impax Global Elevate Women's Leadership Fund, PXWIX. So we really are experts in terms of identifying companies that invest in women, and we're very proud of that history. We also continue to use gender diversity or DE&I diversity, equity inclusion more broadly as a real focus area for the shareholder engagement work that we do across our firm. So we're excited today to have two women who couldn't be better to lead this conversation for us. We've got Elizabeth Alm. Elizabeth as a senior investment analyst, portfolio manager at Saturna Capital. She's focused on integrating ESG into fixed income investing strategies at Saturna. She's been with the firm since 2018. She serves as PM on several fixed income mutual funds in both the global and emerging markets areas as well as in the US domestic market. And we're also excited to have from Impax, Christine Cappabianca, who's a portfolio manager. She joined us at Impax in 2021. She serves as a portfolio manager on several of our strategies, including the Women's Fund, which I mentioned, as well as some other systematic strategies that we manage here. She came to Impax after several years at Mellon, where she served as a ESG data expert, among other roles. And here, at Impax, she plays a really key role in identifying the optimal sources of return from the sustainable and thematic universes. And she's recent completed quite an extensive amount of research on the proprietary Impax gender data that we have here at the firm, which I hope that she'll talk about more as well. And as Gus mentioned to any questions that you think of while Christine and Elizabeth are talking, please do enter them into the chat and we'll have plenty of time for conversation. So with that, I'll turn it over to Elizabeth.

Elizabeth Alm:
Excellent. Thank you so much. Really happy to be here and happy to be a part of this conversation. It's such an honor to get to have a conversation about gender diversity with all the female leaders and leaders in the sustainable investing space. You know, I think that it would be great to just be a discussion with all of us between Christine and I and I think just starting off talking about why we think it's important to incorporate gender and how we do it in the investment process. My perspective is a little different because I'm primarily in the fixed income world and looking at bonds, both in how bonds impact gender equality, but also a lot of the risks that come from maybe not incorporating gender equality. We look at sovereign, sub-sovereign issuers, corporate issuers across the world. The Sustainable Bond Fund we manage is multicurrency and global. And it's generally why it's important, especially from a global perspective, differences in lifetime earnings between men and women. It was surprising to me, but it amounts to about $172 trillion globally. That's two times the world's annual GDP, and over 2 billion women of working age still don't have the same legal rights as men in all 178 economies. So when we're talking about the importance of gender equality in the workplace, we're looking at the global perspective, we're looking at the importance for the global economy, but also as investors, for us, it's really at the core of good governance. And looking for good governance drives our investment decisions.

Christine Cappabianca:
And from an equity perspective, if you take the S&P 500 and you invest in it as it is, you're really investing with the, you're investing in a male dominated index. And so in our equity fund, we're trying to really just make that index more equitable. And the crazy thing is, is that we're not even close to being able to get 50-50 stats from any measure, whether it's women on the board, women in management, female CEOs, CFOs. We are so far off and at Impax, being the leaders that we are in gender equity, we get questions when I'm out with meeting with clients and it's why? Why just gender? Why not you know, broader diversity? And there's a couple of reasons for that. And I think the primary reason is that we don't have gender equity, so why would we back off? And then you have other reasons, such as it's really one of the areas where there's better data availability. It's representative of broader diversity. And I think as we get into it, I can talk about some of the alpha that I believe investing in companies that are embracing more equitable diverse workplaces have.

Elizabeth Alm:
Excellent. With that, I think the way I'd love to structure the conversation is sort of talk a little bit about, I guess maybe the risks first from the fixed income point of view about what happens when we don't incorporate gender diversity or some of the risk associated with that. Just from a fixed income point of view, I know Christine will probably have a lot to say from the equity point of view in terms of firm profitability, etc. But even just when we're looking at the banking sector, specifically, gender diversity on the boardrooms, it's actually correlated significantly with lower bank-specific credit risks. For example, if you have three or more women on a board, you're going to see generally a 50% reduction in bank distance to insolvency and 38% reduction in a bank's distance to default. The financial sector is kind of unique because there's particularities such as complex regulations, economic sensitivity, quest for better risk management, which I think is pretty interesting to look at. Like even so, when I'm looking at a bank credit, we're looking at trends of women on the board, whether there are three or more women on the board, and also as a percentage, 33% or more women on the board and what those trends are like through time. And also, I think like any topic, gender diversity is a complex topic. There's not just going to be one for one correlation in terms of the trends that we're seeing. And another thing that we look at is something called the…actually, the glass cliff. I think it's pretty interesting to note that women are more likely to be appointed as CEO and CFO roles when a firm is having trouble or closer to default in a higher risk position. There is research that shows that female CEOs and female CFOs for firms that are close to default see a decrease in their credit risk and a positive impact on their financial stability. But we're also looking for when these female CEOs are appointed, how long they are in tenure. If there is an issue most of the time they can be replaced with white men. So it's not just as simple as checking a box to say a firm has a female CEO or CFO or three or more women on the board. There are a lot of nuances when evaluating risk from a fixed income perspective.

