Diversity was a key theme in 2020. The Black Lives Matter movement brought race to the fore, with the US protests seen replicated in other countries to highlight the issue of systemic racism.
First Sentier Investors believes that representation matters in business and that diversity goes beyond gender, with factors such as race, religion, socioeconomic background, sexuality and disability being of equal importance. A diverse workplace fosters an environment of informed decisions and stakeholder engagement.
At this stage, gender diversity is the area where we have made the most progress. We are working to improve female representation within the firm, as well as engaging with companies about their number of women in leadership roles. We have particularly focused on how we can contribute to SDG 5.5 and ensure women’s full and effective participation in leadership at all levels of decision-making in the companies in which we invest.
This is a business issue as well as an ethical one. Research1 released in June 2020 by the Workplace Gender Equality Agency and the Bankwest Curtin Economics Centre shows an increase in the share of female ‘top-tier’ managers by 10 percentage points or more led to a 6.6 per cent increase in the market value of Australian ASX-listed companies, worth the equivalent of A$104.7 million.
But progress is slow. The number of women in leadership has flatlined, according to Chief Executive Women’s 2020 census on ASX200 senior executives, with just 30 ASX200 companies having at least 40% women in executive leadership in 2020.2
The EU has outlined the economic case for gender equality, arguing that it would boost GDP through higher employment and productivity. It estimates that by 2050, improving gender equality would lead to an increase in EU (GDP) per capita from 6.1 to 9.6%, which amounts to €1.95 to €3.15 trillion3.
Compared with labour market and education policies, gender equality policies have a strong impact on GDP. For example, a recent study showed that improvements in educational attainment across EU Member States would lead to a 2.2% increase in EU GDP in 2050 (DG EAC, 2016).
We believe that investors have a key role to play in setting expectations and engaging with companies on this issue.
During 2020, First Sentier Investors joined the 40:40 Vision initiative, with CEO Mark Steinberg joining the Steering Group. Convened by super fund HESTA, it is designed to increase the proportion of women in senior leadership across Australia’s largest listed companies to at least 40% by 2030. This is in addition to our membership of the 30% Club, which advocates for boards have 30% female representation.
Initiatives such as the 30% Club and 40:40 Vision are part of our firm’s commitment to responsible investment and creating positive change through company engagement.
Going forward, we would like to take the lessons we have learned through engaging on this important issue, and apply them to workplace diversity more broadly, as well as diversity outside the workplace. Whilst the same level of data and disclosure is not available for other forms of diversity, we expect that this will improve as awareness of this issue has increased throughout 2020. As investors we have an important role to play in driving better disclosure on material issues like this.
However, this engagement also plays a crucial role in the decisions made by our investment teams, as this case study demonstrates.
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