In a pioneering study (DOI: 10.1186/s40854-023-00508-z) published in Financial Innovation on November 21, 2023 , Karim Henide and Zaryab Ahmar from London School of Economics, unveil a new dimension in sovereign debt investment by isolating the impact of female agency on development. Their research provides compelling evidence that incorporating female leadership into sovereign credit assessments can enhance investment returns and align with sustainable development goals.

The study explores the relationship between gender equality and sovereign creditworthiness in emerging markets, positing that economies with greater female agency achieve superior economic outcomes. This hypothesis is grounded in the observation that gender-equal economies tend to allocate resources more efficiently, leading to better financial performance and reduced credit risk.

Henide and Ahmar’s methodology integrates a framework developed by Henide (2021) into the iBoxx USD Emerging Market Sovereigns Index to construct portfolios based on three key dimensions of female agency: politics, economics, and society. By analyzing long-only portfolios of sovereign bonds, the study identifies a positive correlation between higher female agency scores and superior financial returns.

The research findings indicate that sovereign issuers in the top quintile for female agency metrics consistently outperform their peers in the bottom quintile. This performance is attributed to a “halo effect,” where greater gender equality translates into more effective economic and social governance, thus enhancing investment returns.

Read more at: https://www.newswise.com/articles/female-leadership-boosts-sovereign-debt-earnings