Christine Cappabianca:
That really aligns to some of the research I've done on the women in leadership work in the equity space. I think it's hard to draw significant conclusions from the female CEO and female CFO for those reasons that you mentioned. I think they tend to come in in more dramatic circumstances and they tend to be given the ultimatum of saving the company. And it's a binary outcome and in some cases, so the data…there's a small number of data points of, you know, women in these leadership positions and their volatile outcomes. I think in general over the long term, we have seen a positive, you know, addition of alpha from having these positions, but it's not as extreme as perhaps other areas. I think similarly, percent women on the board, which is a leadership statistic, was really, I think from an equity perspective, one of the first broadly available gender statistics. I think when ESG data first came out, it was one of the better covered areas and I think a lot of people got…a lot of companies kind of got on board with diversifying their boards. And we've seen the value of, as more and more companies have diversified their board, there's less of an ability to stand out as a leader in that space. But what I've seen in my research is that the companies who have not diversified are super at-risk. So I look at the spread between the leaders and the laggards, and it's those laggards, the companies who haven't diversified their boards that really underperform in the short and long term. So that's really interesting. What percent women on the board is, is much more of a risk factor. Percent women in management, we are, companies are not as far along on. And so there is still the opportunity to stand out as a leader and to capture some of those upside available with increased diversity there. Can I ask you a question, Elizabeth? Where are you pulling the data for your, when you're doing the company research and are you screening on it first or are you identifying where you want to invest and then digging into the statistics? How do you…

Elizabeth Alm:
That is a great question. Like with any data, it's a combination. So we're using ICON, we're using Bloomberg. But when those fall through just because we are looking in emerging markets and that can be definitely more challenging in terms of data availability, timely data and also just taking into account that having a Western point of view on every culture maybe isn't the right approach, so, especially if we're looking in companies in different places of the world, those places can definitely be in different place, or different parts of their journey towards gender equality and sort of looking at it through that lens as well. So in terms of screening, it's not something where it's like if we're looking at a company, let's say in the Middle East or maybe a Middle Eastern sovereign issuer that has a, maybe a great use of proceeds. We see positive trends through time, they're still below what we would want in a let's say, a European or US company. But really, we're looking at those trends through time and where they are within that place in the world. But in terms of screening, a lot of this has to also be done manually. Like we're going through every single company report and actually pulling proprietary data specifically about the UN Sustainable Development Goals and looking at how companies report or contribute to each of those goals. So unfortunately, a lot of that is manual as well as using some of the data providers. How about yourself?

Christine Cappabianca:
When the gender score was first created at Impax it was really to…they chose data points that they could get for every company in the whole MSCI world. So Developed space not dipping into Emerging yet, but I think that's another reason gender is a lot easier to judge the whole world on than race. It gets very complicated, very quickly. So first it was the set of kind of gender leadership factors that that we were discussing earlier. And a few years ago they expanded out into trying to capture more of the workplace culture, the policies around creating an equitable culture and stuff like that. As I, when I came in and I started doing my quant research on it, and Impax, I think…Emily remind me of it, we just launched a Social Fund right, at the top of that is public and it launched on Friday. Very exciting. But I did all of the quant research for that, which kind of took gender and started exploring to the next level. So when I started trying to look at things beyond gender, that's when the regional differences really started standing out, because I only had good race data in the US. So I separated out the US and then when I saw, we looked at more the EMEA region, Europe, Middle East, Africa, Japan, a whole different beast in our Gender Fund. So we invest in the top quartile of the MSCI world. From a gender leadership perspective, there's only one Japanese name that falls in there. So looking at how the factors performed in Japan were different. And then the Social Fund they want to invest in EM. So after I went through all the factors in the developed world kind of beyond gender, trying to figure out what worked in EM was just totally eye opening. From a gender perspective right now we're looking more at just disclosure, which I think disclosure is always kind of a more infantile form of, you know, when you don't have great…and I don't know, I came to say it's not that we have great data it just it doesn't seem to be making the same financial impact in having the varying levels. Like there's not as much nuance in Emerging Markets, I think from the percentage of women on the board, a percentage of women in management, it's still kind of like if you're advanced enough to be, you know, disclosing it and thinking about it, like that is adding value right now in the EM world from my perspective. But yeah, they were all, every region was so different in how each factor kind of worked.

