Although social inequalities narrowed during the first half of the 20th century, since the 1980s they have been widening globally. Inequality is now recognised as a critical issue and the pandemic has only reinforced the impact of poverty, health inequality and vast disparities in wealth.
Greater awareness has been promoted by recent suggested changes in policy at the US Federal Reserve that would see it focus on inequality rather than inflation. While reducing social inequality is mostly a political issue, by investing selectively in companies that score highly on equality measures, investors can have an impact.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
We believe that if companies address these concerns they will prosper in the long term and gradually bring about a more sustainable and socially responsible investment universe producing stable returns for investors.
A responsible chipmaker
One stock proving the claim that more socially-responsible companies are likely to enjoy a better financial performance is Taiwan Semiconductor Manufacturing Company (Taipei: 2330), known as TSMC. TSMC makes almost 50% of the world’s microchips for smartphones, electric vehicles and other hardware.
The company has been able to ride on the coat-tails of the booming global tech sector to gain a significant share of the market, but its own growth has also been driven by a deliberate effort to invest in tackling income inequality across the business, making it an attractive place to work and luring talent from competitors in the region.
It has a good CEO pay ratio (the gulf between the pay of the median worker and the boss does not appear excessive); provides its workers with superior working conditions and benefits; and insists that the whole supply chain adheres to its strict welfare standards. It is therefore well positioned to continue to take market share and grow with rapid tech development globally.
Global insurer Axa SA (Paris: CS) has the wind in its sails after making good progress on the acquisition of rival XL Group. But it was also recently named the second-most responsible insurer worldwide (it is number two in the Dow Jones Sustainability index), with one of the criteria relating to social impact. The business scores highly on diversity and tax policy, with women making up 54% of the workforce and the business adhering to Organisation for Economic Co-operation and Development taxation guidelines.
Because we are all worth it
Another business that has excelled in its approach to diversity and innovated in ways that do not discriminate by gender or social background is L’Oréal SA (Paris: OR). It has consistently reported strong growth in recent years.
It is well positioned to take advantage of the rising popularity of health and beauty products in the Asian market, with a strong presence in China. But the group has also managed to maintain its impressive approach to human rights and diversity on a global scale. Its gender pay-gap, moreover, has slipped from 10% in 2007 to 2%.
-
Could your family be at risk of an unexpected tax bill? How to keep your loved ones in the loopMany families are out of the loop when it comes to planning the financial aspects of both retirement and inheritance
-
Rightmove: Glut of homes for sale in southern England drives asking price dropAsking prices are 0.1% lower than a year ago, according to the property website, driven by challenges in affordability-stretched London and the south
-
Small UK industrial stocks are hidden gemsOpinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Why is English football thriving – and can it last?What has gone so right for English football? The national team has found its feet; the Premier League is swimming in money and profits are soaring
