State Street tackles gender equality in finance

09 March 2017   Category: News, Asia, Global   By Natalie Leung

State Street Global Advisors (SSGA) has called on 3,500 companies that it invests in, worth a total market capitalisation of US$30 trillion, to embrace gender parity and encourage higher female representation on their boards.

The asset management firm recently issued guidelines to help boards drive greater female representation, including assessing the current level of gender diversity on boards and within management, as well as establishing goals to strengthen gender diversity.

In addition to the guidelines, SSGA says it will use its voting power where applicable, to vote towards increasing female leadership in the boardroom. “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise,” says Ron O’Hanley, president and chief executive officer at SSGA.

An MSCI study cited by SSGA revealed that companies with strong female leadership generated a return on equity of 10.1% per year, as compared to 7.4% for those without significant female representation at the top.

Another report from McKinsey Global Institute also anticipates that a global economy, which is inclusive towards women, has the potential to grow by an additional 26% or $28 trillion in annual GDP by 2025. Despite the progress made on the inclusion of women on corporate boards, SSGA found the levels of diversity to be still unsatisfactory in the three markets it studied, which are Australia, the UK and the US.

“Most large cap company boards in these markets have at least one female director but have yet to fully embrace gender equality in their ranks,” says Rakhi Kumar, head of corporate governance at SSGA.

The under-representation of women on boards is also common in Asia Pacific. In Hong Kong, China and Singapore, the CFA Institute found that only one in six of its members holding C-level positions were women. These countries currently have the largest CFA membership in Asia Pacific.

Nick Pollard, managing director of Asia Pacific at CFA Institute, believes the major obstacle in attaining meaningful female participation is the lack of awareness amongst investors and investment managers of the value that gender diversity brings.

In his article entitled Committing to Diversity, which was exclusively written for Asia Asset Management, Mr. Pollard cited figures from a CFA report, which showed that only 29% of institutional investors and 30% of individual investors believe that mixed-gender teams lead to better investment performance.

“It strikes me as odd that at a time when fund managers are seemingly having to work ever-harder to achieve investment returns for their clients, the importance of the role women play in investment management teams still remains so misunderstood,” Mr. Pollard opined.