Elizabeth Alm:
I could imagine, you know, as part of our work, we do have an office in Kuala Lumpur and both Patrick, the other PM on the fund and myself, we actually do a fair amount of traveling, especially if we're investing in, for example, Southeast Asia or Malaysia. We definitely sit down with issuers and have conversations in various regions to get to know that specific region. And my colleague does a lot of travel in the Middle East and meets with a lot of issuers. And I think that gains a lot of insight as well as to just some of those conversations with boards or with companies or with issuers about how they're thinking about it, whether they're disclosing it. Yeah, I would completely agree. Whether or not they're disclosing is a huge component.

Christine Cappabianca:
Yeah. And then there's differences from the sector perspective as well, which also have regional ties like the, way more tech in the US and I think that has been interesting in driving quantitative research. I've had to do equal weighted research just because you know, the Magnificent Seven have just taken over from a market cap weighted perspective and you can't really do traditional quant research if…All it would do would be to point you towards those seven names that have outperformed dramatically over the past seven years. But even going from market cap to equal weighted, you still see the impact of the significantly larger tech industry in the United States and how factors are different there. I think gender from an alpha generation perspective, works exceptionally in Europe. I think it's very well established. There is a little less volatile, but what I found for the US is that it's where we try to capture a more intangible culture piece. You know, are women supported, are women staying? Are they leaving? You know, that cost of turnover that's associated with not supporting all members of the workforce. That factor has stood out as working across the board on, you know, in all regions, in all sectors. So that has really been where we've been focusing some of our research on just because the individual leadership numbers have not been…they are very nuanced, depending on where the company or the industry, where the country is in their growth and maturity. But our workplace equity factors, as we call them, they're things like pay equity, they're things like talent management. There is both internal and external talent management, you know, how are they recruiting, how are they mentoring, sponsoring, training, just, you know, developing the diverse employees that they have in their in their company. Is this something that they're talking about at the company level? Are they monitoring the diversity at their firm and the direction it's going? Are they talking about, you know, improving it at all, that kind of stuff? So and what we found is that while some of the individual factors are very, very additive, particularly pay equity in the talent pipeline, but when you start combining all of them together and really building a picture of how the company is handling being supportive of all its employees, that we find those companies that are really trying have outperformed significantly on an equal cap, equal weighted basis. So it's been really interesting.

Elizabeth Alm:
I think some of that intangible or, you know, the what we see beyond just the KPIs is very important but also very difficult to evaluate, I find. How are you getting that data? Do you find that individual conversations with the companies or are you looking at the reporting, etc.?

Christine Cappabianca:
So we have a gender analytics team at Impax. There is five members on it with support from the rest of our sustainability center as well, and they spend all year continually gathering the data on every company in the MSCI world. That is how it started. I have high hopes that, you know, AI and big data can help us make that less manual on them. They do look at sustainability reports. I think there are increasing data sets that approach this to some degree that we can rely on. But the head of the gender analytics team has been doing this for 15 years now, and I do think there is a degree of intangible, intangibility of her to capture the intangible, the companies. You know, she knows which companies are, and she leads our stewardship as well. So she's engaging with the companies and she kind of knows what direction they're going in. So we are using a little bit of NLP or sentiment analysis to try to try to code her brain up a little bit. But it's very manual, still.

Elizabeth Alm:
That's really interesting. For us, trying to gather that data, we use a combination of the manual collection you're talking about, but we also try to read as many academic studies that come out as we can, stay on top of the research. Some of those studies do a good job at disclosing certain companies that are doing well. Obviously, not all studies are created equal, not all studies are valid, but we like to keep on top of it. One and I'm sure you've seen this one, just about the cost of sexual harassment in a firm where they actually looked at millions of Glassdoor reviews and showed that like if you'd invested at sexually harassing firms over a period of time, you'd lose 20% versus an increase of 150% of your market value on regular firms. So it's just goes to that the heart of company culture is important. If you work at a toxic place, you're not going to be as productive, your company is not going to be as productive. But it is definitely difficult to put your finger on, you know, specifics of that company. And that's, I think, where that manual component comes in. Reading those reviews, reaching out to the company, going through company reports. I hope one day it's not as manual, but I do think that there is benefit for being close to the story of a company or issuer that you invest in. I think some of that manual human component of the analysis is pretty essential.

