MSCI focused on those companies that have had a critical mass of female directors for at least three years – specifically, three appointed female board members – noting that 33.3% had achieved leadership status with their MSCI ESG ratings and 9.7% ESG laggards. In contrast, companies whose boards were not the same size or stamina as female representation had only 16.2% ESG executives and 23.8% ESG latecomers.
“With gender diversity contributing less than 0.3% on average to the score, the difference in ESG scores between these two groups was surprisingly large,” said Milhomem.
The main reason for the differences in assessment are the environmental practices used by the companies. Those with persistent board diversity did not necessarily have the best records for three-year average carbon emissions intensity. In all sectors, such companies were able to reduce the intensity of CO2 emissions more than their industry colleagues in three years.
“In addition, our preliminary analysis shows that companies with sustained board diversity are more likely (16% versus 6.3%) to have environmental targets related to executive compensation,” said Milhomem, citing a sample size of 525 company statements.
The next question, she said, is whether the correlation is causal. It is possible that a persistent variety of boards creates an active force that causes differences in environmental performance. On the other hand, women may also be more inclined to join corporate bodies that have stricter environmental practices.