Some 42% of asset managers have made a voting decision based on a firm's gender diversity, according to research by the Investment Association (IA), as it urged firms not to ignore the topic.
In its latest Stewardship Survey, which covered the first half of 2018, the IA found asset managers were more likely than ever before to take action if they did not see enough progress on gender diversity.
The survey collected responses from 59 firms managing more than £5.6trn of assets in the UK, addressing issues such as executive pay, company strategy and financial performance.
Over half of asset managers surveyed said they engaged with UK companies on gender diversity and 42% made a voting decision based on that criteria. In most cases, asset managers had voted on the issue at up to ten companies, while 10% of respondents said they had voted at more than 100 UK companies.
Looking at engagement and discussion, 28% of respondents were engaged with 20 or more companies on the topic.
"Asset managers will engage with a board to understand how they are seeking to improve their gender diversity before considering it a voting issue. Usually, it is only when the asset manager considers that progress has not been made they will vote against a company based on their lack of gender diversity," the report said.
Clare Payn, head of corporate governance for North America at Legal & General Investment Management (LGIM), said the firm had voted against 73 UK companies in the first half of 2018 who did not meet LGIM's target of having more than 25% women at board level.
"It is an important issue for us and we raise it frequently with companies. There is a mix of companies who raise it themselves and those who say they do not get asked about it, which I find surprising. Our remit comes from our clients and we are absolutely getting asked more about our engagement and I expect that will continue."
While she said there was "not a silver bullet" to solving firms' diversity issues, she said the issue needed to be considered more widely, including policies such as shared parental leave, to help encourage women to progress up the leadership ranks.
"Diversity on the board is important but it is also important at a management and employee level. We need women coming through the pipeline so we are always talking to companies about what can be done. Firms cannot just want to improve without thinking about their own in-house policies," said Payn.
Meanwhile, Hermes Investment Management recently published the Public Engagement Report Q3 2018, which said the firm was continuing to tighten its voting guidelines on gender diversity around the world.
"We continued to engage with companies lacking in this area, to assess what plans they have in place to adjust board composition accordingly. Lack of board diversity triggered recommended votes against the chair of the nominations committee at Novartis in Switzerland and at Netherlands-based business, AerCap," it said.
However, Rupert Krefting, head of corporate finance and stewardship at M&G, said the firm had not voted against any companies on diversity and preferred to engage with them on the issue.
"We would seek to engage with firms and understand why there is an issue. Usually there is a good reason such as a timing issue. It did take a while for firms to get the hang of it but now most are trying to fulfil the criteria and reduce groupthink."
Chris Cummings, chief executive of the Investment Association, added: "Companies who are lagging behind on gender diversity should expect investors to take action if they do not see enough progress."
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