Christine Cappabianca:
I think a good example of this probably in our portfolio is Disney. So our gender score, it underperformed significantly starting in May, June, July. There was a three month period it had the worst underperformance I've seen in the ten years-ish that I have the history of the factor performance. And I was looking into why it might be underperforming. And I think there were a couple of things. There was the affirmative action for the Supreme Court, and I think that allowed people who…to be more vocal about anti diversity issues. So that was…the woman on the gender analytics team who reads all of the academic papers, that was her guess. My market research was pulling of tons of negative news on…it was the Budweiser diversity issues, you know, where people didn't like their ads. I think Target was getting kind of targeted for their pride ads around the same time. But Disney, there was some negative publicity or people saying that they felt like diversity was being forced on them and if they were anti diversity, they didn't feel comfortable speaking up against diversity. So is that truly diversity? I think it's really complicated. But so Heather, who's the lead data collector and head of stewardship, she's been engaging with Disney for years. And so I asked about it. I asked her about it. You know, are they being too prescriptive? Like, did they go too far? And she was able to say she's like, this is just media and politics trying to kind of make a story where there's not a story. She's like, they are being so thoughtful about it. And just to have that connection to your point close to the source, where it's like, can you get caught up? I mean, it's all becoming so political that it's slightly, slightly terrifying. But yeah, just knowing the company from a real fundamental perspective is helpful.

Elizabeth Alm:
I find, especially when looking at pay equity, which is a stat I would love to see just required to be disclosed globally, but you'll come across issuers that will, you know, in their reporting they'll say, oh yes, we definitely disclose pay equity. It would be, show up as a yes if you're looking at whether or not they disclose pay equity from a like a big data source like that you would download. However, if you dive into their company reports, you know, they'll be the footnote, which is like, we only do it for UK operations because that's required by their law and then they'll give you a link to go see that data. Then you go to the UK pay equity database and then find out that they're actually exempt from disclosing. So you have these companies that claim disclosure would show up in a big data sources having disclosed, and yet they're not actually disclosing anything or they're only disclosing a tiny fraction of their global operations. Do you find that this is the case? For me, it's this difficult to even have a standardized view on pay equity when we have so little information available.

Christine Cappabianca:
Yeah, pay equity of all of our workplace equity factors is still has the lowest like percent of companies that are efficiently doing it. I think having been at companies in the past who have claimed they did it and knowing that it didn't actually mean much as well, I think is, you know, that's the next level. One of the next levels for us is the quality of, you know, how they're addressing any issues that come up. It's definitely a very interesting subject. I think we'll have a lot more transparency on that. That's an area where, you know, it's mathematical, It's not a soft, really data figure. So I think there's hope of it getting better fast. And there's a lot of areas where we would love to have more data. You know, I think we're really interested in things like paternity and maternity leave. Parental leave, that's the word I was looking for. But that's so different regionally as well. But trying to figure out how to how to include that, you know, that line of thinking it is making me think about hybrid working as well or what, you know, how in the future of that will play a role in. And again, I don't think it's just a female thing. I know at my company, you know, if I have to take a call from a kid's doctor's office or something like that. But when my male coworker takes a call from his kid's doctor's office, it's just like it's this feeling of, okay, I'm not alone and it's okay. You know, it's hard to measure that kind of…you want that culture where, you know, it's full of allies. And I think that we're not quite able to. But I think the employee reviews are where we're going to start getting some of that. I don't know how many people actually leave employee reviews, which is a problem. So it's like, then you get into where are millennials leaving? Like where are they discussing their culture or where is Gen Z discussing their culture? I don't know what the next generation is, but, you know, how can we, you know, quantitatively capture the issues that are contributing, like really impactful? And I think we will see that, you know, with an AI future. But yeah, we're not…we're like on the cusp. Are there areas that you wish you could get data on?

