More women in finance: more stability and better returns

By Natasha Narsingh, Head of Absolute Return at Sanlam Investments

More women in finance = more financial stability. In 2009, McKinsey published a study post the 2008 global crisis, which found financial organisations with three or more women leaders scored the highest for ‘leadership’ and ‘direction’. This proved true during the pandemic, too, with women’s transformational leadership coming to the fore, with risk aversion proving key to disaster preparedness. These attributes make women assets to any industry, especially the financial services sector, where they remain grossly underrepresented at leadership levels. Having fewer women representation in key investment and decision-making roles is a risk in itself.

Research by Catalyst (2019) found that although women represent more than half the financial services industry in many countries, their global representation on executive committees in major financial firms was just 20% (in 2019), and they accounted for just 13% of CEOs in firms in alternative investments, like hedge funds (2018). This rings true for my journey. I’ve spent much of my time as a lone lady, especially in my earlier years as an equity analyst.

I specialised in analysing mining, oil and paper companies and headed up the mining team. Back then, women were a ‘rare commodity’ at the table. And, 20 years on, there are still too few women in the industry, especially in top leadership positions. Since 2009, I’ve helped to grow Sanlam Investments’ Absolute Return unit from a little-known entity to our current setup, where I manage about R40 billion in assets under management, with R36.5 billion in the absolute return space. I also singlehandedly manage the SIM Managed Solution Fund range, a set of low-to-high risk-profiled multi-asset global funds. I’ve seen other industries make great leaps in terms of progress to parity. But the finance sector seems to remain predominantly the domain of men.

It’s difficult for women in this industry. There is this constant pressure to prove oneself. It also has a lot to do with the sheer intensity of the job. I happen to work for an employer that prioritises parity and champions women. But that’s not the norm. The same study by Catalyst shows that women are less likely to be promoted in our industry. Harvard Business Review (HBR) found that many women tend to leave the world of finance right when their male peers push for promotions. HBR attributes this partly to the work environment and a lack of women role models in top positions.

What women bring to the table

Thrive Global speaks to the fact that more women in finance catalyse greater financial stability. It references a 2018 story by the World Economic Forum that shows that including more women at every touchpoint in the financial system – customer and firm side – makes the banking industry more stable. This means more resilient banks and better returns for all stakeholders.

Many studies show that including women at the top = better return on equity. Women tend to be more risk-averse, which often means improved risk management. The Guardian did a series of studies that show that women make better financial decisions based on risk than men do.

Thrive also points out that more than half of investors are women, so having more women in financial firms means a greater alignment with one’s client base. This benefits the bottom line. Warwick Business School’s 2018 study compared 2 800 investors in the FTSE 100 and found female investors outperformed their male counterparts by 1.8%. And the Peterson Institute for International Economics found that more women at the C-Suite level means net-profit margin increases of as much as 1%. More diversity of thought means greater creativity and innovation. And higher levels of motivation.

Finally, more women are likely to prioritise environmental, social and governance impact when considering investments. One study found that 73% of women chose to invest in companies that champion positive social change. This should be a major focus for firms – sustainable investing is certainly on the top of the agenda for Sanlam Investments.

Making the industry more inviting to women

These are some of the actions that I believe companies should take in their employee value proposition to propel women forward. It’s something we at Sanlam Investments are continuously working on.

1. Provide ongoing mentorship and sponsorship opportunities.
2. Create an inclusive culture. As soon as a woman joins a company, invite her to meetings, brainstorming sessions, and social events. Give her a sense of belonging from the get-go. This ideally should be led from the top.
3. Give equal opportunities. That means including women in important projects and deals. Women are highly competitive. Create the space for them to fly and contribute meaningfully.
4. Bring balance. Women carry most of the burden of care – whether this is childcare or looking after parents and other family members. The pandemic has amplified this. Flexibility is key. As is an output-not-hours performance focus that rewards people for the value they deliver, not the time they clock up. Women are natural multi-taskers. Trust them to work efficiently and productively, without being constrained by a 9 am -to-7pm day. And consider how to make it easier. Could an office include a childcare service, for example? An environment needs to allow people to adapt to the changing phases of their lives.
5. Engage female colleagues more. Ask women what they need to thrive – then listen. Men are better at speaking up and asking for what they want.
6. Revise hiring practices. Ensure HR’s policies eliminate unconscious bias to hire as fairly as possible.
7. Promote fairly. S&P Global Market Intelligence’s 2019 study of 6 000 companies in the Russell 3 000 Index, across 17 years, showed that 24 months after hiring a woman as a chief financial officer, companies’ profits went up by 6% on average, with stock market returns improving by 8%, compared to their male predecessors. Fair promotions mean better bottom lines.

Diversity isn’t a nice to have, it’s a business imperative. And it’s long overdue.