Can COVID-19 encourage a better gender balance in finance?
As we recover from a pandemic that has disproportionately affected women and people of colour, the Financial Conduct Authority (FCA) is working with the Prudential Regulation Authority on a joint approach to diversity and inclusion (D&I) for all financial services firms.
Back in 2016, a government review into the representation of women in senior managerial roles in financial services found that women made up just 14% of executive committees in the financial services sector. In response to the recommendations in that review, HM Treasury launched the Women in Finance Charter to challenge the industry to do better.
Forward to the Women in Finance Charter Annual Review in March 2021, where FCA CEO Nikhil Rathi revealed the impact the Charter is having. Of its 330 signatories, 62% are seeing an improvement in female representation in senior management. Yet, while attitudes are shifting positively, there is still an underlying lack of progress in terms of gender equality in the sector: even among those Charter signatories, women represent less than one-third of senior management. Furthermore, research by the Investment Association and FCA from 2019 found that women in financial services still received 28% less pay than men, and the proportion of women in senior positions was just 17% – figure almost unchanged since 2005.
Rathi highlighted the low number of women of colour in senior positions in financial services as a particular concern. And it is not only women who are under-represented: research found that, in 2018, fewer than one in 10 management roles in financial services were held by black, Asian or minority ethnic people.
The COVID-19 effect
The effects of the COVID-19 pandemic have exacerbated these imbalances. According to the World Economic Forum Global Gender Gap Report 2021, the shift to remote working has disproportionately impacted women. Women report they are doing 64% more housework than men and that their childcare responsibilities have doubled. The impact has been particularly acute for ethnic minority women.
However, this seismically disruptive period could offer the opportunity for the financial services industry to not only address these imbalances but to go further – to elevate inclusion and diversity so that it becomes part of firms’ core strategy across its operations.
Rathi outlined the FCA’s desire to improve the D&I culture of the firms it oversees, and in the markets it regulates. The FCA is working with the Prudential Regulation Authority on a joint approach to D&I for all financial services firms. Rathi said that D&I matters not only for social good but because research has suggested that greater gender diversity improves risk management culture – and decreased the frequency of European banks’ misconduct fines. “Diversity reduces conduct risk and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.”
Strength in diversity
There is also a strong business case for improving D&I of course. A diminished role for women could have negative consequences not only for firms’ workplace cultures but also for its bottom-line growth. According to research by McKinsey, the most diverse companies are 35% more likely to outperform the least diverse. Rathi says: “Ultimately, improving diversity and inclusion is both a matter of fairness and a crucial way to strengthen consumer outcomes.”