Elizabeth Alm:
Oh, there are so many areas, especially from a global perspective. And I think there is a differentiation about what we actually disclose publicly on a portfolio level tends to be those data points which are more consistent and more readily available. So we're disclosing percent of women on the board for our portfolios versus a benchmark. We're disclosing if the holding has three or more women on a board versus the benchmark, we do look at the strengths of diversity and anti-discrimination programs for companies and disclose that. However, internally we definitely use more data points. For example, women in management, percent of ethnic minorities in management. But again, those data points are less available, less able to be, I guess, reported on a portfolio level. But we do try to…it's almost like making a mosaic where you look at a lot of different data points to try to make a picture. So we will actually go through every single company report, company website for all of our holdings in our Sustainable Funds, and we look by Sustainable Development Goals, so. And to see how a company is specifically reporting on their contribution to that goal and we divide it into three categories, which is one, if they just mention it, and it kind of feels like marketing, two, if they actually support it with data, or three, if they support it with quantitative targets. So in terms of diversity, one of our, two of our focus SDGs is SDG 5, which is gender equality and SDG 10, which is reducing inequality. So we'll actually break down by company, by issuer, by sector to look at how they're disclosing on each of those goals and if it feels credible and if it feels relevant. So in absence of perfect information, we try to at least get a gauge of corporate governance around it or commitment to these issues.

Christine Cappabianca:
Yeah, we disclose similarly, just because if you have to disclose in every company in your universe, you know, those are the ones that are available, we actually just all got together to discuss like what, you know, what are we…what would we ideally like to show if data availability wasn't an issue. And I think something that we say is that, you know, gender is one arm of diversity, but companies with broader gender diversity tend to have more racial diversity where the data is available. So again, that good data we have is only US. I mean, it is true for the US, but whether, you know, figuring out how to show that. In the same vein, you know, turnover, I think that's part of what we're saying is that, you know, if you make everybody feel welcome and supported, you'll have less turnover costs. So that's another derivative item. We've looked at other things like employee health and wellness or I remember when the Roe versus Wade issue first came out, I did…there was a list of companies who came out to say they would support their employees to take care of their health as needed. And so, you know, a gender tilted portfolio has a higher percentage of companies compared to the benchmark that might be more like. So there's a lot of derivative things. Just the…how to report that within approved guidelines, I think is a challenge because the data…I mean, the turnover data, not every I think like 60% of the companies in the MSCI world or something report their turnover in a consistent…which is I guess…we're getting there. It probably 25% five years ago, so we're moving, but.

Elizabeth Alm:
Excellent that we're moving in a positive direction. Not nearly fast enough but and I will add from a fixed income point of view, maybe this is a good opportunity to sort of shift the conversation to, you know, what are we doing, you know, as investors to make it better part of the impact point of this. But from a sovereign issuer just in the bond market, it's a lot different because we're not just looking at corporate issuers. We're also looking at sovereigns, sub-sovereigns, supranational. So the analysis gets more complex other than just women on a board or it becomes more of maybe a greater economic question. If you're looking at countries and potential growth factors, we do look at things like labor force participation rate. If you take a country like South Korea, it's actually an interesting example because for men, labor force participation rate I think is around 74% versus women it's 54 or 55%. But if you look at real GDP, if you had equal participation rate, you'd see it grow by more than 7% in the next ten years. So these sort of things actually do have a material impact on GDP growth, the country's future. Obviously, it's not one for one, but it is part of our analysis. And that being said, from a bond perspective, there's actually some really unique global opportunities, especially with dedicated use of proceeds bonds. So I found it really surprising that globally only about 1% of registered land titles are owned by women. And this is a huge part of the barrier of just women getting credit, women getting to grow their businesses or gain equal economic power. And one example I like to bring up from the bond market is a bond we own called the Women's Livelihood Bond. And it's actually run by an organization out of Singapore called the Impact Investment Exchange. And they're a very cool group. They do really innovative research in these use of proceeds bonds. So the money basically goes to microfinance organizations in Southeast Asia, like Cambodia, Vietnam, even some in India, and also directly to women owned enterprises to advance the economic power of women. But with any impact or use of proceeds, the most important part is also tracking that impact and making it very credible. And what this organization does that's so cool is that they're on the ground, they're interviewing women, they're having…putting out surveys to thousands upon thousands of women about how this money has changed their lives. They're surveilling microfinance organizations to make sure that they're on track, not having predatory lending standards, etc. But they've reported a really interesting statistic called the social return on capital, about how much per dollar the bond actually impacts women's lives or grows the economy specifically related to women's livelihoods. And one of their bond issues, you know, impacts about 50,000 women and gained a social return on capital for about $4.50 for every dollar invested. So this money can actually go a long way in the areas of the world. And I think the next thing we're going to see in the bond market is just more bonds being constructed for institutional investors like us with daily pricing and ISIN, but also towards these innovative use of proceeds. The next thing we're going to be seeing is called an orange bond initiative, which is really a gender lens debt security that combines peace, gender equality and also climate action goals, recognizing that climate impacts tend to impact the most vulnerable, including women more.

