It's not just investors who care about gender diversity, job seekers do too

The business case for a gender diverse workforce is well established but we’ve recently learned at HESTA just how important gender diversity is for many jobseekers too – particularly Gen Z women.

Analysis of Seek's Laws of Attraction data show that when focussing on company reputation as a driver of attraction,?almost three-quarters of Gen Z women say diversity in the workplace is a must. Women in leadership also ranks highly, with nearly 2 in 5 saying it’s a “must have” and differentiates potential employers.

In many conversations I’m in, there are talks about the tight talent market; there’s not a CEO in the country right now who doesn't have the talent challenge at the top of their to-do list. We’re all being forced to rethink how to attract and retain the best people.

Diversity is becoming a competitive edge; people view a company with gender diversity as future-focused, and not one stuck in the past when it comes to what makes a great leader.

There is a lot at stake because those companies that fail to prioritise gender diversity, and foster an inclusive culture, risk missing out on this next wave of talent who are going to be tomorrow’s leaders. The growing body of evidence suggests if companies get diversity right it can mean better long-term performance that can help improve the value of our members’ investments. And contribute to a stronger, more productive economy for everyone.

So how can we ensure that the role of women in the workplace and in society is central to efforts to rebuild economies in the post-COVID era, and that women do not fall further behind?

Our approach to gender diversity at HESTA is firmly based on our mission to make a real difference to our members’ retirement outcome. As an employer we’ve long seen the benefit of diversity in building high-performing teams and a strong organisation. As a large institutional investor, diversity at both board and senior management levels is an accurate indicator of a well-run company, more likely to deliver long-term value to shareholders and better long-terms returns for our members.

The research backs this up. The seriousness with which investors view gender diversity is escalating. Realindex Investments’ 10-year global study of 2500 businesses shows a strong correlation between female executive participation and company returns. The research found that?investors targeting companies with greater gender diversity in executive and senior management positions stand to make higher returns – in some cases up to as much as four per cent.

We want to ensure the companies we invest in have the diverse leadership needed to make balanced decisions so our members can directly benefit from this ‘diversity dividend’.

The good news for investors is that disclosure requirements in Australia are ensuring companies report annually on the percentage of women at both board and senior management levels. While we’re still wanting to see more when it comes to transparency, it’s helping give investors a far clearer picture of the companies leading the way and those that are lagging.

What is HESTA doing about gender diversity?

One of the things I love most about leading my colleagues at HESTA is the purpose-driven culture we’ve worked hard to establish. There’s a focus right across the organisation around how we can drive meaningful change and how each of us can make a positive impact for our members.

One of the ways we hope to drive change and put a spotlight on gender diversity is through 40:40 Vision – an investor-led initiative HESTA founded to achieve gender balance in executive leadership by 2030.

Launched in October 2020, there are 26 current signatories – those companies who’ve publicly committed to achieving 40% male, 40% female and 20% other in their executive teams by 2030. This is impressive and a truly wonderful achievement. But we want to set the bar high and our ambition is to have all ASX 300 companies shift from talking about improving gender equality to backing that with measurable action.

As investors we want to back companies and their leadership to deliver on their commitments. But we want this commitment to be numerical, time-bound targets and be backed by transparent annual reporting on progress.

As we approach the second anniversary of the launch of 40:40 Vision, I don’t want to take anything away from what the investors who support 40:40 Vision, who collectively manage more than $6.3 trillion, have achieved. But we all know there’s still a lot more that needs to be done. The pace of change is still too slow. If we continue at the rate we’re going, it will take 65 years or until 2086 before women make up 40% of roles in executive leadership teams. As investors, we’re not prepared to leave that potential long-term performance on the table.

Part of the challenge is too few women in line roles, resulting in an insufficient pipeline of talent to increase the proportion of female CEOs and executive leaders. Data from Chief Executive Women’s 2021 Census shows 62% of ASX 300 companies having no women in line roles. Further exacerbating the problem, only one in 23 ASX 300 CEOs appointed last year were women. There are only 18 women CEOs across the entire ASX 300.

Progress needs to accelerate. We live in an increasingly complex world with many competing priorities. It’s the businesses that harness the power of diversity to strengthen decision making that will thrive in this uncertainty. We’ve started where we thought we could achieve the greatest change – gender diversity. But we know there’s a bigger conversation to be had around diversity more broadly and how an inclusive culture underpins flexible, adaptable organisations. But we’re witnessing, as we emerge into a post-pandemic world, the very real risk that the hard-won advances in gender equality are being reversed. Achieving greater equality and opportunity for half the world’s population is a goal that won’t wait. There’s far too much at stake.