Levelling up – Equality roadmap (video)

Inequality has reached a crisis point. Global inequalities are about as great today as they were at their prior peak in the 1910s. The income gap between CEOs and workers, the wealth gap between billionaires and the rest of society, and the lack of healthcare and education access for the least advantaged, even in wealthy countries, all point to the growing importance of inequality for society and the economic system.

Prices are outpacing pay, with more than 791 million workers seeing their wages fail to keep up with inflation and as a result have lost USD 1.5 trillion from 2020 to 2022, equivalent to nearly a month of lost wages for each worker. Inequality is also causing real world disruptions such as labour strikes and protests against green policies.

Inequality is the inequitable distribution of income, wealth and well-being. Inequality has existed throughout history and is in some ways a natural by-product of our economic system.

At BNP Paribas Asset Management, our goal is not to prevent inequalities occurrence. Instead, we seek to address structural inequality, which persists when circumstances at birth, like parental resources or gender, are more determinative of income, wealth and well-being outcomes than individual talent and effort. Our conviction is that inequality risk can manifest systemically in the market and individually at the company level.

Inequality is a systemic risk because it limits economic growth, raises financial crisis risk, erodes social cohesion, raises political risk by concentrating power in the hands of a few, multiplies the damages of other threats both acute, such as COVID-19, and long term, like climate change, and undermines our collective capacity to tackle complex global challenges such as the transition to a low-carbon economy.

Inequality also matters for individual company performance. We can see this in a few ways.

First, companies that strengthen equality within their workforce through material benefits such as living wages and strong values such as positive diversity measures are more attractive places to work.
In fact, research shows that high levels of employee satisfaction generate superior long-term returns.

Second, companies that value diversity may limit discrimination in the hiring process and may reduce incidences of workplace discrimination and sexual harassment. Discrimination raises legal and reputational risk that threatens a company’s social licence to operate.

Third, a wide body of research suggests that better workplace practises, including improved wages and a commitment to diversity, benefit shareholders. For example, according to one study, when companies increase wages, the resulting productivity gains outpace costs.

Finally, a wide and growing body of research points to the potential financial performance benefits of increasing diversity, particularly gender, in boards and management teams.

Addressing inequality also represents an unprecedented opportunity to increase economic growth, reverse wage stagnation, increase consumer purchasing power, improve market and political stability, improve social cohesion, and contain crises.

Investors have a number of tools to integrate inequality into their investment processes. At BNP Paribas Asset Management, we use the six tools outlined in our Global Sustainability Strategy.

• First, we look at how companies are preparing for a just transition and how they are promoting gender equality.
• Second, we avoid investing in companies that do not respect human rights, labour standards and anti-corruption principles.
• Third, we use environmental, social and governance data to assess companies’ performance and risks, focusing on social indicators that measure inequality.
• Fourth, we use voting engagement and public policy advocacy to motivate companies to improve their equality practises and support shareholder proposals that address inequality.
• Fifth, we offer investors products that align with our equality theme, such as funds that invest in social bonds or inclusive growth.
• Sixth, we walk the talk on inequality and promote diversity and inclusion, fair wages and employee well-being.

We also partner with organisations that, for example, seek to improve access to power and water or take on youth unemployment.

Finally, we’ve developed a framework to assess how key corporate actions can impact inequality across a firm’s business operations, corporate governance, and business ethics, and products and services.
You can learn more about this framework and find the full Equality Roadmap on our website.