IWD 2023 news in brief: EBA clamps down on firms flouting gender policies

Luxembourg launches women in finance charter; NatWest raises €500m from women SMEs social bond; Asian firms with more female managers perform better.

international womens day 2023The European Banking Authority has called on competent authorities to take appropriate supervisory measures to ensure that all credit institutions and investment firms comply with the legal requirement to have a diversity policy. The EBA made the call after finding that around 27 percent of the nearly 800 firms it surveyed lack one. The survey also showed that, at the end of 2021, women accounted for just 18 percent of executives and 28 percent of non-executive directors. Women executive directors also earned on average 9.48 percent less than male peers, while for female non-executive directors the shortfall was 5.90 percent.

German financial regulator BaFin said it expected credit institutions it supervises to draw up diversity policies after the EBA report revealed that German banks are doing worse than the European average. The proportion of women on boards at German banks is half the European average at 9 percent, BaFin noted, with institutions also lagging on the implementation of diversity policies and gender targets. BaFin reminded institutions that they are legally required to have gender-neutral remuneration and to draw up targets for promoting underrepresented genders under the Banking Act.

Luxembourg has launched a women in finance charter to promote gender diversity. The charter was founded by several financial associations under the patronage of the ministry of finance. Signatories include the European Investment Bank, European Investment Fund, the Luxembourg Stock Exchange and several financial institutions. Under the charter, financial institutions commit to designating an executive within their firm who will be responsible and accountable for gender diversity and inclusion, and commit to setting voluntary targets to achieve greater gender balance, notably at executive and senior management level. Signatories will be required to publicly report on progress towards the targets on an annual basis.

NatWest raised €500 million from a new social bond to fund lending to women-led SMEs on Tuesday. The five-year bond is the bank’s third such deal, with previous issuance raising money for lending to deprived areas in the UK and loans to social housing associations. It is the first social bond by a European institution to raise money specifically for women-led businesses, but BMO launched Women in Business Bond in 2021 and the International Finance Corp has also been active in the space.

Asian firms with more female managers perform better, according to research from Bank of America Securities. Companies with a higher proportion of women in management outperformed those with a lower proportion by 26 percent over a five-year period on average. The same organisations also outperformed the benchmark index by 4 percent over the same period. While 79 percent of corporates in Asia report on board gender diversity, less than 13 percent report on the gender pay gap. As it stands, just 25 percent of company management in Asia are women, with the average female board representation standing at 20 percent.

Investment teams with a greater level of diversity have better investment outcomes, according to analysis by WTW. In particular, the data and insight firm found that investment teams in the top quartile of gender diversity outperform the bottom quartile by 45 basis points per annum in terms of net excess returns. However, it also found that only 42 percent of the 407 asset managers that responded to its DE&I questionnaire currently have any measurable objectives in their DE&I policy, while nearly half have no targeted initiatives to attract more senior diverse talent. In the future, WTW intends to provide additional insights into diversity data through the WTW Diversity Index, which will allow an investment strategy to measure and compare its diversity to peers today, as well as its optimal diversity level.

Companies in the Morningstar Developed Markets Gender Diversity Index, which focuses on developed market companies that have strong gender diversity policies and practices, outperformed their broad market counterparts in 2022. According to Morningstar, firms in the index declined 16 percent in 2022 relative to a 17.8 percent decline for its parent index, the Morningstar Developed Markets Large-Mid Cap Index.

The 30% Club, in partnership with board advisory specialists Lintstock, has found that female directors are more likely to identify the need for further board diversity in areas such as age, culture and social background. The campaign group came to the conclusion by conducting a qualitative analysis based on the engagement of male and female directors in 100 FTSE board reviews. Female directors are also more likely than men to focus on emerging issues, notably company culture and employee development, according to the report.

The number of women working in the UK’s finance sector has declined by more than 30 percent since 1997, according to a report by the London Stock Exchange (LSE) and the Centre of Economic and Business Research (Cebr). However, over this same period, the gross value adds by women working in the financial sector constituted a £1.12 trillion ($1.34 trillion; €1.27 trillion) “gender diversity dividend” to the UK economy.

Women hold less than 9 percent of the 9,278 chief executive and chairperson positions in the UK’s financial services sector, according to Fox and Partners. The employment and partnership law specialists also found that, if progress towards gender parity at firms continues at the same annual rate, it will take 70 years for a 50/50 gender split to be reached.

The proportion of women on global company boards rose by 1.9 percentage points last year increase to 24.5 percent, according to MSCI research. The analysis – which tracks gender diversity in senior leadership at more than 2,800 companies – found that the percentage of female CEOs increased to 5.8 percent in 2022, up 0.5 percentage points from 2021. MSCI projects that corporate boards globally will reach the 30 percent and 50 percent targets for female representation by 2026 and 2038, respectively.

UN secretary general António Guterres has warned that progress on women’s rights is “vanishing before our eyes”. He called for collective action from governments, civil society and the private sector to invest in bridging the divide, with gender equality currently on track to be achieved in 300 years. Guterres also stressed the UN’s theme for International Women’s Day this year, calling for the world to close the digital divide and increase the representation of women and girls in STEM.

CFA Institute has partnered with non-profit Girls Who Invest (GWI) to launch a course aimed at attracting more women into the investment management industry. They will offer a CFA Institute Investment Foundations Certificate for GWI scholars to provide them with an understanding of how the investment industry works. The course will cover key concepts about purpose, structure, vocabulary and ethical considerations, among other aspects of the investment industry.