Fearless women in emerging markets
While the progress remains slow, we continue to use our voice and vote to advocate for greater gender diversity in the boardrooms of our portfolio companies.
Under pressure from regulators, investors and the society at large, board and management gender diversity has become a global mainstream ESG issue. It is showing an improving trend, but the progress remains slow. Some asset managers recently announced a pledge to vote against all nominations to boards in North America and in the UK where there isn’t at least 25% female representation. A top tier investment bank from the US earlier declared that it would not help companies go public in the US and in Europe, without at least one female board member in 2020 and two in 2021. In California, 43 companies that failed to add at least one woman to their board in 2019 will be hit with a fine, while a study1 showed that 83% of board directors opposed diversity quotas.
A far cry from a global Womentum
Today, there is on average 20% female directors in companies included in the MSCI ACWI index, which is a 2.1 percentage-point increase compared to the year before. On the current path, a 50/50 gender split among global directors could be reached by 2044.2
Globally, the number of companies with majority female boards doubled in 2019 compared with 2018. Yet these 22 firms accounted for fewer than 1% of the constituents of the MSCI ACWI index as of October 2019; 98.7% of the boards remained male-dominated. Other appalling statistics show that 7% of the world’s government leaders and 3% of chief executives are female and only 23 of America’s Fortune 500 companies are led by female CEOs. This is at a time when women make up 47% of the global workforce.
And even less so in emerging and frontier markets
It is hard to make sweeping statements covering such a culturally and geographically diverse universe as ours, but still fair to say that gender diversity is even worse than in developed markets.
In our ESG scorecard, our minimum expectations for female representation are 30% of the board and the management, with a negative score for those not meeting these expectations.
It is our conviction that board diversity boosts the quality of decisions. In consumer-facing sectors it is also crucial that boards representing the customer base have better intuition, and we still meet too many companies that seem not to understand this. We therefore see it as an important task to let them know that this matters.
Across our portfolios and on the basis of our own ESG scorecards (as not all our companies disclose data in external databases), the average number of female directors is 14%. The two strategies with the highest number are East Capital New Europe and East Capital Balkan, both with 17%. There are only 2 boards with more than 50% women, both in Asia (a China A-shares company and a Vietnamese company).
Raise the bar in the boardroom
Our engagement with boards leans historically on having truly independent and truly competent board representatives as a priority, but we are intent on increasing our focus on the gender issue as our portfolio companies’ ESG profiles improve. We have noticed that introducing competent INEDs raises the overall ESG bar and enables a dialogue on gender diversity within companies. In the Baltics, where we have a strong local network, we work to influence gender diversity and make the management aware of the risks for a company’s business and reputation. In Central Europe, we have focused our engagement on regulators, pointing out the low presence of women to Polish capital market institutions. In Russia, gender diversity is also increasingly being discussed when it comes to finding INED and climate change-competent candidates.
Other initiatives
During 2019, we joined a “ESG and Gender Diversity” panel as a speaker at the Annual Deloitte Fund Forum, and shared our views on gender diversity in the fund management industry. We became a signatory to “My Pledge,” a Luxembourg initiative aimed at ensuring diversity at public events and actively encouraging diversity. As a member of the Women on Board Initiative in Hong Kong, we have joined the conversation with other likeminded investors to make changes happen faster in Hong Kong, which is lagging behind in terms of diversity, with 13.4% female directors in the Hang Seng Index and 11 all-male director boards.
1 PriceWaterhouseCoopers Annual Corporate Directors Survey
2 MSCI Women on Board 2019 Progress Report
