Driving change: inclusion as a key ESG agenda

ESG transformation is the current buzzword across all industries, and Financial Services (FS) play a bigger role than most in building this sustainable future. FS is one of the key pillars of any economy – the intermediary that channels capital into low-carbon activities and finances key transition activities to achieve Paris 2050 goals.

However, FS still lags on the ‘S’ of ESG!

In sustainability discussions, the ‘environmental’ aspect is often at the forefront, leaving a lot to be desired on the ‘social’ front. FS employs 7.6 million individuals in the United States alone. So, naturally, the social practices of this sector are looked up to, giving it the opportunity to be the leader and changemaker. One such area that presents this opportunity is DEI- Diversity Equity and Inclusion and a subset of that is ‘Gender diversity’.

Despite efforts to improve the representation of women in leadership and management positions, the industry still has a long way to achieving gender parity. It brings us back to the debate of equality vs equity in an unequal society. Treating everyone the same only ensures that the marginalised continue losing out. Upliftment strategies are required to address imbalances by actively seeking and promoting qualified candidates from underrepresented groups.

Diversity needs to be more than just numbers and ticking a checkbox

Gender representation at entry-level roles is relatively balanced in this sector. However, as women progress in their careers, the gap widens significantly. The pipeline to the top is leaky: the gender ratio starts at 47% for support staff and goes down to 23% for executive level. Within FS, a dismal 5% of CEO positions were held by women in 2021.

European banks paint the same picture, with zero women CEOs appointed by the top 30 banks in Europe, despite almost half of these companies replacing CEOs in the same time frame.

Hiring women just for ticking a checkbox hampers the progress on the much-needed sociocultural shift. Merely advising women to be more assertive and “put themselves out there” undermines the mismatch between how women are often perceived, and the qualities often associated with a leader. Subtle biases prevent the required “learning cycle” which helps mould leaders.

The women that do reach leadership positions are often expected to do multiple hats of uplifting other women and providing them emotional support. In an environment where there are already very few women in these roles, this burden called the “hidden cost” is unevenly shared, unrecognised, and largely uncompensated for.

Beyond mere societal duty, multiple other factors make diversity initiatives essential

In addition to being an ethical social responsibility, diversity is crucial to multiple stakeholders of a financial services company – employees, investors & customers.

Visa was awarded the title of ‘Best employer for Women’ by Forbes Magazine in 2018 in lieu of its efforts in creating a workplace with equal opportunities and pay, through programs like “Return to Work”. A similar initiative by Capgemini, “She said Yes”, aims at encouraging former employees to come back after gaining external experience. Another program called “CAPtivate” is Capgemini’s Career initiative to support female professionals who want to transition back into the workforce. Inclusive policies like these enable companies to create a supportive environment and initiate conversations.

For investors, diversity can bring a fresh perspective to the investment process, leading to a wider range of opportunities, and better risk management. A European Central Bank study found that banks with more than 37% female directors had around 10% lower lending volumes to companies with higher pollution rates. Sodexo, a food and facilities service provider, found that with optimal gender balance, their employee engagement increased by 4 percentage points, gross profit increased by 23% and brand image strengthened by 5 percentage points.

Additionally, a diverse employee base reflects the diverse customer base, helping the company to better understand what its customers need. This leads to better customer experiences, greater customer satisfaction, and increased customer loyalty.

Being prepared for a more accountable and responsible future: vital for organisation survival

Regulatory authorities are also pushing companies to reveal statistics and initiatives. Companies listed on Tokyo Stock Exchange are obligated to publish their diversity policies and goals. The UK’s Financial Conduct Authority requires listed companies to disclose performance data against diversity targets including 40% female board representation.

To sum up, it is vital for companies in FS to inculcate gender diversity in their long-term growth strategy. There are multiple factors at play and the gender conversation has been around for a while. We have identified three broad considerations to keep in mind as we formulate our strategy and solutions.

The goal is to keep in mind the need for a shift in the organisation’s culture and this is possible only through involving all stakeholders. Recognise and identify areas for improvement, create a supportive environment and set clear collaborative targets that provide the much-needed flexibility.

Future growth requires constant innovation. Therefore, invest in your diverse workforce to attract and retain the best talent who collectively work towards company goals in an environment that supports their success.