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International Women’s Day: The state of play in finance

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8 Mar 2022

The inclusion of women in the UK industry has made progress, but the financial sector still has catching up to do. Mona Dohle reports.

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The inclusion of women in the UK industry has made progress, but the financial sector still has catching up to do. Mona Dohle reports.

A famous quote about Hollywood dance duo Ginger Rogers and Fred Astaire encapsulates the different experiences of men and women in a professional setting: “Ginger Rogers had to do everything Fred Astaire did, but backwards and in high heels.”

Nearly 100 years on from when Astaire and Rogers graced the silver screen, women account for nearly half of the UK workforce, but continue to be underpaid and under-represented compared to their male counterparts. The Covid pandemic has shone a spotlight on gender, racial and social divides in society as women, people of colour and the working class were hardest hit by the effects of the pandemic.

The (metaphorical) high heels are now among others the expectation to combine childcare and home-schooling in the midst of a global pandemic, which has affected women disproportionally.

In 2021, one in four women considered either reducing hours or leaving the workforce altogether, with women of colour, mothers and women in executive positions reporting the largest challenges, according to a McKinsey survey.

Boardroom boost

But when it comes to gender diversity in executive positions, figures show a clear improvement, despite, or in some cases precisely, because of the Covid pandemic.

Gender diversity at board level has become a priority for investors and policymakers alike. Over the past few years, legal quotas for the representation of women on company boards were introduced in many European countries while in the UK quotas remain voluntary. Yet investors have cranked up the pressure through the Glass Lewis Guidelines, which require a third of directors to be female.

These measures are starting to have an effect. The share of women on boards of FTSE250 firms has increased to 39%, compared to around 25% six years ago, according to the Hampton-Alexander Review. They now hold almost a third of all leadership positions, compared to a quarter in 2016.

Driving those changes is the power of hard cash. The Glass Lewis Guidelines stipulate that women should account for at least a third of FTSE350 board members, which now includes ethnic diversity. They are being followed by a growing number of institutional investors.

Pot and kettle

But the financial industry has not exactly covered itself in glory. During the past three years, there have been more fund managers called Dave than were female, according to Morningstar. Last year, 68 funds in the UK were run by men called Dave, compared to 45 managed by women.

While the representation of women in some sectors, such as HR and PR roles, has improved, they still account for only 13% of all chief investment officers, according to the Women in Finance Charter.

In the alternative investment industry, women hold only 12.9% of senior positions, with women being particularly underrepresented in real estate and private equity funds, according to Preqin.

And representation is not everything, the pay gap in the financial industry is even wider than in the broader economy. It now stands at 30% in the investment management industry, compared to 14% across all UK companies, according to PwC.

Bloomberg revealed last year that among the 10 largest investment banks, the average pay gap between men and women was 44.5%. This gap is widest at HSBC, at 54.4%. Also, only 9% of people sitting around its boardroom table are women.  

Upping the ante

But this is changing: A group of institutional investors owning a combined £1trn in assets have warned that they will not commit to asset managers who fail to meet their criteria on gender and ethnic diversity.

The group, which includes Nest, Brunel Pensions Partnership, Lothian Pension Fund, London CIV, The West Midlands Pension Fund, RPMI Railpen and the Cambridge University Endowment Fund, have pledged to include Diversity in their asset manager selection and to monitor improvements on an annual basis.

The Association of Member Nominated Trustees has also announced that it is raising its expectations. It has increased its gender diversity target to 33% from 25% and at least one of four board positions now has to be held by a women. The litmus test for this will be the upcoming AGM season.

There are indications that times are changing. Morningstar revealed on 08 March that for the first time since it started polling funds for gender diversity, there are now more female fund managers than managers called Dave.

This is largely due to a change in methodology, the fund rating provider has broadened the scope of it’s survey by screening for share class instead of accumulation unit only. As a result, it has taken in to account broader sample of funds and found that women managed 184 of the 1,846 funds in question, compared to 59 funds managed by men called Dave and 1,512 by men generally. This still leaves women managing only 11% of all funds.

Nevertheless, Morningstar sees progress. Ruli Viljoen, head of manager selection, EMEA at Morningstar Investment Management, argues that women in the investment industry have benefited from the move to working from home. “Women are no longer forced to choose between having a career or being on hand to provide for their families. Additionally, men have realised that they too are able to help, and we have seen an increase in the number of fund managers that have resigned to ‘spend more times with their family’ as they realise how over the years’ they may have lost out on this valuable experience,” she says.

But more needs to be done. At the current rate of progress, it would take 30 years for women to be equally represented at top level jobs, the Women in Finance Charter predicts. And while much attention has been paid to diversity at the top, equal pay across company levels and social and ethnic diversity remain complex issues to tackle.

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