Christine Cappabianca:
I've never heard anybody make fixed income sound more exciting. I'm an equity person and that sounds amazing. I want to invest in that.

Elizabeth Alm:
I love bonds. It's I get really excited about these. I'm glad I get to share that passion with others.

Christine Cappabianca:
Yeah, that is that is amazing. Orange bonds, that's the gender bonds. Cool. I think the impact that we make from an equity perspective, there's a couple different directions. I think another one of those offshoots like what I was talking about before, where, you know, it tends to have lower turnover, it tends to be broader diversity or support their employees. Having a more diverse leadership tends to also make the company focus on environment, positive environmental outcomes as well. And I think women are more likely to be negatively impacted by environmental crises, whether it's, you know, loss of food, living, safety, etc. So I think investing with a gender tilt also tends to put you in a lower carbon intensive portfolio, etc. So that's one outcome. And then there's obviously the engagement that we do as active shareholders. Impax is very engaged. And so one thing I think is the McKinsey study on women in the workplace and that's where they talk about their broken rung theory. So men and women are hired at the same rate and then with each promotion, you have women, women's participation at that level fall off until you get to the executive level where, you know, it basically falls from 50% to, I think less than 10% or something like that. And so as part of our engagement, we do encourage companies to just kind of do either, you know, different assessments of where they're at and just actually consider and look at what's happening, you know, whether it is from a pay equity perspective or just a, you know, diversity, you know, disclosing diversity or how it's being…how people are moving through the company at that level. But I think the comments you had about GDP, I mean, that's why you want more women to participate, is right. Like if you don't, you assume that innovation is spread evenly between men and women. I guess whether that is…everybody has that assumption is different, but I assume that it is spread evenly between men and women because innovation is like creativity. And, you know, we all have it. And I think if you don't have, you're losing the opportunity from some of the workforce. But I think as you lose women who move up through the levels, you're also losing that experience, I think, which has a lot of value walking out that door. And why are we losing that? You know, is it because they can't manage the work life balance? Do they feel like they're not heard at the company? I heard a new one, I was listening to a podcast on Bloomberg, on women who don't feel supported during menopause and drop out. That's a critical level right before becoming an executive. I think there's a lot of problems that are causing that broken rung where women just aren't moving up through an organization successfully. So I think a lot of our engagement and our goal through this portfolio is really to try to keep the participation equal at every level.

Emily Lee:
Now, this is great. I know we could go on and on with these two, so much good information. Thank you both so much. That was really, really interesting. And I know you both touched on the impact. I'll make a quick plug. You know, we have our Impax engagement report on our website. There's also some great material that was linked from the invite to this webinar, so I encourage you all to check that out too. So again, if you've got questions, please type them into Q&A box. Before we open it up to questions, I do want to turn it to Erin. You know, she mentioned in the beginning, Green Century is also a firm that spends a lot of time on shareholder engagement and advocacy. So, Erin, we'll turn over to you before we open it up to questions.

