Neville White, head of RI policy and research at EdenTree Investment Management, tells Investment Week why firms who do not take gender diversity seriously when recruiting new managers risk falling behind in the industry.
Is gender diversity on boards something you take into account when investing in a company?
As responsible and sustainable investors, we take into account a number of environmental, social and governance issues.
Gender diversity is indeed a governance issue for us, and we have integrated an approach to gender diversity through our engagement with companies and our voting policy.
Have you questioned any of your holdings on the gender split of their boards?
As diversity is integrated into our voting policy, we take action against chairs of nomination committees where insufficient progress on diversity has been achieved by a company.
We are also a member of the 30% Club investor group, a UK investor coalition that has gathered the support of over 30 institutional investors, that have committed to exercise their ownership rights through voting and engagement to effect change on company boards and within senior management teams.
EdenTree has led and supported some of these engagement initiatives with senior management.
How do you approach such issues? What was the response from the firm?
Since the launch of the Davies Review, EdenTree has tracked the progress of diversity in FTSE 100 companies and successively at FTSE 250 companies.
Since 2016, gender diversity has been integrated into our UK voting policy and, since 2018, also in our overseas voting policy without exception.
As a committed member of the 30% Club Investor Group, we have also been engaging with companies on their diversity efforts, both collaboratively with other institutional investors, and on our own.
This has already resulted in opposing the re-election of several Chairs of Nominations Committees in the UK and overseas.
Do you think the balance is improving?
In the UK, a voluntary approach has been adopted since 2011, when Lord Davies set a voluntary target of 25% female directors on FTSE 100 boards by 2015. The voluntary approach has proven to be effective in the UK market, while other countries have adopted a regulatory or quotas based approach.
Norway and France introduced a mandatory 40% quota in 2003 and 2017 respectively where non-compliance can result in a fine or sanctions, while Germany set a quota of 30% of women on supervisory boards (but not management boards) in 2016.
The UK's voluntary approach took a step further when the Hampton-Alexander Review took over in 2015 and set companies in both the FTSE 100 and FTSE 250 the target of 33% of women on boards by 2020, as well as 33% representation of women on FTSE 350 executive committees and the direct reports to the executive committee.