Gender equality isn't nabbing mainstream media headlines like other SRI issues such as climate change and executive pay, but its shareholder advocacy efforts are going strong.

During the 2010 proxy season, Pax World Management LLC, investment advisor to Pax World Funds and a leader in sustainable investing, withheld votes from 74 board slates because those companies didn't nominate any women directors.

Feedback to its vote withholding and follow-up suggestions regarding gender diversity is getting a little stronger each year, says Joe Keefe, Pax World president and CEO.

Pax World also sent letters this summer to the CEOs of 82 companies held in its Global Women's Equality Fund-the only mutual fund in the U.S. that focuses on investing in companies that promote gender equality and women's empowerment-urging them to embrace the Women's Empowerment Principles (WEP).

So far, nearly 40 companies worldwide have agreed to support these principles, which outline how to empower women in the workplace, market and community. WEP is a joint initiative of the United Nations Development Fund for Women (UNIFEM) and the United Nations Global Compact. They're based on the Calvert Women's Principles initially launched in 2004 by Calvert Group Ltd. and UNIFEM.

Another recent development on the gender equality front: Entertainment company Netflix Inc. amended its director selection language and then appointed its first female director to its board following a resolution jointly filed by Calvert Asset Management Company and the Connecticut Retirement Plans and Trust Funds.

"Gender equality and women's empowerment have to become core principles of ESG (environmental, social and governance). Gender inequality is probably the No. 1 impediment to sustainable development," says Keefe.

Additionally, many studies show the status of women is an excellent clue to a company's growth potential, he says. For example, a 2007 Catalyst study found that Fortune 500 companies with the highest representation of women on their boards outperformed those with the lowest representation in return on equity (by 53%) and return on invested capital (by 66%). Those with the greatest percentage of women on their top management teams also significantly outperformed those with the least, found a 2004 Catalyst study.

"When women are at the table, the discussion is richer, the decision-making process is better, and the organization is stronger," says Keefe.

Leadership diversity isn't the only gender-related criteria that interests Pax World. It also looks at companies' career development, education and training programs; hiring and promotion policies; work-life balance initiatives; nondiscrimination and violence policies; use of women suppliers; and portrayal of women in advertising and marketing material.

The Pax World Global Women's Equality Fund (assets: $33 million) has undergone some big changes this year. Acquired by Pax World in 2007 and known as the Women's Equity Fund until May 1, it's now required to have at least 40% of its net assets invested in non-U.S.-based companies. It also has a new benchmark, the MSCI World Large Cap Index, to better reflect its new global philosophy and makeup.

"We want to invest in real leaders in the world," says Keefe. The fund will continue to avoid investing in companies whose products, policies, and advertising and marketing images are dangerous or demeaning to women.

Sujatha Avutu, portfolio manager of the Global Women's Equality Fund, says her favorite holding based on gender leadership is National Australia Bank, an international financial services group with a presence on four continents.

NAB conducts gender pay equity audits for its Australian operations and reports its findings. "Only a handful of companies in the world do this; this is real leadership," says Julie Gorte, Pax World's senior vice president for sustainable investing. Last year, NAB's Australian-based female senior managers earned 96% of their male counterparts' earnings, she says. Official gender pay gaps worldwide average in the double digits.

NAB offers programs to address gender balance and develop future leaders, flexible working arrangements and child care. It has made 3,500 microfinance loans this year. In general, such loans worldwide are geared mostly toward women since they have less access to credit than men. NAB also supports schools. Three of its 12 senior executives are women, as are two of its 13 board members. Female manager representation jumped from 34% to 43% between 2006 and 2009, says Avutu.

Shiseido Company Ltd., a Japan-based global cosmetics company founded in 1872, is another Avutu favorite. Disclosures about its programs and demographic data, performance transparency, and quantifiable goals are some big plusses she sees. Shiseido also publishes an annual sustainability report, has a gender equality committee and work-life balance initiatives, and mentors women into leadership positions. Women constitute nearly 83% of its workforce in Japan. They also represented 18.7% of management in 2009, says Avutu-well above the country average.

Pfizer Inc., the world's largest research-based pharmaceutical company, is one of Avutu's favorite U.S.-based companies. It has three women on its board of directors and five female senior managers on its leadership team. Of its 118 global senior managers, 30% are women. Women represent 43% of its 116,000 employees worldwide, adds Avutu.

Pfizer has a supplier diversity program with women and minorities, five child  care facilities, a phase-back program for new moms returning to work, and flex time. It also offers reimbursement of qualified adoption expenses of up to $10,000 per child.

Investors may also want to keep an eye on companies headquartered in Europe, which is pushing national gender diversity percentages for corporate boards. Norway already requires 40% women representation on boards, the figure Spain has proposed within eight years. The Netherlands and France have also passed legislation. "I expect this will become much more international as time goes on," says Gorte. She and Avutu note that women currently make up 16% to 18% of U.S. corporate boards.  

Down the road, companies are likely to have an easier time finding qualified women board members through the Diverse Director Database being jointly developed by public pension plan giants CalSTRS and CalPERS. "The diversity we're looking for goes beyond race and gender into skill sets, experiences and areas of knowledge," says CalSTRS spokesman Ricardo Duran.