A significant proportion of investors – 44% – believe that gender diversity in the boardroom significantly influences their decision to invest in a financial services company, with only 16% stating that it does not have any influence.
According to the EY European Financial Services Boardroom Monitor, UK financial services firms are responding to investor expectations and are leading their European peers in terms of gender diversity: 58% of board appointments in the UK over the past year were female, compared with 50% across European firms. Furthermore, over the past two years, 56% of board appointments at UK financial services firms were female, compared with 46% female board hires in Europe.
It brings the current gender split of board members in UK financial services firms to 43% female and 57% male, just one percentage point up from the European average of 42% female. It also marks a five percentage point increase from June 2022, when 37% of UK financial services board members were female.
Sharron Gunn, ICAEW’s Chief Operating Officer, commends financial boards in the UK for their progress, but says there was no room for complacency. “The financial sector has taken significant steps in translating the rhetoric on equality and sustainability into tangible progress. However, rather than marginal gains, companies should ensure they are measuring the benefits of their equality, diversity and inclusion and sustainability endeavours and using it as the fuel for even more ambitious targets in the future.”
ICAEW will continue to provide guidance and advice to help businesses reach these targets, Gunn adds.
The report also found that the average board tenure for female directors at UK financial services firms is 34 months, significantly shorter than the European average of 54 months. This reflects the recent accelerated recruitment of female directors in the UK. Meanwhile, the average board tenure for male directors at UK financial services firms is 50 months, 16 months shorter than the 66 month average for their European counterparts.
Diving deeper into the UK’s FTSE tiers, Susan Vinnicombe, Professor of Women and Leadership at Cranfield School of Management, says: “The FTSE 350 companies have moved significantly forward green economy in terms of appointing women on to their boards, FTSE 100 have already met the Women Leaders Review target set for 2025 of 40% and FTSE 250 are on the cusp of meeting it.”
However, Vinnicombe says that the fact that every single FTSE 100 sustainability committee chair was a woman was not necessarily a good thing.
“It does make me think that rather than trying to find different qualities that women bring to boards, it’s rather easier to see that they bring different areas of interest such as sustainability, diversity and inclusion, wellbeing, risk and corporate governance and are therefore predominantly prescribed these positions on boards,” she added.
Investors look for boardrooms with previous experience in sustainability
EY’s analysis also discovered that more than half (51%) of investors believe that boardroom experience in sustainability has a significant impact in terms of making a company an attractive investment, with 22% indicating it has a highly significant impact on a company’s investment case.
This comes as the UK is leading the way in the accelerating trend of appointing board members with sustainability expertise. Data from the EY Boardroom Monitor shows that 44% of UK financial services firms currently have board directors with prior professional experience or expertise in sustainability. This is significantly above the average across all European financial services firms monitored, which stands at 32%.
The report also found that sustainability experience is most prevalent among female board members, with female board directors at financial institutions far more likely to have professional experience in sustainability than their male counterparts.
Wealth and asset management firms and insurers, though, in the UK and Europe continue to lag the banking sector in terms of having board members with sustainability backgrounds. In the UK, 66% of bank boards include individuals with sustainability backgrounds, compared with 50% of wealth and asset managers and just 17% of insurers. Similarly, in Europe, 43% of bank boards include individuals with sustainability backgrounds, compared with 32% of wealth and asset managers and just 17% of insurers with similar experience at board level.
EY analysis also shows that in the UK, 57% of board directors with sustainability experience have been appointed within the last year. Additionally, 20% of all board directors appointed within the past year bring sustainability expertise.
Omar Ali, EY’s EMEIA Financial Services Regional Managing Partner, says the report showed that climate change presents both a systemic risk and significant opportunity for financial services. “We expect boards to continue to build this expertise at this accelerated pace. Achieving net zero is impossible without financial services – a key message coming out of COP27. Having a deep understanding of the materiality of climate risks and opportunities is seen by investors as a competitive advantage.”
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