{"id":27938,"date":"2023-01-12T14:10:47","date_gmt":"2023-01-12T14:10:47","guid":{"rendered":"https:\/\/sarasinandpartners.com\/ie\/?p=27938"},"modified":"2024-06-04T10:50:35","modified_gmt":"2024-06-04T09:50:35","slug":"how-investors-can-make-a-difference-on-diversity","status":"publish","type":"post","link":"https:\/\/sarasinandpartners.com\/ie\/think\/how-investors-can-make-a-difference-on-diversity\/","title":{"rendered":"How investors can make a difference on diversity"},"content":{"rendered":"

As responsible investors, we want to make sure that the companies we invest in are genuinely moving the dial in the right direction, and taking steps to remedy issues when they find them. In 2021, we intensified our efforts to drive change.<\/strong><\/h3>\n

Why diversity and inclusion matters<\/h3>\n

Research points to the value of a diverse board, suggesting that embracing diversity at a board level helps guard against groupthink, facilitating input and challenge from a range of perspectives. A proactive approach to diversity also builds in the advantages of a wider talent pool for candidate selection. A diverse board is also likely to be able to better understand the needs of a diverse customer base, ensuring that a company\u2019s management is aligned with end consumers. It is our belief that companies with diverse boards make better investments and are better placed to navigate a rapidly changing world.<\/p>\n

A diverse and inclusive workforce is increasingly a priority for companies \u2013 and for their employees<\/p><\/blockquote>\n

If the carrot is not enough, the stick may provide an impetus for change. NASDAQ board diversity rules now require most companies trading on the exchange to have (or explain why they do not have) at least one female director and at least one director that is either a member of an ethnic minority or the LGBTQ+ community. In the UK, as at April 2022, the FCA has set targets requiring at least 40% of board members to be female, with at least one senior board position to be occupied by a woman. At least one member of the board should come from a minority ethnic background.<\/p>\n

Assessing the challenges<\/h3>\n

Making progress on diversity targets can be challenging, not least because there is a high level of variability between regions. Countries with mandatory gender quotas, which are increasingly common in Europe, are making fast progress. Voluntary targets, such as the UK\u2019s best practice board-level quota of 33%, are also effective in driving change. In 2022, women held 38% of board seats in the UK, with Western Europe coming in at 35.5% and the US trailing slightly at 30.4%. In Asia, the picture is quite different. In South Korea, only 10% of board seats were held by women in 2022, and in China only 11.9% seats were held by women.<\/p>\n

Diversity also varies by industry. Companies within the healthcare, consumer staples and utilities sectors score highest on board diversity, while those in energy, materials, IT, industrials and financials lag significantly. What this means for us as an active investors is that a standardised approach to engagement is unlikely to be effective.<\/p>\n

\"\"<\/p>\n

An action plan for change<\/h3>\n

While we want to see companies make broad improvements in gender and ethnic diversity, we focused our efforts on one of the most well-established metrics \u2013 gender diversity at board level. We also sought to make substantive progress on ethnic diversity.<\/p>\n

In 2021, we identified three mechanisms through which we could effect change.<\/p>\n

    \n
  1. Tailored engagement for laggards
    \n<\/strong>A number of companies on our buy list had a lack of diversity at board level. Having written letters to these companies to express our concern, we developed tailored engagement plans for any companies that had not responded to us, employing tools such as letters to the chair, post proxy votes and letters, and calls.<\/li>\n
  2. A tougher voting policy for gender diversity and a new ethnic diversity voting policy
    \n<\/strong>Voting is one of the core levers shareholders have to drive change, so we regularly review our voting policies to ensure they evolve along with our thinking.<\/li>\n
  3. Carry out policy outreach on ethnic diversity through support of the 30% Club
    \n<\/strong>We are a signatory to the 30% Club UK Investor Group and publicly support both its engagements and its targets:
    \n- At least one person of colour on FTSE 350 boards and executive committees by the end of 2023
    \n- Half of the target 30% of board seats allocated to women to go to women of colour.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    As responsible investors, we want to make sure that the companies we invest in are genuinely moving the dial in the right direction, and taking steps to remedy issues when they find them. In 2021, we intensified our efforts to drive change. 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