RI Interview: Pax World’s Keefe on the importance of gender-lens investing

The right thing from both a moral and economic perspective

Joe Keefe, President and CEO at Pax World and one of the Financial Times’ ‘top feminist men’, says when the SRI firm decided to launch its gender index in 2014, a world first, it was forced to create it itself due to a lack of interest from index providers.

“They sort of nodded politely and smiled and thought it was a good idea. But none of them were really ready to move forward on my timetable,” he says.

Fast forward a few years and the landscape is changing. Recently, Thomson Reuters launched a Diversity & Inclusion Index and Californian pension giant CalSTRS has put $250m behind State Street Global Advisors’ She Index, which invests in companies with a good proportion of women in senior management.

For the first time this year, the US SIF Foundation’s biennial report on sustainable investment tracked gender-lens investing, finding that $397bn in investor assets had an explicit focus on products or companies supporting women’s advancement.

This was all in future when Keefe started on the journey of gender-lens investing at fund manger Pax World in 2007. He initially bought an active fund focused on companies with good gender diversity. But while it had a decent performance, it was not clear what the gender factor was adding.

“So I started thinking wouldn’t it be nice to have an index fund. Then you can have apples-to-apples comparison with the market as a whole,” he says.

So Keefe pursued the idea of creating the first gender-focused index, building it in-house after a lack of interest from existing providers.

Now known as Pax Global Ellevate, it includes the 400 best companies in the world for promoting women on to their boards and senior management based on the MSCI World Index. Companies on the index, which currently has $100m assets under management, include Estée Lauder, GAP and Kellogg Company.

Keefe says since launching the fund it has been beating the MSCI World Index by a healthy amount, which he says is “completely attributable to the gender piece as it is a factor index betting on gender diverse leadership”.

“This index is proving in real time, with real money, from real investors precisely what the research has suggested – companies with gender diverse leadership are actually better companies.

“We hope that over time more companies will see gender diverse leaderships are a pathway to just better performance.”

Pax Global Ellevate is chaired by Sallie Krawcheck, the Wall Street figure who was formerly president of the Global Wealth & Investment Management division of Bank of America.She also has a stake in the index fund through her company Ellevate Asset Management – funded by a network of female investors.

Krawcheck, arguably one of the most influential women professionals in finance, is a vocal proponent of gender-lens investing. She not only puts her money where her mouth is, but also works hard on influencing policy to adopt the agenda.

Keefe explains: “Sallie Krawcheck and myself have filed a petition for rule making with the Securities and Exchange Commission asking it to mandate that companies disclose their gender pay ratios on an annual basis and in the alternative if they are not willing to mandate it at least issue the guidance for those companies who would like to disclose.

“We strongly believe this would incentivize companies to close the gender pay gap and would be information that investors would like to have.”

Pax World also regularly files shareholder proposals at companies around gender diversity across its other funds.

Keefe speaks regularly on the subject of gender equality and investing in women around the world and is often asked why this issue so important to him as a man.

“I feel that’s a little bit like asking a white person in the United States during the 1960s why are you supporting the civil rights movement, or a white person 30 years ago, why are you supporting Nelson Mandela and the struggle against apartheid,” he says.

“The fact is there is still a system of Jim Crow [segregation], still a system of apartheid when it comes to women and girls around the world. In one place it may be honour killing, in another place it may be genital mutilation, in another place it might be women not being able to drive automobiles. In the US it is women only earning 78 cents for every dollar a man earns, and holding only 17% of Fortune 500 board seats – so it’s the greatest human rights issue of our time.

“A recent McKinsey study said that if women and girls had the same education and economic opportunities as men it would add the equivalent of $26trn per year annually to global GDP. That’s the equivalent of another US or Chinese economy every year – so it’s not just the greatest human rights issue of our time, but the greatest economics issue. I think it’s self evident that tackling this issue is the right thing to do from a moral perspective, but also the smart thing to do from a business and economic perspective.”