How asset owners can push for gender parity in listed companies
Public listed companies in Asia Pacific need to do more to improve gender parity faster within their organisations, which will likely require a concerted push from asset owners and major fund managers, say experts.
A growing body of research has emerged in recent years to show that gender-diverse boards have proven to be more productive and even outperform companies with all-male boards, making them better investments. However, advance in this space in Asia Pacific is painfully slow, with a lot more work needed to be done.
In January, Bloomberg announced that 59 Asia Pacific companies were listed in the 2021 Bloomberg Gender-Equality Index (GEI), up from 47 in 2020. Globally, numbers have risen too, from 325 companies in 2020 to 380 in 2021. However, this is still a miniscule proportion of the 11,500 companies that are eligible globally, which includes firms that are listed on a major exchange and have a $1 billion market cap. The number of eligible companies in Asia Pacific is not available.
“We see an opportunity for companies in the region to tackle pipeline development and also work on policies and benefits that can build a more inclusive culture such as parental leave, family care support etcetera,” said Patricia Torres, global head of Bloomberg’s sustainable finance solutions.
“We still see a lag of female representation in senior roles, which we find has a direct correlation to women in line-positions or ‘revenue-producing roles’. Diversity as a whole is about more than just the board, and we find that investing in women as senior leaders, not just board members, will impact development and representation within the firm,” she said.
According to the US-based Corporate Women Directors International project, Asia Pacific trails behind most other regions with only 15.1% of board positions being held by women compared to Northern Europe's 37.6%, North America's 28.6% and sub-Saharan Afria's 19.1%.
Experts note that investors should not view promoting diversity among companies as purely an abstract and ethical concern. On March 4 Bank of America research showed that companies with at least 30% of women in management have a bigger median improvement in annual return on equity. This tallied up with an MSCI report in 2016 which found that companies with at least three women on the board had median gains in return on equity of 10 percentage points, compared with 1 percentage point for companies without any female representation.
“If you're an institutional investor and you're looking at a team that persistently has no women or a small number of women on their board and their leadership team in spite of evidence that show diversity will bring better performance, then you're looking at a company that's willing to leave money on the table,” said Kirstin Hunter, co-founder of Future Super, who recently stepped down as chief executive.
“Institutional investors are in a really strong position to [encourage companies to do better] because they are shareholders of these companies and the companies need to make money for their shareholders,” she told AsianInvestor.
INVESTOR ROLES
A growing number of asset owners have demonstrated a willingness to push for gender parity within their own organisations, but the extent and manner in which diversity influences their investment decisions can greatly differ.
Future Super, which manages A$700 million ($537 million) in funds and is dedicated to impact investing, is among the most progressive in the region. It completely divested from seven companies that have no women on their boards in 2019.
Hunter said the pension fund first discussed with investee companies about they had invested in and disseminated information about how diverse companies perform better. It eventually divested from the companies that did not make a change or share plans to improve diversity.
That said, not all asset owners may want or be able to divest from companies that fail to hit minimum diversity standards. Hunter said that for many merely raising the topic would be a step forward.
“My advice for any institutional investors is to simply start by asking the question. Even asking the question can be very powerful when coming from an institutional investor… Just start having a conversation so that they know that their investors are watching and you know sticking their head in the sand is not going to cut it anymore,” she said.
“There's also a lot of space on that spectrum between asking and divesting for institutional investors to play in - even if they're not at a point where divestment is a real option for them."
PASSIVE APPROACH
Other asset owners take a more passive approach to gender investing. The biggest example is Japan's Government Pension Investment Fund (GPIF).
In December GPIF invested ¥300 billion ($2.84 billion) into a passive fund tracking the Morningstar Gender Diversity Index (GenDi). The index groups equities from the Morningstar Developed Markets ex-Japan Large-Mid Index and weights them using the Equileap Gender Equality scorecard, whose categories include gender balance, compensation, transparency and company policies. The top groups receive more weight in the index while the bottom group receives less.
While adopting a passive approach, GPIF noted the empirical evidence supported its decision.
“A significant body of empirical research indicates that strong gender diversity has the potential to boost corporate performance,” president of GPIF Miyazono Masataka said in a statement on the pension fund’s decision to use the index in December.
The Morningstar Gender Diversity Index offers a competitive level of returns versus global indices – its five-year return last year was 7.5% compared with the MSCI World ex-Japan's 7.3%.
Singapore’s Temasek Holdings is also a major shareholder of two of the six member companies in Singapore listed on the Bloomberg GEI: telecommunications company Singtel and DBS bank. However, it is unclear how big a priority the government-owned investment company places on pushing for gender parity in its investees.
When contacted, a Temasek spokesperson told AsianInvestor: “We look at ESG holistically. It has become an integral part of our investment decision-making, as well as portfolio management process. We continually evolve and strengthen our ESG framework.”
While the spread of ESG promises to generally improve the focus on diversity, asset owners can take additional steps to encourage companies to adopt gender parity practices, says Derlie Mateo-Babiano, assistant dean of dversity and inclusion at The University of Melbourne.
“Investors can actively influence companies that they invest in to adopt good ESG practices, processes and policies. They can also support socially-conscious investments in companies which have meaningfully taken on board sustainability strategies,” she told AsianInvestor.
“The steps that they could take include: be more socially conscious of what they invest in; increase transparency of their actions and activities; and shift from ESG to sustainable development goals."