Sovereign ESG: Reversing the decline in women’s and girls’ rights

Officially adopted by the UN in 1977, International Women’s Day on March 8th provides much needed focus on issues such as gender equality, sexual violence and reproductive rights. However, the rights of women and girls have suffered a decline over recent years according to our data and they remain an issue of concern that could benefit from the attention of ESG focused sovereign investors.

All regions bar Europe have seen risks increase on our Women’s and Girls’ Rights Index since 2017, while just 32 countries – comprised primarily of Western European nations, as well as Australia, New Zealand, Canada and Chile – fall within the low risk category of the latest edition of the index.

While this paints a worrying picture of the global state of play for women’s rights, there is potential for sovereign investors and bond issuers alike to drive change.

Investors have the opportunity to improve the social impacts of their investment decisions through active engagement with governments on issues linked to the development and protection of women.

At the same time, issuers, particularly those in emerging markets (EMs), could attract strong interest from ‘impact’ focused Western investors with a renewed focus on women’s and girls' rights. These could come via ‘use of proceed’ social, SDG or gender (orange) bonds, or performance-based Sustainability-Linked Bonds using gender-specific KPIs.

For sovereign investors though, the challenge is to identify where to focus their efforts and to understand the specific gaps they need to engage issuers on.

Breaches of women’s and girls’ rights a global concern

Our Women’s and Girls’ Rights Index (WGRI) can help shine a light on these issues. It is based on the UN’s ‘structure-process-outcome’ configuration and, as such, measures the strength, enforcement and infringement of laws that are specific to the rights of women and girls in 198 countries. Digging into the data shows persistent weaknesses in both the ‘process’ and ‘outcome’ pillars across many jurisdictions.

While almost all states and governments are signatories to the relevant treaties and international laws governing women’s and girls’ rights, the main problem tends to be with implementation – which in turn weighs on outcomes, or breaches of rights. As shown below, risks have increased at a global level across the process and outcome indicators of the WGRI since 2017. The resulting violations vary widely, ranging from trafficking, forced labour and sexual violence to workplace discrimination and decreased access to justice.

Identifying points of engagement

For sovereign investors with an eye on the impacts of their investments, these indicators can form a good starting basis for engagement efforts. And they could also be usefully combined with our other E, S and G indices to get at once a broad and deep understanding of the social and economic situation for women in any country.

In Indonesia and India, for example, the process indicators of the WGRI have registered some of the largest drops globally since 2017, along with countries as varied as Brunei, Israel, Hungary, Ghana, Russia, Mexico and Brazil (along with the extreme case of Afghanistan).

Saudi Arabia, meanwhile, remains similarly weak on the process side, with near-worst scores – despite publicity around reforms such as the lifting of the women’s driving ban.

On paper, these indicators could give investors some relatively ‘apolitical’ discussion points to take to governments.

Gender in thematic debt

Gender equality is one of the goals of the UN’s 2030 Agenda for Sustainable Development (SDG 5). This calls for reforms that give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources. In theory, gender bonds would contribute to several goals beyond SDG 5, such as decent work and economic growth (SDG 8), industry, innovation and infrastructure (SDG 9) and reduced inequalities (SDG 10). But the role of gender in sovereign thematic debt remains very niche.

In 2021-Q1, Colombia marked International Women’s Day with an announcement that it was preparing to issue gender-based bonds on the international market, but the initiative failed to materialise. In 2023, Chile updated its 2022 Sustainability-Linked Bond (SLB) framework to include a gender equality KPI, which was then included in a June 2023 USD2.25 billion SLB. In keeping with Chile’s leadership in the GSS+ space, this marked the first sovereign SLB to incorporate social targets.

Given weak EM indicators on many social and economic rights and the well-proven benefits of targeted financing for women, indebted sovereigns struggling to cover financing needs could quickly find greater appetite for these kinds of instruments, particularly in Europe.

Investors and issuers have an opportunity to reengage with the ‘S’ in 2024

Facing pressure from shareholders, consumers and national/supranational regulators led by the EU, institutional investors are becoming much more selective and discriminating towards their portfolios.

From the big European funds to provincial pension funds, more social impact metrics are being incorporated into investment decisions. From this perspective, gender bonds could become an increasingly useful thematic instrument both for investors and issuers competing for scarce capital.

As the UN’s 2030 deadline for achievement of the SDGs hoves into view, the time is now for investors and issuers to more proactively support gender equality, with the proven economic and financial benefits this can bring.

Eileen Gavin

Principal Analyst, Markets & Americas

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