Keeping an eye on gender lens investing and women in leadership
Gender lens equity investing developed from a substantive body of research demonstrating the financial, risk management, decision-making and other corporate benefits of higher levels of women in leadership.
In our coverage universe at Parallelle Finance, 27 gender lens global and regional equity funds are available to individual investors. Their assets under management (AUM) totalled $3.47 billion (about £2.54bn) as of 30 June 2021, reflecting a growth rate of 32 per cent during the first half of the year.
Our coverage universe also includes an expanding group of diversity, equity and inclusion (DEI) funds that target companies with robust DEI policies for investment. These DEI funds totalled $154 million in AUM (about £112.57m) as of 30 June.
Gender-lens fixed income also saw strong growth during the year’s first two quarters, particularly in gender bonds issued by private financial institutions and issued or sponsored by development finance institutions (DFIs). Latin America leads on the total number of gender bonds, with proceeds going to women-owned enterprises.
‘Stubbornly slow’ leadership headway
Despite this advancement, progress for women in corporate leadership remains stubbornly slow.
Government mandates, regulatory actions and stock exchange listing rules have a role to play, particularly combined with shareholder activism.
In the US, the Securities and Exchange Commission (SEC) approved NASDAQ’s ground-breaking board diversity rule for new listed companies in August. Under this rule, most listed companies will be required to have at least two diverse directors, with some exceptions for foreign and small firms, or explain in writing why they don’t.
In a similar move, the UK Financial Conduct Authority (FCA) proposed in July that listed companies be required to comply with board diversity targets or provide an explanation, and to publish diversity data on their boards and executive management.
In addition, back in the US, an SEC subcommittee has recommended the adoption of required disclosure of gender and racial diversity of mutual fund boards. And since California enacted legislation on board representation for women almost three years ago, the number of female corporate directors has doubled, although women remain underrepresented.
Global asset managers increasing the pressure
Global asset managers have a range of stewardship policies and statements to support growth in corporate women in leadership. In the face of criticism about the prevalence of all-male boards, more asset managers have signalled their willingness to vote against non-diverse boards.
BlackRock announced late last year that it will push companies to disclose diversity data and information on measures to improve it. Similar statements from Vanguard, Fidelity Investments and State Street Global Advisors (SSGA), among others, soon followed.
An analysis of the diversity voting guidelines for the 12 largest global asset managers by AUM as of 31 March 2021 found that their approach to stated thresholds may not be aiming high enough. These guidelines tend to ‘encourage’ board diversity, with several identifying no specific targets and others naming thresholds of only one or two female and other diverse board members.
Advocating for one or two female board members places asset managers behind the curve instead of leading a charge toward board parity. A slight majority of S&P 500 companies now have at least 30 per cent female board representation. Women hold 28 per cent of Fortune 500 board seats and 36 per cent of FTSE 100 seats.
Fidelity International states that it may vote against boards in developed markets if women hold fewer than 30 per cent of the seats.
But who will be the first among these asset managers to call for board gender parity? Or for board parity that encompasses gender, race and ethnicity?
To evaluate diversity, equity, and inclusion efforts, CFA Insitute through the Experimental Partner Program collected data from 41 investment organizations in the US, Canada, and Australia. This report provides an analysis of the findings and proposes new strategies.
C-suite representation under microscope
Equally as important, which of the large asset managers will be the first to achieve gender parity on its own board and C-suite? Our analysis of the top 12 asset managers found that Goldman Sachs and JPMorgan Asset Management have the highest female board representation, followed by BlackRock, Allianz Group and UBS. But female board representation is progressing faster than C-suite gender diversity. Women CEOs are found at only six per cent of both S&P 500 and FTSE 100 constituents. In keeping with the broader data, there is a scarcity of female CEOs among the top asset managers.
There are five female CFOs among the top asset managers and research on Russell 3000 constituents finds a correlation between the first 24 months that a woman CFO is in place and an increase in profits and share prices.
But six of the top 12 asset managers have no women in the four core C-suite positions — chair, CEO, CFO and COO of parent company — and four firms have only one. Fidelity leads with three, but two of these positions are held by the same person. Only three of these asset managers have gender lens equity funds available to individual investors.
None of the 12 firms have sponsored or issued a gender bond. In a unique step, Goldman Sachs recently announced it will commit $10 billion in direct investment capital to address opportunity gaps for black women.
Global asset managers have two areas of opportunity to boost corporate women in leadership. The first is within their own ranks. Second, they should exercise stewardship and chart the path forward towards board gender parity and higher female C-suite representation.
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By Marypat Smucker, CFA is a writer and research analyst with a focus on gender lens and environmental, social, and governance (ESG) investing.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image credit: ©Getty Images / amana productions inc.