Investments in this strategy aim to ensure equitable pay for all genders, in the process reducing poverty and increasing economic output. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.  

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What is the problem the investment is trying to address? For the people experiencing the problem, how important is this change?

Wage gaps limit equity and equality among people of different genders, races, ethnicities, physical or cognitive abilities, sexual orientations, and their intersections in both developed and emerging markets.

Broadly defined as lack of equal pay for equal work, the existence and size of wage gaps has been debated extensively by social scientists, corporate actors, politicians, and investors alike. Although the gender wage gap has attracted much political attention, wage inequity is intersectional; race and ethnicity often multiply wage gaps. This strategy focuses on measuring the extent to which a wage gap exists within an organizational structure and the extent to which existing gaps are systematically and appropriately addressed. Investors considering social impact investments in individual businesses in any sector can apply variations of this strategy to screen businesses’ performance in terms of gender-equitable pay.

Implementing this strategy in combination with Gender-Equitable Workplace Conditions and Gender-Equitable Governance, Ownership and Leadership will make this strategy more robust.

What is the scale of the problem?

Estimates of the unadjusted gender pay gap in the United States range between 78% and 82% of men’s pay, or an 18–22% difference in earned income between men and women without adjusting for differences in occupation or seniority (1). After adjustment for differences in occupation* and seniority,** the gender wage gap remains at an estimated 5–6%, based solely on gender discrimination and success in negotiation related to compensation (2).

While the gap varies by geographic context, no country has fully addressed or eliminated its gender pay gap. Although the broader gap in pay can only be addressed through systemic societal change and may seem daunting at the level of individual businesses, investors interested in this strategy can screen for proper compensation for professions traditionally gendered female and therefore consistently undervalued; businesses supporting shifts in the gendered socialization of children; and gender-aware compensation policies, salary-negotiation processes, and promotion practices.

 

*Occupation is often heavily gendered based on differential socializing by gender of children and adults.

**Seniority is often influenced by sociocultural structures that differentially encourage and reward men with leadership positions.

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who/What is helped through this strategy?

While this strategy focuses on investing in companies that have resolved or are actively working towards resolving the gender pay gap, gender is only one of several intersecting inequalities: women of color, individuals from marginalized ethnic, racial, gender, and and sexually diverse groups, and others can all benefit from increased attention to equitable pay structures and policies that support them.

Women: The global 23% wage gap between men and women essentially “robs” women of equitable pay, and many women retire into poverty (3). Single women, divorced women, single mothers, and women of color are particularly affected by poverty, deriving in great measure from the gender pay gap. These groups would disproportionately benefit from equitable pay (4).

Gender and Sexual Minorities (GSM): GSM experience high levels of discrimination and harassment in the workplace. For those belonging to multiple minority groups (e.g., lesbian women), considering their needs when implementing gender-equitable pay can improve their overall performance and productivity in the workplace. Limited research in the United States suggests that lesbian women receive lower wages than their heterosexual female colleagues (5).

Children: Making global pay gender-equitable would halve the poverty rate of working women, which is particularly severe for single mothers. This would dramatically improve the economic well-being of children in general, partially due to the well-known trend that women invest more of their earned income in the well-being of their children than do male parents and partially due to improvements for those children who are raised by single mothers (4).

Broader Society: Closing the gender pay gap would positively impact the entire economy, adding an additional USD 512.6 billion to the U.S. economy alone if men’s wages were to stay the same (4,6).

What are the geographic attributes of those who benefit?

Inequitable gaps in pay by gender, race, ethnicity, sexual orientation, and the intersection of these are present in every geographic region around the world. Globally, women earn approximately 77% as much as men before adjusting for occupation or seniority (7). For other minority groups, this gap greatly expands. As gender pay equity currently does not exist in any nation, beneficiaries are spread across all regions, though some areas have bigger gaps than others (8). Investors interested in better understanding geographic trends in gender pay gaps can find country-level information from the OECD (9).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

Is the investment’s contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How Much and Who?

