AXA IM Framlington Equities Portfolio Manager Anne Tolmunen, Head of Sustainable Investing at AXA Rosenberg Equities, Kathryn McDonald, and Marie Fromaget, Human Capital and Diversity Analyst at AXA IM, examine the ways in which investors and corporates can keep the momentum around gender diversity going and continue to build a better world for everyone.

AXA IM: We’ve seen significant moves in recent years by governments, corporates and civil society to improve gender diversity. How do we ensure that the momentum continues?

Marie Fromaget: I think investors must join forces to say to companies that this is a topic that is, and will, continue to be important. And to drive this home, we need to raise this point whenever we meet companies. For example, we invest in social bonds, which aim to raise money for projects that have positive social outcomes. Companies are supposed to report on the beneficiaries of these bonds and every time we speak to them, we ask can they provide the data on men and women as well?

It is all part of slowly and carefully making our point that gender diversity matters, even within a specific target population, and it’s well received. I also think we need to be consistent, as an industry, when it comes to measurement. One of the big problems for companies is that they are bombarded with questionnaires from investors wanting to know specific details about their businesses. And it is the same when it comes to gender diversity. Going forward, however, we need to harmonise what we are requesting. This is a main advantage of the disclosure initiative.

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Anne Tolmunen: Shareholders certainly have a role to play in directing capital towards companies with better practices and better corporate culture. Not only is it the right thing to do, but investors should also benefit over time, as studies have shown there is a link between greater diversity and improved performance. I also agree, we need to present a united front. But I think it has to move beyond just investors.

To keep the momentum going, we need all actors in society, to join forces. This problem often has a cultural backdrop. We need families, the education system, the government, corporations, investors and the media, all working together to articulate the benefits for everyone of improving diversity. For example, what is often portrayed in the media are negative stories, the scandals. It would be good if we could move the debate to the shared benefits within society: Growing the pie for everyone by further including women and by paying them fairly, by giving them equal opportunities to get promoted. Ultimately, this is a positive feedback loop from which I believe, we will all benefit.

Kathryn McDonald:  I agree we should demand of ourselves and the media, that we move away from these one-off stories of companies being forced to do something that goes against shareholder value or against economic value.

The State of California recently passed an initiative requiring publicly traded companies of a certain size to have at least one female board member. In the US press it was viewed as the incursion of top down, ‘socialist’ policy in America, which is kind of a nonstarter here. In reality, nobody’s asking companies to bring someone unqualified to the board.

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There are plenty of women, who are qualified to be on boards, but there is great inefficiency in the way board members are currently chosen. I think a much more nuanced view of the role of government and regulators is needed, and I think that we, as investors, as people who have a voice that can be heard by many, have a responsibility to talk about the overwhelming societal benefit associated with women coming into the workforce, women being paid a fair wage to do work, women given economic opportunity. All of this really benefits men, women, and children.

AT:  I would add to the board quota point – this California example – that it’s actually very rare to find a company that has fewer than 10% of employees who are women. Even in traditionally male industries, women generally make up at least between 20% and 30% of the workforce. Therefore, when you think about it, there is no reason why we should not see at least a few of these women naturally progressing to the top. Moreover, when you look at these industries, which have over 50% of their workforce made up of women, the fact that you still don’t find more women at the top is also quite striking.

AXA IM:  Do you think there need to be different approaches in different countries? Anne, you invest in emerging and developed markets. How do you approach this? 

AT:  When we look at our universe of companies, we strive to put data and information into context. Particularly as there is a large cultural context pertaining to gender diversity. We don’t think it is fair, for example, to compare a company in Japan to one in Norway. The starting points are very different. It’s important to recognise companies that are leading the way within the context of their country or their industry.

Again, certain industries like mining might have very different challenges and starting points than sectors exposed to consumer industries, where you traditionally find a majority of women as employees and customers. Also, in countries where you have quotas, obviously we put less emphasis on the board and look more at what companies are doing from within, to grow their female pipeline and promote their female talent to senior roles.

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KM:  I go back to the first principles: ‘Do you as a company recognise the threat that groupthink presents to your company? Do you recognise this as a problem? What is the way your company is dealing with it?’

We want to see greater gender representation at all levels in a company. We want to see greater representation of other minorities, but ultimately there is going to be a nuance and a story, depending on what industry we’re in. If we can continue to push companies to address this idea of groupthink, some of this will naturally play out as it is legitimately a good remedy for that problem.

MF:  We definitely need to approach countries differently because they are at very different stages when it comes to embracing the notion of gender diversity. In some countries, men are much more favoured from birth, whereas in other countries, women study as much as men but they still don’t have access to the top positions – they are facing the glass ceiling. You need to engage with companies in regard to the human capital policies that impede women in their efforts to climb the corporate ladder. When you engage with multinational companies, we are interested in how they adapt their policies to different countries. This is an issue I am dealing with now.

AXA IM: How should we be thinking about this issue going forward?

MF:  I think that gender diversity is gaining momentum but is still a very touchy topic. We need to be careful about the wording and the way we are collating our ideas. And, importantly, we need to include men in the solution.

AT:  A way to sum it up was given to me by a company, when we had a discussion around gender diversity: The firm was a laggard in this respect. I was surprised they seemed to take this issue quite seriously when I met them. They told me that what set them apart is their culture, and within that, the fact that they are a true meritocracy. Senior management had come to the realisation that it was therefore problematic that women systematically didn’t make it to the top in their company. The other observation this firm shared was its core belief that talent is distributed equally within the population – I believe this means its missing out on talent because it only recruits and promotes a certain type of talent, which happens to be men.

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KM: Within the context of investment management, we’ve had this principle of diversification for a long time. We believe diversification can potentially help to deliver better results within portfolio construction. A broad selection universe, that allows us to consider many opportunities, is far superior to considering only a handful of opportunities. Many of these same arguments apply when we think about broadening our pool of applicants to include well-qualified individuals who may be systematically not appearing in our talent pool, people that bring with them a variety of problem solving frameworks.

Coming from asset management, these are not controversial statements. We’ve been using these principles for investing for years and years. This is a pretty unemotional way to deal with the topic of diversity. This might be the type of argument that is more appealing to those who feel under attack and companies who feel like they’re being forced into something.

I believe that positive arguments and proof statements are a better way to get people on board, than a lot of top down regulation or ‘box-ticking’ exercises. Although I’m the first to admit that when these arguments are exhausted, it might take more of a top down approach to move things in the right direction. I don’t think we’re there yet in many places, but we need to continue to push from both sides.

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