There’s a lot to be said about ‘inspiring inclusion’ which is 2024’s theme for International Women’s Day. The fight for equality and inclusion is nothing new. You only have to look at the late 19th and early 20th century when women fought for their right to vote.
Since then, women have come a very long way to find a better balance in life. More women are financially independent, and women’s incomes are making a meaningful contribution to society, enriching the growth of many nations. Progress is being made, but very slowly, and the fight for equality continues.
40% is the new 50%
In an attempt to speed up the change around diversity and inclusion in financial services, the FCA announced new rules in 2022 stipulating that at least 40% of listed company boards should be women (and at least one of the senior board positions should be a woman). So far, progress has been good.
According to the FTSE Women Leaders Review there are already 42% of FTSE 350 companies with women represented on boards, but only 35% are in a leadership role.
These rules are due to be reviewed in 2025 to make sure they’re working, but my challenge is this - why isn’t it 50%? How is 40% considered equal? And why stop at board level? Why not consider other senior positions?
We know that having more diverse boards can lead to better decision making and improve corporate governance. But this diversity should run through the veins of every company at every level, not just board level. Diversity is how we challenge the status quo with alternative solutions to problems. It can bring about innovation and help companies change for the better. It should be part of the culture.
And diversity is not just about gender, it should be far reaching to include backgrounds, ethnicity, skills and age, all of which can benefit company performance. Inclusive companies provide a sense of belonging and allow others to be emboldened, which surely must be felt on the company’s bottom line. The new rule should be 50%, the true reflection of equality.
Snail's pace progress
While the rules on diversity in publicly listed companies have led to meaningful improvements, progress elsewhere could be better. Investment teams in asset management companies are still heavily male dominated. Indeed, the 2023 Citywire Alpha Female Report made for grim reading. Of the 18,000+ active fund managers on Citywire’s database, only 12.1% are female. The figure for 2022 was 12.0% so there’s been hardly any headway. A real disappointment.
What’s more surprising is that the percentage of women portfolio managers in Asian countries like Hong Kong, Singapore and Taiwan is by comparison much higher at 20-30%. These countries have deep rooted cultures and traditions yet they are leading the way in terms of diversity, which is refreshing.
Engage, engage, engage
It’d be unfair to tarnish all asset managers with the same brush, as some are doing more than others in this space. Through our fund due diligence meetings, we engage with fund managers on this very subject and provide challenge where needed.
One fund manager recently explained how they launched a 100% female internship programme in 2022 and now hire from universities they wouldn’t have considered before. They also relaxed the criteria for interns needing a financial background with the hope some will enjoy working in investments, be good at it, and over time help improve the diversity gap. While this doesn’t improve the stats today, it’s a journey we are keen to encourage, and we’ll continue to engage with our fund managers for improvements.
After all, we know that mixed teams can lead to better long term investment outcomes for clients, and that’s good for everyone.
The results are in from the Parmenion 2024 annual gender and race diversity study. Find out if improvements are being made.
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Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.