Diversity Matrix: The economic power of gender equality

•  N CALVINO, K GEORGIEVA, OR BASSO

NEW YORK: It is hard to find a word that is more relevant to the world’s greatest challenges and policy priorities than “inclusion,” the theme of this year’s International Women’s Day. Inclusive, green economic growth that benefits all of society is an essential component of sustainable prosperity, social cohesion, competitiveness, and geopolitical stability. Supporting a “just transition” that includes all members of our societies is crucial to ensuring that climate action and the digital transformation lead to a more sustainable and secure world.

Gender equality and equal rights are not just a matter of equity; they are also of paramount economic importance. Research from the International Monetary Fund suggests that narrowing the gender gap in labor markets could increase GDP in emerging markets and developing economies by almost 8%. The gains from fully closing the gender gap would be even higher, lifting GDP in those countries by 23% on average.

Simply put, diversity and an equal role for women in the economy, in decision-making, and in policy debates bring better results. Mobilising all available talent maximises productivity and competitiveness, which will be crucial for addressing climate change and promoting global prosperity. It is especially important at a time when the combined effects of the climate crisis, the COVID-19 pandemic, and Russia’s invasion of Ukraine threaten to reverse many of the achievements we thought we had secured.

With four billion people around the world voting in elections this year, there is no better time to highlight the large, positive impact that gender equality has on all societies. For example, research by the European Central Bank suggests that a one-percentage-point increase in female managers at a firm leads to a 0.5% drop in carbon dioxide emissions. Similarly, the European Investment Bank has found that firms led by women have higher environmental, social, and governance (ESG) scores. Likewise, IMF research shows that such firms are also more profitable, and that greater gender balance on bank boards is associated with greater financial stability and better performance. These findings suggest that the greatest challenges of our time cannot be addressed without inclusion – throughout organisations and at the top.

There has been clear evidence of progress. More and more women today are starting businesses, despite having less access to financing. World Bank data for 71 countries show that, in 45 of them, women represent an increasing share of “sole owners” of companies.

How might we build on this progress? A study by the European Bank for Reconstruction and Development demonstrates that blended-finance programs can help women entrepreneurs to access more credit and expand their businesses.

Given that women make or influence 80% of consumer-product purchase decisions, firms must take women’s views and experiences into account if they want to sell more of their goods. Women also tend to be more environmentally conscious, which helps to explain the growing customer demand for green financial services. Globally, one in three consumers reports that she would pay a premium of as much as 25% for sustainable financial services.

This points to yet another reason that inclusion is good for business: research shows that more women on corporate boards correlates positively with the disclosure of CO2 emissions. Women now control 40% of global wealth, and they want to invest in a sustainable future. Some 74% of women report being interested in increasing the share of ESG investments in their current investment portfolios, compared to 53% of men. Firms that fail to make room for women overlook an opportunity to outperform their competitors.

Over many centuries, women have developed strategies for dealing with unequal situations, and this has made us especially valuable to organisations that want to change the world. Owing to our historical experience of exclusion and inequality, we are more likely to recognise the need for change and to consider the impact of a company’s operations or policy decisions on others. By the same token, countries with higher female representation in parliament are more likely to ratify environmental treaties and adopt policies that address climate change.

Women’s talent is a driving force behind economic progress and an essential part of the solution to climate change. Women already lead some of the world’s most influential financial bodies and play a growing role in the political arena. Now women must lead the shift to a more inclusive and sustainable growth model. We have a unique opportunity to advance inclusion, to inspire similar commitments from others, and to shape the future for the better.