The Financial Conduct Authority (FCA) has been actively promoting gender diversity in the financial services sector since the launch of the Women in Finance Charter in 2016. The FCA has set targets to increase the representation of women in its own senior leadership team, aiming for gender parity by 2025. In fact, as of March 2022, the FCA has already reached 46.5% representation of women in senior leadership positions.
In a recent speech by Emily Shepperd, the FCA's Chief Operating Officer and Executive Director of Authorisations, the importance of culture in regulated firms was highlighted. The speech emphasised the need for a cultural shift in the financial services industry to meet regulatory expectations. With the draft rules for diversity and inclusion expected to be released this quarter, it is clear that the FCA's interest in this area will extend beyond mere interest and become part of the regulated landscape.
What has the FCA already done within the sector to promote not only gender diversity but gender balance?
To promote gender diversity and gender balance, the FCA has taken several actions within the sector. The FCA's work on culture and governance includes a focus on diversity and inclusion, particularly in senior management and board-level positions. The FCA's impact studies have shown positive benefits in areas such as healthy working cultures, innovation, and risk management resulting from diversity and inclusion.
The FCA has also introduced new Listing Rules that require companies to include a statement in their annual financial reports regarding whether they have met specific board diversity targets. These rules apply to UK and overseas issuers with equity shares on the FCA's official list, including closed-ended investment funds and sovereign-controlled companies. The targets include having at least 40% women on the board, at least one senior board member being a woman, and at least one board member from a minority ethnic background.
Under the new Listing Rules, companies are required to either comply with board diversity targets or explain if they have not met them. This comply or explain approach, encourages transparency and accountability, prompting companies to take action towards improving gender diversity. It fosters a culture of open dialogue, sharing best practices, and working towards a more inclusive and diverse financial services sector.
The initial results of these disclosures will be seen in annual financial reports published from the second quarter of 2023. The FCA has provided flexibility to companies in collecting the data, aiming to mitigate privacy and data protection concerns. The rules will be reviewed within three years to ensure their appropriateness and ambition.
What progress has been made across financial services and the wider business landscape?
Progress has been made in gender balance at board level, as shown in the FTSE Women Leaders Review published in February 2023. Women held 40.5% of FTSE 100 board positions (a slight increase since 2021), but there are still 7 companies that have not achieved the 33% target. For FTSE 250 companies, women held 40% of board positions (an increase of 3%), but 24 companies have not reached the target. The increase in signatories for the Women in Finance Charter also indicates a growing acknowledgment within the sector of the importance of gender balance.
Further, a Boardroom Monitor by EY in January 2023 revealed significant improvements in female representation on the boards of major European financial services firms. The sub-sectors of Banking, Insurance, and Wealth Asset Management saw notable increases, reflecting the broader impact of diversity and inclusion. EY also found that gender diversity at the board level significantly influenced the investment decisions of 44% of European financial services investors.
What can financial services employers do to promote gender diversity and gender balance?
To promote gender diversity and gender balance, financial services employers can take various initiatives aligned with the Women in Finance Charter:
- Set specific and measurable targets for diversity and inclusion.
- Review and revise recruitment and promotion processes to promote equal opportunities, such as using anonymised CVs or considering more general skills rather than specific experience.
- Establish internal support networks and mentorship/sponsorship programs for underrepresented groups.
- Conduct regular equal pay audits and salary reviews to ensure fair pay practices.
- Engage with external initiatives like the Women in Finance Charter by signing up and actively participating.
In conclusion, the FCA has been actively promoting gender diversity in the financial services sector, both within its own ranks and across the industry. With targets, new Listing Rules, and ongoing efforts, the aim is to achieve better representation of women in senior positions and foster a more inclusive culture throughout the sector.
As the financial services sector eagerly awaits the release of the draft rules for diversity and inclusion, it is crucial for financial services employers to closely monitor their diversity and inclusion practices. The upcoming regulations are expected to further emphasise the importance of gender diversity and inclusion and are likely to shape the future regulatory landscape of the industry. By staying informed and proactive, FS employers can position themselves at the forefront of promoting gender balance and creating a more equitable and inclusive financial services sector.
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