Applying this strategy will yield a portfolio of investees with comparably more gender-equitable pay. Broad, aggregate application of this strategy, signaling the importance of gender-equitable pay to an industry or within a geography, would greatly contribute to gender equality by encouraging enterprises to actively implement policies and practices to eliminate the gender wage gap.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many can receive the outcome through this strategy?

By rewarding those businesses that actively seek to eliminate the gender pay gap within their organizations, this strategy indirectly benefits their female employees. Further, evidence suggests that businesses with more equitable pay by gender more successfully attract and retain high-quality, diverse talent, avoiding the substantial costs of turnover (estimated to exceed 20% of the annual salary of the replaced employee) specifically related to female employees seeking better-paid opportunities (10).

How much change can beneficiaries experience through this strategy?

Addressing structural inequities, especially the wage gap, materially improves the well-being and lived experiences of women and other traditionally marginalized people. Equitable pay improves female employees’ ability to save for the future, own and control financial assets, and retire in a manner matching their standard of living. The gender pay gap, whether adjusted or not for occupation and seniority, reduces women’s autonomy and choice in the world and in their jobs and increases their vulnerability to emergency situations and economic shocks (11).

Data released from the Household, Income and Labour Dynamics in Australia (HILDA) panel study regularly demonstrate the significant economic differences experienced by men and women in retirement: nearly 24% of single women aged 65 or over live in entrenched income poverty compared to 17.4% of single men in the same age group (12). One study in the United States found that the gender pay gap alone contributes to the disproportionately high level of anxiety and depression women experience – 2.5 higher than the rate for men (13).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What risks do investments in this strategy run in terms of either people/planet experiencing impact or society as a whole? What is the probability that those risks happen?

External Risk: Although investments in this strategy can help reduce gender biases in society over time, target beneficiaries will still be impacted by gender biases that are ingrained in law and/or customary practices and which may keep women and GSM from fully and equitably participating in the workforce, even if an organization is actively promoting gender equality and gender equitable pay. To help mitigate this risk, organizations can advocate for more gender equitable laws through their engagements with governments and by joining collaborative efforts such as Business Action for Women.

What are likely consequences of these risk factors?

Failure to appropriately address these risks can limit the impact organizations are intending to have and, in some cases, create unintended negative consequences for target beneficiaries and others.

Illustrative Investment

From 2017 to 2018, Salesforce spent USD 2.7 million to address pay discrepancies by gender worldwide and by race in the United States. In 2017, they adjusted pay (salaries and bonuses) for 11% of their employees; this year, they adjusted 6% of employees. Since 2015, Salesforce has spent more than USD 8 million to address the wage gaps by race and gender and fired an executive who was unwilling to execute the new policy (14). By leading the way and demonstrating commitment to addressing pay inequity, Salesforce gained beneficial press attention.

In 2018, Starbucks announced that after a decade of efforts, it had achieved gender and racial pay equity in its United States operations (15). Having already implemented parental leave, educational support policies, and retirement contributions for hourly paid employees, the company’s apparent (but not yet verified) achievement of gender and racially equitable pay is another step towards an equitable workplace environment. Further, Starbucks has stated that the company will no longer request pay history when determining compensation levels for new employees and that it will encourage open and transparent discussion of salary and pay among employees, further encouraging the identification of potential inequities.

Have another illustrative investment we should consider? Let us know!

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 1
The Impact of Equal Pay on Poverty and the Economy

Milli, J., Huang, Y., Hartmann, H. and Hayes, J., 2016. The impact of equal pay on poverty and the economy. Institute for Women’s Policy Research, pp.1-9.

NESTA: 1
Health Impact Assessment (HIA) of Gender Pay Inequity

Wayne County Department of Public Health, Health Impact Assessment (HIA) of Gender Pay Inequity, 2011

NESTA: 1
Unequal Depression for Equal Work? How the Wage Gap Explains Gendered Disparities in Mood Disorders

Platt, Jonathan, et al. “Unequal depression for equal work? How the wage gap explains gendered disparities in mood disorders.” Social Science & Medicine 149 (2016): 1-8.

NESTA: 1
The Power of Parity: How Advancing Women's Equality Can Add $12 Trillion to Global Growth

McKinsey Global Institute, The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth (2015)

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.