Erin Gray:
Great. Well, thank you, Emily. We've heard a lot of really compelling research and data today about why investors need to prioritize gender equity and broader diversity in the workplace and one of the nuts and bolts ways to do that that we've heard some examples of already is through shareholder advocacy and engagement, which is just a way to think about how investors can make a positive impact on the issues like these that your clients care about. And each of our firms here have different approaches to building more equitable and responsible portfolios. But with whatever portfolio you create and use for clients, there's still no 100% perfect, responsible company out there. So a big part of what investors can do is work with companies to improve their ESG performance through advocacy, and especially being an active investor on material, environmental, social and governance issues that can really affect the bottom line. So I think I will just skip ahead to, you know, there's a variety of ways that we can, and tools that investors have available to engage companies. Just starting conversations, filing shareholder resolutions, working at a policy level. I'll just jump in so we can get some examples here. At Green Century, we work on a wide range of environmental issues, from climate change to food supply and public health issues. A couple examples of engagements that might resonate well with clients and one that is often of particular interest to women is toxic chemicals and exposures to toxins, many of which are found in plastics. And the concern is that there are 13,000 chemicals that are used in plastics, and of these, over 3,200 have been classified as hazardous. And that means they could be persistent, which means they last a long time in the environment. There's a risk of bioaccumulation, so they build up over time. So even though a small amount of exposure might not be a concern, certainly long-term exposure can be dangerous and then they are toxic. They can lead to disease like endocrine disruption, which especially affects women and children in terms of regulating hormones and can lead to significant health care costs. And then finally plastics can degrade, which releases these chemicals and also create nano and microplastics that have the potential to enter humans and animals. And I've got a few gross statistics here, so apologies for anyone who's grabbing a snack right now. Microplastics have been found in human breastmilk, and it's estimated that we each eat a credit card's worth of plastic a week based on chemicals that have been found in the food chain. And then of those over 3,200 chemicals of concern, only 128 are currently regulated globally, and at least 6,000 plastic chemicals have never been evaluated for their relative safety or risk. So for all these reasons and certainly many more, my colleagues who are advocates have been working for a long time to reduce toxic chemicals and non-essential single-use plastics. In the early 2000s, we filed a shareholder resolution at Whole Foods, which helped lead the company to remove bisphenol A, or BPA, which is a reproductive toxin that has been linked to breast cancer from their baby bottles and eventually all of their products. And so now we're looking at groups or families of chemicals. So just like bisphenols rather than specifically bisphenol A because others in a similar family often have similar harmful effects. In some of these other families are phthalates. We've heard of PVC plastics, piping used in houses and building construction, PFOS, which is a surface treatment on plastic fibers. These forever chemicals are in clothes, carpets, furniture. And these all may sound familiar because this summer three companies, including DuPont, agreed to pay more than $1,000,000,000 to settle a claim about these forever chemicals that have been found in our public water supply. So certainly material risks. And then this year we have engaged Keurig Dr Pepper. They are updating their chemical management policy to reflect some of these areas of concern, which is a big step forward. They're also cutting their single use plastic by expanding their bottle reuse and refill options. Similarly, we've worked with Coke who has agreed to increase their use of refillable and reusable bottles by 25% of their global beverage distribution by 2030. And through other engagements we've gotten companies across a variety of industries from Mattel, Target, Jack in the Box, Amazon and most recently Costco, to agree to evaluate and reduce their use of plastic packaging. And then at a policy level, we've joined 48 financial institutions representing three and a half trillion in US assets under management, signing on to a letter organized by the CDP, The Climate Disclosure Project, going to the UN, urging action on this issue at the upcoming Global Plastics Treaty, where 175 nations have committed to create a legally binding agreement on plastic pollution by the end of next year. So we're looking forward to that. And along those lines, just last month, a group of 20 international scientists have sent a letter to the treaty negotiators asking them to put health at the center of these talks, and aim for a treaty that reduces production volumes of plastics and mandates proper testing on all chemicals in plastics. So definitely high-profile issue that's getting a lot of attention. And just want to point out, another collaborator in our field, As You Sow, has done a lot of great work on this issue that we've discussed today. So I encourage you to check out one of their recent reports called Capturing the Diversity Benefit, which could be a great resource for those looking for more information. And just to wrap up, you know, I think it's this deeper type of engagement work on ESG issues that's done by the experience firms you've heard from today that really separate us from some other players in our space. And we've certainly found that these detailed stories of on the ground engagement really resonate with clients and can help advisors build those deeper connections and relationships with clients on the issues that they care about. So with that I'll turn it back to Gus and I think we can open it up to the Q&A.

Gus Grefthen:
Yeah, thanks Erin. So the first question that came through is, are your firms asking the companies regularly for this data that isn't readily available yet? It seems like the request would start to push the companies towards collecting and reporting those data points. So I think that question was sort of when Elizabeth and Christine, you were discussing some of the difficulties you have in some of those data stories you're looking for.

Christine Cappabianca:
I would say that's absolutely part of the engagement that we do regularly with the companies and we've seen progress.

Gus Grefthen:
Are you seeing anything, Elizabeth, on the fixed income side when you guys are chatting with issuers or is that not something?

Elizabeth Alm:
It's definitely a different type of, I think, engagement than you see in the equity market especially. It's difficult with like sovereign issuers, you're not going to have the same type of conversation than you would with corporate issuers. But we have had conversations, especially in the developing economies or when we're sitting down with issuers one on one to ask about this or their plans for disclosure and specifically how they're disclosing and their methodology for it. So there's definitely still a lot of manual process in this, but we're getting there.

