Gender-lensed equity investing developed from a body of substantial research demonstrating the financial, risk management, decision-making and other corporate benefits of higher levels of women in leadership ( WIL). In our coverage universe at Parallelle Finance, there are 27 global and regional equity funds with a gender lens available to individual investors. Its assets under management (AUM) amounted to $3.47 billion as of June 30, 2021, reflecting a growth rate of 32% in the first half of 2021.
Our coverage universe also includes an expanding group of diversity, equity and inclusion (DEI) funds targeting companies with strong DEI policies for investment. These DEI funds totaled $154 million in AUM as of June 30.
Gender fixed income also saw strong growth in the first two quarters, particularly in gender bonds issued by private financial institutions and issued or sponsored by development finance institutions (DFIs). Latin America leads the total number of gender bonds, with benefits going to women-owned businesses in a variety of sectors.
As of June 30, gender-focused fixed income totaled $7.71 billion in AUM, which represents US bond, note and certificate funds, a platform for gender bonds and loans in both developed and developing countries. This translates into a growth rate of 68% in the first half, as the gender bond AUM issued by DFIs almost doubled during the period.
A push to increase women in corporate leadership
Elsewhere, women’s progress in business leadership remains stubbornly slow. Government mandates, regulatory actions and stock market listing rules all have a role to play, especially combined with shareholder activism. The US Securities and Exchange Commission (SEC) approved NASDAQ’s innovative board diversity rule for newly listed companies on August 6, 2021. Under this rule, most listed companies will be required to have at least two different directors, with some exceptions for foreign and small companies. , or explain in writing why they do not.
Before the proposal, more than 75% of NASDAQ constituents would not have met the criteria, although most had at least one female board director. Smaller companies in particular have the most work to do to meet the proposed thresholds.
In a similar move, the UK’s Financial Conduct Authority (FCA) proposed that listed companies must meet board diversity targets or provide an explanation, and publish diversity data on their boards and executive management. In addition, a subcommittee of the SEC has recommended the adoption of mandatory gender and racial diversity disclosure of mutual fund boards. And since California enacted legislation on women’s board representation nearly three years ago, the number of female corporate directors has doubled, although women remain underrepresented.
The role of global asset managers
Global asset managers have a range of policies and custodial statements to support the growth of corporate WIL. Faced with criticism of the prevalence of all-male boards, more asset managers have expressed their willingness to vote against non-diverse boards. BlackRock announced late last year that it will push companies to disclose diversity data and information on measures to improve it. Similar statements soon followed from Vanguard, Fidelity Investments and State Street Global Advisors (SSGA), among others.
BlackRock, JPMorgan and Goldman Sachs have since released their own 2020 EEO-1 data, with several others committed to doing so or releasing partial data.
An analysis of the diversity voting guidelines for the 12 largest global asset managers by AUM as of March 31, 2021 found that their approach to established thresholds may not be high enough. These guidelines tend to “encourage” board diversity, with several not identifying any specific goals and others naming thresholds of one or two women and other diverse board members.
Advocating for one or two female board members places asset managers behind the curve rather than leading a charge toward board parity. A slight majority of S&P 500 companies now have at least 30% female board representation. Women hold 28% of Fortune 500 board seats and 36% of FTSE 100 seats.
Fidelity International says it can vote against boards in developed markets if women hold less than 30% of the seats.
But who will be the first of these asset managers to call for gender parity on the board? Or for board parity that spans gender, race and ethnicity?
WIL to the largest asset managers
Equally important, which of the big asset managers will be the first to achieve gender parity on their own boards and directors? Our analysis of the top 12 asset managers found that Goldman Sachs and JPMorgan Asset Management have the highest female board representation, followed by BlackRock, Allianz Group and UBS.
But female board representation is moving faster than C-suite gender diversity. Female CEOs are found in only 6% of S&P 500 and FTSE 100 components and only 8% of Fortune 500 companies. Consistent with the broader data, there is a dearth of female CEOs among top managers of assets Fidelitat is the only company of its kind run by a woman.
There are five female CFOs among top asset managers, and research on Russell 3000 constituents finds a correlation between a rise in earnings and share prices in the first 24 months after having a female CFO.
But six of the top 12 asset managers have no women in the four core C-suite positions — president, CEO, CFO and COO of the parent company — and four firms have just one. Fidelitat leads with three, but two of these positions are held by the same person.
Only three of these asset managers have gender-sensitive equity funds available to individual investors. The UBS Global Gender Equality UCITS ETF had $615.91 million in AUM as of June 30, while the SPDR SSGA Gender Diversity Index ETF had $213.25 million and the Fidelity Women’s Leadership Fund had $133.78 million of combined dollars. BlackRock’s DEI fund, the iShares Refinitiv Inclusion and Diversity UCITS ETF, had $58.59M. None of the 12 companies have sponsored or issued a gender link, although some have had manager roles. In a unique move, Goldman Sachs recently announced that it will commit $10 billion in direct investment capital to address opportunities for black women.
Global asset managers have two areas of opportunity to drive corporate WIL. The first is within their own ranks. Second, they should exercise management and chart the path towards gender parity on the board of directors and higher female representation in management.
For more analysis from Marypat Smucker, CFA, visit Parallel Finances.
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All posts are the opinion of the author. Therefore, they should not be construed as investment advice, nor do the views expressed necessarily reflect the views of the CFA Institute or the author’s employer.
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Marypat Smucker, CFA
