Ambalika Gupta, Head of Sustainability, Snowkap
How can increase in hiring of women (diversity hiring) help a company’s ESG rating?
An increase in women’s hiring, particularly in leadership roles, can significantly enhance a company’s ESG (Environmental, Social, and Governance) rating. Most rating agencies assign the highest weightage to governance, as it reflects transparency, leadership commitment, management systems, and long-term business sustainability. The distribution of weightage across ESG criteria varies, but social factors, including diversity and inclusion, play a crucial role.
Within the social (S) component, companies are assessed on various factors such as anti-discrimination policies, diversity initiatives, and management systems that support equal opportunities. Merely having a diversity policy is not enough—companies need structured programs, clear targets, and measurable outcomes that actively promote women’s inclusion, particularly in senior management roles.
ESG ratings also consider workplace safety and inclusivity measures. This includes policies like parental leave, period leave, flexible work arrangements, and systems that address workplace incidents such as harassment. Companies that invest in post-incident support, such as access to therapy and enhanced security, foster a safer work environment, which positively impacts ESG scores.
Leadership roles often demand extended working hours, frequent travel, and higher responsibilities. Companies that provide flexible work solutions and support systems for women in leadership create an environment where they can thrive, reinforcing their commitment to diversity.
By investing in gender diversity hiring especially at the leadership level, businesses demonstrate strong social responsibility, governance, and inclusivity. This not only improves their ESG ratings but also enhances their reputation among investors, and stakeholders, and impact funds that prioritize gender equity.
How can it help the company increase its funding?
Diversity hiring, especially hiring women, can significantly impact a company’s ability to secure funding. Many impact funds prioritize gender diversity and women’s empowerment when assessing potential investments, ensuring alignment with their mission and framework.
Funds like Nia Capital, ImpactShares, YWCA Women Empowerment, and Fearless Fund specifically focus on companies with strong female representation in the workforce. For example, Fearless Fund is dedicated to supporting women of color in business leadership. Similarly, YWCA, in partnership with Morningstar, has a Women Empowerment Index that evaluates companies based on female leadership representation and equal compensation.
Sustainability and reporting frameworks also consider these factors, requiring disclosures on women in leadership and remuneration ratios between male and female employees. Investors analyze these trends over multiple years rather than a single data point, ensuring companies demonstrate long-term commitment to gender diversity.
Research supports the benefits of women in leadership, showing they often act as strong ethical leaders, handle pressure effectively, and make fair decisions. By nature, women excel at multitasking and decision-making, which contributes to business success. As a result, many funds actively seek companies with better gender representation in leadership.