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Despite representing half of Europe's population, barely a third of the board members of the EU's largest listed companies are women. Although these figures are improving year on year, driven by regulatory initiatives, gender equality is still far from being a reality.
To remedy this situation, a regulatory framework has gradually been put in place in Europe, including :Â
These regulations have proved their effectiveness, as countries with mandatory quotas have seen the proportion of women on boards increase more rapidly. France, for example, is the best performer in the EU, with 45.3% women on the boards of its major companies1. However, despite these encouraging figures, there is still a long way to go to achieve perfect gender diversity.
Asset management companies have adopted a variety of methods to integrate gender equality into their investment strategies. WeeFin can help you navigate these solutions!
Among the list of 14 IAPs as defined by SFDR, 2 social IAPs are dedicated to gender issues:Â
WeeFin surveyed 50 asset management companies of varying sizes to assess the level of reporting on these PAIs, and the extent to which they are taken into account at entity level.
On average, management companies invested in companies reporting a 12% gender pay gap. However, the average coverage of this incidence is quite low, at 23% (i.e. only 23% of companies invested in by SDGs reported the average pay gap). As a result of these low coverage rates, reporting is not representative and does not allow for very conclusive comparisons between market players. As Aurélie Baudhuin points out, the implementation of CSRDs would improve data coverage and bring a degree of consistency to the data.
SGP 1 and SGP 2 stand out with a gender pay gap of 5% and 11% respectively, and fairly high coverage rates. Conversely, SGP 3 invested in companies with a pay gap of over 25%. However, given the 11% coverage rate, this figure is not representative of the investments made.Â
The SGPs with a coverage rate of over 30% either called on Trucost or collected the data directly from the data published by the invested issuers.
In terms of gender diversity within corporate governance bodies, the incidence levels are much closer, with issuers averaging 33% women on their boards. The average coverage rate for this IAP is relatively high, at around 75%. The low disparity in incidences underlines the fact that few players exceed the regulatory framework imposed by the European Women On Board Directive, i.e. a minimum of 33% of management positions must be allocated to women.Â
More than a majority of asset management companies reporting their data source for measuring PAI indicate that they use an external data provider. According to Aurélie Baudhuin, "this dependence on suppliers whose calculation methodologies are generally different makes the comparability of results for these indicators irrelevant".
SGP 1 and SGP 2 stand out with over 40% women on their governing bodies and coverage rates of over 70%. On the other hand, SGP 3, whose PAI results indicate a very high level of gender diversity within the company's governing bodies, has a relatively low PAI coverage rate (only 20% of issuers covered), revealing a result that is ultimately insignificant.
Based on the results of our analyses, we find that the players with the best impact levels and coverage rates are those using commitment, ESG rating and exclusions. These results are in line with WeeFin's recommendations: it is necessary to combine quantitative and qualitative methodologies to ensure mitigation of negative impacts. Thus, integrating a criterion relating to this theme into your ESG rating methodology, while engaging or even excluding issuers whose practices are inadequate, remains the best recipe for promoting professional equality between women and men.
The global market for thematic funds has exploded in recent years, growing 3-fold between 2019 and 2021, according to Morningstar. Despite this surge, funds focused on promoting gender equality remain few and far between. Out of 5 funds identified, the theme is integrated via different investment strategies:Â
However, it is difficult to claim that these thematic funds are leading by example. In fact, only one thematic fund reports quantitative data for PAI 12 and 13. This fund, whose ESG objective is defined by gender diversity, reported the following impact levels:Â
However, as mentioned above, among the 50 management companies included in our analysis and having communicated the incidence rate of PAI 13, the result varies between 30% and 40%. Finally, the data available for objective comparison are still insufficient to assess whether the strategies put forward by thematic funds are truly effective.
As mentioned above, social and governance criteria can be integrated to monitor gender equality . MSCI and ISS have incorporated the following criteria into their respective rating grids: "no female director metric", "not 30% female key metric" and "gender distribution". On the other hand, asset management companies with proprietary ratings can incorporate gender equality criteria, such as Mirova, whose methodology includes the indicator "share of women in management positions", or Sycomore, which has developed its own indicator: " equality between men and women in terms of employment and access to management positions ".
As an Asset Owner, it is possible to integrate this theme into the SRI policy, as Malakoff Humanis does, whose SRI policy is based on 4 themes, including parity. Aurélie Baudhuin stresses the importance of adapting "requirements according to the asset class, as they will not be as high for an issuer in an emerging country as for one in a developed country".
Tracking a benchmark index can help ensure that gender equality is taken into account. Examples include the S&P Developed 100 Gender and Diversity Index, the Euronext® Equileap Gender Equality Eurozone 100 and the Euronext® Equileap Gender Equality France 40.) Reference to an index can also be made as part of the evaluation of gender equality within a financial player.
Some management companies choose to make commitments to encourage their portfolio companies to achieve greater diversity. For example, Mirova has signed up to the UN's "Women Empowerment Principles", and participated in the creation of the 30% Club France Investor Group, whose aim is to promote greater gender diversity. Other asset management companies are strengthening their influence by promoting Diversity & Inclusion programs, such as Robeco, whose program focuses on the disclosure of unadjusted gender pay gaps and gender diversity on boards of directors.Â
The commitment can also be broken down by asset class. For example, Malakoff Humanis has launched a private debt fund with Sienna, for which a social audit is carried out by an external service provider on 3 themes: Gender equality, Disability and Employment of seniors. Weaknesses in these areas are identified and improvement targets are set. If these targets are not met, the debt repayment amount is reduced. It's a strong, high-impact support system, to be applied by asset class and location.
Not all European labels take gender equality into account. Where gender equality is expected, it is addressed through a variety of strategies. The Belgian label appears to be the most ambitious on these issues:
AurĂ©lie Baudhuin emphasizes the function of the SRI label, which is currently a process label. For this reason, Malakoff Humanis has set a target of obtaining the label each year, in order to guarantee the internal process that has been put in place. However, as this label is not a content label, it does not justify results on any particular SRI theme, including parity. It is therefore necessary to look elsewhere.Â
Of the 5 financial companies managing thematic funds included in our study, only one stands out as having 50% women on its management board, and only two are in line with the requirements of European regulations, with more than 33% women on the board. A study carried out by Morningstar in 2021 on 1,942 French funds illustrates this under-representation of women in the world of finance, listing only 352 female managers, or 18.1% of the total.
Several solutions can be implemented to promote parity within the management company. Malakoff Humanis, for example, tracks the Pénicaud index on a monthly basis to monitor these issues and implement corrective measures where necessary. According to Aurélie Baudhuin, "a constant effort must be made to promote gender parity." The Director of Socially Responsible Investment at Malakoff Humanis, points out that it is possible to "set up specific programs to encourage this parity, in particular by supporting women throughout their working lives to avoid confinement to certain positions (HR, marketing) and to mitigate the effects associated with maternity on their careers (training after returning from maternity leave, flexible working hours)".
So, even if the industry is still predominantly male-dominated, Aurélie Baudhuin insists that, as a woman, "it's important to keep your identity, your strengths and weaknesses. Women can adopt a different approach to men, which is neither better nor worse, but complementary. We need to capitalize on this different outlook."
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ESG Connect's functionalities can help you meet the challenges associated with this theme. Thanks to our platform, you can improve your PAI coverage rates, as well as monitor the commitments you have made to issuers to ensure they meet the targets you have set them, such as gender parity in decision-making bodies.
Promoting diversity in board positions and reducing the gender pay gap are also part of tomorrow's challenges!
Watch the video below for a demonstration of ESG Connect's functionalities.
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