How Data and Disclosure Drive Impact Investing Decisions

Impact Reflection | September 24, 2021

When approaching a big decision, one of the first steps is determining what information is material to your goal. Once you know what is material, you have to find out what is available. With investment decision making, there are a kaleidoscope of considerations in assessing both risk and opportunity, and pieces of relevant data are often simply unavailable.

Historically investors have used both quantitative and qualitative data to make decisions about the prospects for a particular business. Beginning in the 1970s, and specifically with the Pax World Balanced Fund launched in 1971, investors – including mutual fund managers – started including social and environmental data points as an essential part of their due diligence process.

Fast forward fifty years. There has been a huge increase in investor concern about social and environmental issues, but there still exists a broad lack of transparency across a wide range of relevant quantitative data. The ability to align investment decisions with social values, as well as the ability to better mitigate risk, both depend on the transparency of relevant metrics.

Who Decides What Data is Relevant?

When analyzing an investment, investors have access to an enormous amount of public data. There is also a good deal of potentially relevant data that is either inconsistent or not publicly available. The SEC has determined a broad swath of financial data that must be regularly disclosed, but they have historically been silent on information related to social issues. Recently, however, the Commission is becoming more responsive regarding what sort of information is deemed relevant, and by doing so they are expanding the frame of consideration regarding mandated disclosures.

A few years ago, Pax petitioned the SEC to make rules mandating companies to report gender pay ratios annually and updated the petition in 2020 to include reporting of pay ratios by race. In addition, they engaged the SEC directly in 2020 regarding the recognition of climate change as an investment risk. While the SEC has not yet responded with new rulemaking, they have made several public statements and promised to step up enforcement on nondisclosure of climate risks.1

For many years investors have pressured companies directly for more than just financial disclosures, demanding access to social and environmental data that offers a more complete picture of a business’s risk and impact. In the past, these requests have generally been ignored. Companies have been reluctant to share any data that may dissuade potential investors or result in less than favorable headlines. The landscape is shifting slowly toward greater disclosures that address the concerns of impact oriented investors.

More Assets Means More Influence

Mutual funds, beginning with Pax in 1971 and mushrooming in numbers in recent decades, have been key players in the push for more disclosure. These companies pool assets for hundreds of thousands of investors and want additional data for their own investment decision making processes.  As more and more fund companies have developed ESG investing options, the requests are becoming difficult to ignore.

Today we address two specific areas that mutual fund managers focus on: diversity and pay equity.

Data around diversity and compensation levels is already collected each year using the Equal Employment Opportunity Report (EEO-1). The EEO-1 report is a federally mandated annual data collection that requires all private sector employers with more than 100 employees to submit demographic data. This includes data about each company’s workforce by race/ethnicity, gender, and job category. Previously, this information has been locked away without being released to the public. With the help of proactive mutual fund managers, pressure is now mounting for companies to disclose it.

Transparency is valuable; the data creates a baseline for investors to evaluate how companies prioritize diversity and pay parity in their workforce. Some investors want to craft portfolios that align with their values. Other investors want to better assess potential liability from pay discrimination, or prioritize companies with diverse leadership since studies have shown that more diverse workforces tend to outperform less diverse workforces when measuring financial metrics and business outcomes.2 For both sets of investors, greater access to data allows for better and more personalized decisions.

At North Berkeley, our ESG and Carbon Conscious investment portfolios include mutual funds that have been pushing companies to disclose EEO-1 data. Below we highlight examples of their successes.

Tangible Progress

Employee pay has traditionally been shrouded in secrecy, allowing pay disparity and gender pay gaps to continue.3 For decades, through a combination of dialogue and shareholder advocacy, Impax Asset Management has pushed for transparency in this arena that would allow them to account for these factors in their investment decisions, and hopefully create real change in that process.4

Last year, Impax Asset Management worked with PNC Financial on the issue of pay equity. As a direct result, the bank created an action plan to address the issue and disclosed all EEO-1 pay data in 2020 for the first time ever. HCA Healthcare and Citizens Financial are two additional examples of companies that disclosed gender and racial pay analysis as a result of engagement efforts by Impax. Other companies resist disclosure, and the process can take years of consistent pressure and dialogue. Impax filed their fourth consecutive pay equity shareholder proposal with Oracle last year, which received substantial support during Oracle’s 2020 shareholder meeting.5 The tenacity of fund managers to address pay equity builds momentum over time.

Related efforts have been underway to improve diversity within companies and at the corporate leadership level, or to at least get access to consistent data about progress (or lack thereof) that companies are making. T-Mobile offers a good example of this change in action. Following engagement in 2020 encouraging them to enhance their diversity and inclusion, T-Mobile added another female to their board, bringing the number of women to three. Half of the 14-member board now includes representation of women and people of color. Additionally, as part of their 2021 proxy statement, T-Mobile included a comprehensive diversity disclosure, allowing investors to assess progress toward its stated goals.6

Incremental and Important

We recognize these are small steps on the journey towards a more equitable society. At North Berkeley, our goal is to help clients understand the data and considerations relevant to their personalized decision process. For many clients, that includes participating in this arc of change by orienting their portfolios to include both financial and ESG considerations.

Whether investors want to align their portfolios with their values or simply want to build a more complete picture of social and environmental risks, more transparent and consistent data is key for all investors.


1 Impax Asset Management, “Engagement Report 2021: Building Resilience in a Changing World,” pg 23.

2 The Other Diversity Dividend Harvard Business Review

3 The State of the Gender Pay Gap in 2021

4 Impax Asset Management owns Pax World Funds, which launched the first socially responsible mutual fund in the United States in 1971. The company continues to be a global leader in ESG investing and shareholder engagement. North Berkeley Wealth Management uses several Pax World funds in client portfolios.

5 Impax Asset Management, “Engagement Report 2021: Building Resilience in a Changing World,” pp 15-16.

6 Pax World Funds, “Spotlight on Engagement: Climate Change & Inequality,”pg 3.

Matthew Gatt, CFP - Lead Advisor 

About Matthew Gatt, CFP®

Matthew Gatt is a Lead Advisor at North Berkeley Wealth Management. He works with clients to align their financial lives with their personal values.

Read more about Matt

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This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

By |2021-10-08T13:56:40-07:00September 24th, 2021|