• Companies in the Asia-Pacific region trail global peers when it comes to female representation on boards and in management
  • Pressure on companies from local regulators and global investors, including Impax, should encourage more women board members across the region
  • The structural shortage of experienced female leaders in Asian companies can be addressed by building out the pipeline of future women in leadership
  • Greater gender representation has been shown to enhance risk management, lowering long-term risks for investors

We have long believed that more diverse companies can perform better over the long term.1 Embracing diversity is an important element of good governance. Companies that more closely mirror their customers and wider society should also be more responsive to demand. There is the important matter of gender equity itself, too.

Across the Asia-Pacific region, company boards remain overwhelmingly male dominated. Many have no female representation at all. This should not be excused as a natural expression of societal norms. We believe now is the right time to redouble efforts to highlight the issue and drive progress.

Growing pressure from the region’s regulators and global investors to increase female board representation is encouraging. Alongside targets and initiatives, however, practical steps are needed to develop the female corporate leaders of tomorrow.  

Momentum for change is building. While we appreciate that this will be a long journey, unlocking the skills of half the population should improve outcomes for companies, investors and societies at large.

Gender inequality – Asian exceptionalism?

Without doubt, companies in the region suffer from serious and deep-rooted gender inequality. This is demonstrated by how few women sit on corporate boards and in management teams.

According to data from MSCI, only 13% of Hong Kong-based constituents of the MSCI ACWI Index of listed companies had at least 30% female representation on their boards in 2022.2 The landscape is even more unequal in Asia’s other major markets – only 3% of South Korean companies reach this threshold. For local companies that are not included in the MSCI ACWI, and so subject to less scrutiny from global investors, these figures will be much lower.

The research also found that 21% of MSCI ACWI index constituents in the region had no female board members, compared with just 0.1% of companies in North America and 0.4% in Europe. These include companies with a predominantly female customer base, such as an Australian cosmetics company, a Japanese producer of baby food and a South Korean clothing manufacturer.

Catalysts for change

Though starting from an exceptionally low base, we observe three strong drivers for Asian companies to make progress on female representation at board level: pressure from regulators, demand from international investors and the growing attention paid to non-financial metrics of company performance, including diversity.

First, regulators across Asia are beginning to require that companies appoint women to their boards. India was an early mover, with the Securities and Exchange Board of India (SEBI) requiring from 2015 that Indian-listed companies appoint at least one female director.

Other markets have since introduced regulation around gender representation. Singapore, for instance, requires companies to disclose their board diversity policies and progress they are making towards measurable objectives. Larger listed South Korean companies must now appoint at least one female director and all listed companies in Hong Kong must do likewise by the end of 2024.

Second, a growing number of international investors want to see more diverse boards among companies in which they invest. Some are primarily motivated by the business case for diversity, while others are responding to their clients’ concerns about gender inequality.

Growing numbers of investors are collaborating in regional initiatives to promote female directors. Impax is a member of the 30% Club Hong Kong, a coalition of asset managers and owners that is working to improve gender diversity on boards. Launched a decade ago, the group works to raise awareness of the benefits of diversity and to inspire debate.

Third, increased focus among global investors in environmental, social and governance (ESG) factors has placed greater perceived importance on the ESG scores awarded by specialist rating agencies – despite their flaws and limitations. Many of these ratings take metrics tracking gender diversity into account. Appointing women directors can therefore improve a company’s ratings, helping to ensure that its shares are eligible to the widest possible universe of investors.

Tackling the ‘chicken and egg’ issue of experience

Progress is slow, however. Not only are we battling against long-held cultural norms and a lack of open-mindedness but concerns about the availability of talented female board candidates. So often companies tell us that they would recruit women on to their board if there were eligible candidates. This reflects a ‘chicken and egg’ problem, whereby companies complain about a lack of experienced candidates while failing to provide women with the opportunity to gain that experience.

There is certainly work to do to support an expanding cadre of experienced female directors in many countries in the region. But there is no shortage of talent waiting to be tapped, as illustrated in India where regulatory requirements soon changed the picture.

Encouragingly, organisations are emerging that can help match companies with talented female directors. For example, the Japan Board Diversity Network is working to connect, inspire and train female board leaders to build a pipeline of future directors and help Japanese companies identify them. It is vital to build and support networks like this and the 30% Club in Hong Kong, which runs its own initiatives and networking opportunities for aspiring women leaders in business.

The business case for gender diversity

Excluding women from leadership positions has been associated with poor investor outcomes. For example, a recent study from Morningstar found that companies without any female board members significantly underperformed, delivering average shareholder returns of 1.3% over a three-year period, compared with 6.0% for those with at least one woman on the board.3

Adding more women to boards or management is not guaranteed to bring superior returns. However, a lack of diversity makes it more likely that bias will be introduced into strategic decision making and lead to unintended consequences.

More diverse boards can reduce ‘groupthink’ in decision making, improving risk management and bringing the perspectives of a wider range of stakeholders. According to the Principles for Responsible Investment, more diverse management teams prove better able to address ESG risks, reduce incidents of poor conduct and show fewer incidences of over-investment and fraud.4

Engaging to catalyse positive change

In Asia as in the rest of the world, we will continue to engage with companies on the issue of gender diversity alongside our peers. While our access to Asian companies has improved markedly over the past decade or so, we have learned the importance of engaging with the appropriate executives and of building trust and relationships in order to enjoy meaningful dialogue and achieve better outcomes.

Rapid progress is possible. For example, we have been positively surprised by recent success in Japan, where we have been engaging with companies on the issue for many years. Impax recently signed a letter promoting improved gender diversity in corporate Japan that was coordinated by the Asian Corporate Governance Association, and that was sent to the Japanese Financial Standards Authority and the Tokyo Stock Exchange. Soon after, in April 2023, the Japanese prime minister announced a goal for at least 30% of larger listed company executives to be women by 2030.

It has taken decades of hard work and engagement to achieve some success in terms of gender parity. Of course there is still a long way for Asian companies to go, but with many stakeholders – including investors, regulators and non-governmental organisations – pushing in the same direction, we believe the dynamics will improve in many markets over the next five years.

Ultimately, we believe those companies that embrace greater diversity will be better placed to navigate the risks and capitalise on the opportunities arising from the transition to a more sustainable global economy.

1 Our most recent review of the latest academic research into diversity and its impacts on financial performance, The business case for diversity: don’t drain the talent pool, was published in November 2022.

2 MSCI, 2022: Women on Boards – 2022 Progress Report

3 Morningstar, 2021: Is Performance and Gender Diversity Linked? Morningstar’s gender diversity data covered the UK, the US and Canada #

4 Principles for Responsible Investment, 2022: Diversity, equity & inclusion: Key action areas for investors

Nothing presented herein is intended to constitute investment advice and no investment decision should be made solely based on this information.  Nothing presented should be construed as a recommendation to purchase or sell a particular type of security or follow any investment technique or strategy.  Information presented herein reflects Impax Asset Management’s views at a particular time.  Such views are subject to change at any point and Impax Asset Management shall not be obligated to provide any notice.  Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary.  While Impax Asset Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein.  No guarantee of investment performance is being provided and no inference to the contrary should be made.

MSCI and its affiliates, third party sources and providers (collectively, “MSCI”), makes no express or implied warranties or representations and shall have no liability whatsoever with respect to MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

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