Christine Cappabianca:
It can take years of engagement with any single company and frequently we will partner with other shareholders to get more power. I think, you know, Disney is something we've been successfully engaged with for years. Johnson & Johnson is another name that comes to mind, but it will take, it does take a few years of not getting board approval or share, you know, to do the deep dive that we're asking in the data disclosure. But we do we do see progress.

Gus Grefthen:
And let's move on to the next question here. Many large American companies have anti-disparagement and confidentiality clauses that censor employees from talking about exposing workplace and company issues related to workplace equity. And are there any other issues on sites like Glassdoor and to what extent do you think that this impacts the level of truth that you're able to scrape on those sites?

Elizabeth Alm:
I just think this is why we have to use many different data points from many different sources to paint a picture, because those are absolutely issues we think about and the level of truth on any one site, I'm sure there are going to be biases or incorrect information or stuff that's not precise. But I think when you combine a lot of the different types of information, including trends for women on board, gender equality, pay equality, then you start to get the truth we hope.

Gus Grefthen:
Did you have anything you wanted to add, Christine?

Christine Cappabianca:
Yeah, you know, I don't love Glassdoor at all, but kind of like we're still digging for where to get data. I think it's kind of like the best of the worst to a degree. I think we're going to see other especially as like the language, international language processing improves. You know, is there places where it's referenced on Reddit or they have new sites where employees go on anonymously and can talk about it, but then you need to get access to those sites and kind of dig through. But I think we're really just at the early stages of this, which is, you know, one of the things I'm super excited to see how it plays out, but definitely every time I go on Glassdoor, they want me to get input some data and I don't feel like inputting data, so I'm not necessarily even contributing the highest quality. So I know firsthand the weakness there.

Gus Grefthen:
And one question from an audience member: Are certain industries worse than others? And banking, finance, we just filed with Goldman Sachs whose numbers revealed that it that at the current rate of improvement, white women will not reach pay equity until 2059, three decades from now, black women not until 2130, a century from now. Wow. And Latino women not until 2224. Yeah, any comments on are certain industries worse than others?

Elizabeth Alm:
You know, from a bond perspective, some of the ones that I mentioned, the use of proceeds in terms of the women's livelihood bonds, I think is one of the leaders that we're investing in.

Christine Cappabianca:
I think in our fund, there does tend to be more gender leaders in consumer based areas, which Impax is not an area we're heavily invested in as part of our tilt towards where we think the more sustainable future is. And consumer is challenging from a sustainability perspective. But there are a lot of companies that are women run, heavy female exposure, are trying to do the right things. I think Lululemon is an example that stands out here. Ulta Beauty is another one. And then we also do see a lot of our environmental leaders that we own pretty heavily across Impax that also score very well. Schneider is one of my favorite names. That's kind of part of the energy efficiency, energy transition play, great gender profile.

Gus Grefthen:
Awesome. Well, we have we're coming up to the end of the hour. We didn't quite get a chance to answer all of the questions. Apologies for that. So thank you, everyone, for joining us today. Thank you, Christine and Elizabeth, for your great discussion. I know that I learned a lot today. I hope everyone else did as well. And please don't hesitate to reach out to any one of us with any questions. We'd be happy to follow up and chat with you about any of these issues or other sustainable investing related questions you may have. So thank you so much and Merry Christmas, everybody. Take care.

Saturna Sustainable Funds are distributed by Saturna Brokerage Services, a wholly owned subsidiary of Saturna Capital Corporation, investment adviser to the Saturna Sustainable Funds.

Investing involves risk, including possible loss of principal.

Sustainable investing strategies generally limit the securities they purchase to those consistent with sustainable principles, which limits opportunities and may affect performance.

The Green Century Funds are distributed by UMB Distribution Services, LLC.

Saturna Brokerage Services, Impax Asset Management, Green Century Funds, and UMB Distribution Services, LLC are not affiliated.

Impax Asset Management manages the Impax Ellevate Global Women’s Leadership Fund, PXWIX.

S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities.

The MSCI All Country World Index is produced by Morgan Stanley Capital International (MSCI). It is a broad measure of equity market performance throughout the world. Investors cannot invest directly in the indices.

As You Sow is a non-profit foundation chartered to promote corporate social responsibility (for example on human rights) through shareholder advocacy, coalition building, and legal strategies.

ICON is a healthcare and pharmaceutical intelligence data gathering platform.

Bloomberg is a financial news and data platform.

Glassdoor is a job search and company review website.