Men hold the vast majority of board seats and CEO positions in Canada. Gender lens investing aims to close the gap.
Corporate Canada is running a deficit – a diversity deficit.
A recent Osler report found that women hold only
16% of board seats at TSX-listed companies, and a staggering 66% of boards have
either one or zero women.
The figures are even more dismal for the C-suite: women account
for only 3.3% of CEOs among TSX-listed
companies, and there is only one – yes, one – female CEO among the top 100 publicly
traded companies in Canada, according to a report from BNN Bloomberg.
This diversity deficit persists despite the fact that women are outpacing men academically: girls have been outperforming boys in school for decades, and women are earning about 60% of all bachelor’s and master’s degrees.
gender diversity matters for business
This severe gender imbalance is unjust, and it
paints a stark picture of how far we have to go on gender equality. A lack of
women in leadership also means lost opportunities for companies and investors – there
is intrinsic value in having a gender mix around the table.
Data collected by Catalyst Inc. shows that gender diversity
is associated with corporate outperformance on a number of financial metrics, including
earnings per share, return on assets, return on equity, return on sales, revenue
and share price performance.
In a recent McKinsey study, researchers found that
companies actually pay a price for lacking diversity. Companies ranked in the lowest
quartile on diversity were 29% less likely to achieve above-average profitability.
A gender mix is also beneficial from a risk-management
perspective. An MSCI report found that companies with
gender-diverse boards tend to have fewer instances of controversial business practices
such as fraud, corruption and bribery.
The evidence clearly suggests that companies ignore gender diversity at their own — and their shareholders’ — peril.
investors take action: gender lens investing
Gender lens investing is a relatively new concept that
refers to investing with the intent to address gender issues. Gender lens investing
is on the rise in Canada as responsible investors lean in to narrow the gap in corporate
For example, Canada’s two largest institutional asset owners,
the Canada Pension Plan Investment Board (CPPIB) and the Caisse de dépôt et placement
du Québec (CDPQ), are engaging with their investee companies to promote more women
in leadership. In 2017, CPPIB asked 45 Canadian companies with all-male boards to
add women directors. A year later, nearly half of those companies had added a female
director. Active ownership can be a powerful tool to influence corporate practices.
But in some cases, companies on the receiving end of these
requests will respond with excuses such as “There are no qualified female candidates
to join our board.”
The responsible investment team at CDPQ now maintains a
database of highly qualified female directors, which they send to male-dominated
boards who claim such falsehoods.
The retail market is also seeing leadership on gender lens
investing. A growing number of mutual funds and ETFs are available to retail clients
who are seeking exposure to women-led companies. For example, BMO, RBC, Mackenzie
and State Street offer thematic products that invest in companies with a minimum
ratio of women in senior leadership positions.
Other Canadian efforts are also underway to promote more
women in leadership. Earlier this year, Addenda Capital and NEI Investments launched
an investor statement of voting intentions on board diversity. On the corporate
lending side, CIBC has launched a social bond framework to provide financing for
companies that prioritize gender diversity in leadership roles. And more than 260
Canadian executives have become members of the 30% Club, a network of business leaders
that aims to achieve better gender balance in corporate leadership.
Although there is still a long road ahead to achieve gender parity, these recent developments are cause for optimism. A growing cohort of market participants is clearly recognizing that companies and shareholders will be better off with more women in leadership. It’s kind of a no-brainer when you think about it: Why wouldn’t a company want access to half the population’s talent?
Considering the benefits that come with a gender balance, the diversity deficit highlights a wealth of unrealized opportunities for companies and investors. The rise of gender lens investing is good news for responsible investors and society as a whole.
This article was written by Dustyn Lanz, CEO at RIA Canada