The female economy represents the world’s largest and fastest-growing market. Yet, the financial services industry remains slow to leverage it. Bringing women to the forefront of banks’ leadership teams is not just about equality, but about better achieving business and development goals.
A growing wealth of research is highlighting the need for more women in banking. Policies that envisage a larger percentage of women at the bank management level allow for “more efficient fulfilment of environmental objectives”, the European Central Bank (ECB) reported in 2022.
The bank says women-led firms give rise to better environmental, social and governance metrics. Also, firms with a greater representation of women in leadership positions were found to be more likely to adopt environmentally friendly practices.
According to the research, banks with women at the helm lend less to big polluters, too. Finding an inverse relationship between banks’ lending volumes and firms’ pollution intensity for boards with more women, the ECB reported that banks with larger proportions of female directors (above 37%) displayed about 10% lower lending volumes towards firms with relatively high pollution intensity.
Trust in female leadership
But opinions differ about the strength of women-led firms. For the past five years, the European Investment Bank (EIB) has conducted annual climate surveys to better understand international perceptions of climate change.
In its most recent 2022–2023 EIB Climate Survey, one question looked to ascertain levels of trust in female leaders. The survey asked whether work to mitigate climate change would be more effective if women leaders had greater political roles.
Opinions differed sharply between men and women. Across all regions surveyed (EU, UK, US, China, the Middle East and Africa), men were more likely to question the impact of female leadership on climate action.
The EIB reports that less than half of men surveyed in the EU thought that having more female leaders would make a difference, compared to 60% of women. In the UK, 61% of women responded that women leaders would tackle climate change more effectively, but only 38% of men believed the same. Clearly, gender biases continue to hold women back, as illustrated by the Financial Conduct Authority’s recent guidance aimed at mitigating harmful workplace cultures.
Targets or quotas?
But supporting women’s advancement is still a challenge. Last year, the EU issued a new directive to boost women’s participation in senior roles. Across listed companies, it stipulates that women must hold at least 40% of non-executive director positions, or 33% of total director positions (non-executive and executive) by 2026.
At the board level, some banks are already hitting these targets. For example, in DBRS Morningstar’s September 2023 sample of 63 European banks, women represented 38% of board positions in 2022 — above the 33% target that EU member states must reach within three years. Gender parity at the executive level, however, has not progressed as much.
DBRS Morningstar suggests that national gender quotas — which have mostly focused on representation at the board level — should be expanded to include senior leadership roles as well.
Use metrics, set a goal, make an objective, and then you will make progress.
European Women on Boards (EWOB), a Brussels-based not-for-profit promoting gender equality in decision-making, lobbied for the EU’s new gender balance directive to be brought into force after a decade of delay. EWOB CEO Kristen Anderson says relying on countries’ and banks’ voluntary methods alone is not enough.
“The word ‘quota’ has got a lot of negative connotations for some,” Ms Anderson says. “But a business would not spend €20m on a new product and just say ‘do it whenever you have time, I’m not going to ask you how it’s going and I’m not going to have any goals or measure anything’. Diversity is the same: use metrics, set a goal, make an objective, and then you will make progress,” she continues.
BNP Paribas opted for numerical targets instead of quotas, says Caroline Courtin, head of diversity and inclusion at the French bank. This method has proved successful: in 2015, BNP Paribas had just 5% of women at the executive committee level. Today, that figure stands at 33%. This reflects changes in French legislation, which now requires companies to increase the share of women in senior executive roles to more than 30% by 2028 and 40% by 2031.
But these targets are still only the first step. “Having numerical goals is not sufficient on its own; it must be supported by a robust plan. In that plan there needs to be a succession plan and a strong pipeline, detailing all of the action required. Without this, you cannot reach the objective,” Ms Courtin says.
Leadership on boards
Improving gender diversity relies on committed leadership, accountability and metrics, and engagement at all levels, Ms Anderson says. “It doesn't necessarily have to be the CEO, of course, but someone that has visibility and is vocally saying ‘this is important, this will happen’,” she says.
Norwegian bank DNB has both a female CEO and a senior leadership team made up of at least 40% women. Viktoria Ytterland, head of people development at DNB, says gender equality, and the work culture required to support it, is the norm within the bank.
“It has been important to me to have great female role models and female executives in DNB,” Ms Ytterland says. “Women are at every management level — CEO, [chief financial officer], even the chair of the board, and so on — we have a lot of great role models internally.
“I have worked at the executive level within DNB for five years. We breathe [gender diversity],” she adds. “It’s just a part of DNB’s cultural journey.”
Diversity targets must not be viewed as solely the purview of the human resources department, Ms Anderson says. Employee resource groups or affinity groups — typically groups that work on certain areas of culture change to develop inclusion — can enable a “wave of change”, she says. “Once the wave gets going, it’s pretty much the momentum that can carry a lot of change.”
Still, the Official Monetary and Financial Institution Forum’s Gender Balance Index 2023 estimates that it could take more than a century to achieve parity between men and women in governor or chief executive positions at central banks and financial institutions.
It is clear that robust gender strategies are essential to attract, retain and promote female talent, which, in turn, ensure firms’ long-standing economic performance and climate resilience. While the EU directive is not going to solve all of European banks’ gender inequality issues, Ms Anderson says, it can be the first, crucial step in making progress.
