Asset managers ramp up diversity efforts with boardroom backlash

 
Rebecca Smith
Asset managers are ramping up efforts to vote against board chairs at firms where not enough diversity progress has been made
Asset managers are ramping up efforts to vote against board chairs at firms where not enough diversity progress has been made (Source: Getty)

Asset managers are stepping up their efforts to press for more diversity among firms, increasingly voting against annual reports and accounts where there is insufficient progress on gender diversity.

Think tank New Financial researched 100 asset owners globally with combined assets of more than $8 trillion, with a particular focus on UK representatives.

Regarding engagement with investee companies, the report said asset managers including Hermes Investment Management, Aviva Investors and Legal & General Investment Management, were "escalating their stewardship duties" after reviews such as the Davies review of representation of women on corporate boards, and the Hampton-Alexander review of women in senior management.

Read more: City watchdog takes backward step on its own diversity targets

They are increasingly voting against annual reports and accounts, board chairs and nomination committee chairs at firms where not enough progress has been made on gender diversity.

"This year, Blackrock, State Street and Vanguard, the biggest passive asset managers, have also stepped up a gear on board diversity - for example, voting against boards with poor disclosure, calling on companies to increase the number of women on boards, and advocating for more effective corporate governance including more diverse boards," said the report's authors, Olivia Seddon-Daines and Yasmine Chinwala.

The report also recommends that more schemes should follow in the footsteps of US public pension schemes in carving out a portion of their portfolios to back female and minority owned, or managed, funds, as something that would send a strong signal of intent.

The motivations behind the efforts made by US schemes include "redressing social justice, democratising capital, reflecting beneficiaries, encouraging economic development, and enhancing returns".

New Financial added that diversity is moving up the agenda for asset owners, but there is still a "widely-held and deeply entrenched view that improving diversity compromises returns".

Of the reasons given for tackling diversity, improving decision-making, attracting and retaining talent, and to innovate and better compete, were cited. Just five asset owners in the sample said diversity enhances financial performance.

Leon Kamhi, head of responsibility at Hermes Investment Management, said:

Diversity is now a very difficult topic to push back on.

We are going to keep researching and building the business case but perhaps the strongest argument, that the more enlightened will understand, is that if you're not taking diversity seriously, you are just wasting talent.

Read more: Bank of England needs more diversity Morgan tells chancellor Hammond

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