There is an increasing focus on Environmental, Social and corporate Governance (ESG) factors in pension scheme investing. This has been supported by the Department for Work and Pensions (DWP) requiring trustees to consider ESG more closely.
One governance factor which has been of particular interest is the gender pay gap. Companies with more than 250 people are required to report the average pay difference between men and women (please note this is different to unequal pay – paying women less than men for the same work – which is illegal). Investment firms have some of the largest gender pay gaps in the workplace, calling into question their ability to pursue ESG issues; if they can’t get their own house in order, how can they expect to influence the firms in which they are investing?
Often the gender pay gap is accredited to a gender distribution imbalance; there are more men in higher-paid senior roles than women. This means that reducing the gap permanently could take a long time; however, many asset managers are taking steps to reduce elements of it more rapidly. One of the largest asset managers has been taking steps such as training managers to be aware of their unconscious biases during the hiring process and helping managers avoid hiring replicates of themselves. The firm’s board of directors considers diversity a key driver for addressing compensation for management teams. They also have dedicated female ‘future talent’ programmes with mentoring opportunities, career coaching, and training programmes that are aimed at increasing the visibility and exposure of women within the firm. However, it could be argued that a general ‘future talent’ programme inclusive of both male and female rising stars would be fair-minded.
So far, the results of that particular asset manager’s efforts are encouraging: 51% of their new hires in the UK were women, up from 41% in 2013, and 68% of their UK graduate class were women, an increase from 44% in 2013. When asked what the gender ratio of graduate hires was to better gauge the significance of this statistic, their Compliance and HR teams replied that they do not share it due to privacy concerns. So, although the figure appears a huge success it must be considered against this background.
In summary, the gender pay gap needs to be improved in all industries, not just in financial services. It is encouraging that there are examples of some asset managers taking the correct steps to reduce this gap. However, this is very much the tip of the iceberg and needs to be replicated across as many firms as possible, as quickly as possible.