Breaking the Bias and Investing in Diversity

 

 

 

Guest Blog By Helen Winch*

As Premier Miton’s Head of Responsible Investing, my experience is in sustainable and responsible investing. However, as we celebrate International Women’s Day (IWD), I see the two themes as very much interlinked. In both areas we can celebrate the achievements to date, yet there is still much more we can all do.

This year’s theme for IWD is #BreaktheBias; including creating a world that is diverse, equitable, and inclusive. At Premier Miton, we are celebrating the small role we have played in improving diversity in three key areas: investment decisions, engagement and our governance.

Investment Decisions

In a recent report published by the Department for Business, Energy & Industrial Strategy (BEIS), a Business Minister noted that “evidence shows that more diverse businesses are more successful businesses and the case is too strong to ignore”. Research has found that having diversity at the top can improve companies’ profitability, a point that the financial industry is keen to embrace, and companies are already looking to improve diversity in their boardrooms.

As an investor, one of the metrics we look for in companies is female representation in the boardroom and there is some progress. For example, recently we have seen the number of companies that we hold in the Premier Miton Responsible UK Equity Fund that have female leaders increase. We applaud companies with more diversity as:

  • Diverse boards can provide better oversight of the business.
  • Diverse executive committees are less prone to group think and, given that on average 50% of customers are female, they are better able to ensure that any business can equally appeal to all customers.
  • More diversity can promote a better work culture and improve performance.

We particularly like investing in companies with female chairs, chief executive officers or chief financial officers, due to the diversity of thought in decision making that this can bring.

Engagement

Engagement is one of the important tools at our disposal to encourage a shift in the way companies think and behave, in particular when encouraging better diversity at C-suite level. Premier Miton wrote to nineteen companies held in the  our European Sustainable Leaders Fund on the subject of diversity in the executive committee and on the need to do more than simply placing one female non-executive on the board.

In discussions with portfolio companies, management are receptive and understand the need for change, however companies find the complexity of doing this a challenge as they do not see it as an easy or quick fix. Feedback from companies is that credible change involves work on diversity across the entire firm, from graduate recruitment to maternity leave, to returning to work from maternity through to executive representation.

We want to invest in companies that have balanced boards and strong diversity and inclusion values throughout their businesses. However, we are also aware that these changes will take time. As long term investors, our intention is to work with our companies along their diversity and inclusion journey.

Breaking the Bias

International Women’s Day is an opportunity to put the #BreakTheBias agenda firmly to the forefront, to create a gender equal world that is diverse, equitable and inclusive.

An example of the power of diversity comes from a report from BoardReady that looked at companies from the high carbon sectors and found that more diverse boards act with greater speed and substance to combat climate change.

The report found that companies with more gender diverse boards are:

  • Performing significantly better in 8 out of 9 climate action indicators.
  • Twice as likely to develop a decarbonisation strategy.
  • 25% more likely to have medium and long-term greenhouse gas emissions reduction targets.
  • Significantly more likely to allocate future capital aligned to these targets.

The discussions we have had on gender diversity with our investee companies have been infinitely more insightful than the evaluation of ESG data points, such as the percentage of women on boards.

Larger companies are fully aware of the diversity issue, and their legal obligations, and will improve their gender diversity as they refresh their boards. In addition, those that are acting and engaging on the topic can expect to see long term support from us as investors. Where we see companies resisting changes to their all male boards, they should expect votes against proposals including chair reappointments at annual meetings.

Our Board

My final point is a more reflective point; the Premier Miton Group plc eight person board includes three female, non-executive directors who introduce diversity of thought and all the benefits that this brings. Additionally, one of our female directors has experience from outside the fund management industry which we believe will bring even greater diversity of skills, views and experience.

In Summary

The facts and reports are in agreement and cannot be ignored; diversity within the boardroom and across all parts of business are vital for the future success and strength of a business and its workforce. By tackling the challenges and barriers to diversity and inclusion in our work environment, we inevitably champion the calls for equality on International Women’s Day and greater gender diversity within our investee companies.

* Helene Winch is responsible for overseeing Premier Miton’s overall responsible investing strategy and development. Helene has over twenty years of investment industry experience, including considerable experience in responsible investing, co-ordinating the integration of ESG into investment processes, as well as working as an investment manager. Helene holds an MSc in Mathematics & Finance from Imperial College, London. Helene also holds the CFA certificate of ESG Investing and is on the IA Sustainable and Responsible investment committee.

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