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It is clear from reading the headlines and checking the research that, in spite of significant efforts, progress toward gender equality in corporate America has been very slow. What can be done to move the needle? Bloomberg is betting that viewing the issue through a data-driven lens has the potential to drive change, increase shareholder value and improve the economic well-being of women and communities around the globe. It is for this reason that, earlier this year, Bloomberg launched its Financial Services Gender-Equality Index (GEI), a reference index that measures gender equality in the financial services industry.
We had the pleasure of interviewing Angela Sun, Bloomberg’s Head of Strategy and Corporate Development – and principal architect of the GEI – on the day that Bloomberg released its survey for the 2017 GEI. Join us as we learn more about the motivation behind the index and why Ms. Sun is bullish about the GEI’s significance on Wall Street and beyond.
Parts of this interview have been edited for clarity.
Paolo Gaudiano And Ellen Hunt: What led you to create the GEI?
Angela Sun: I sit on the Board of Trustees of Women’s World Banking (WWB), the largest global network of microfinance institutions and banks that focuses on women’s inclusion in financial services and the economic empowerment of women. During one of my conversations with Mary Ellen Iskenderian, the President and CEO of WWB, we discussed how there is a dearth of hard data around gender equality. We thought that in the same way that people focus on the Dow Jones Sustainability Index, which has gained traction over the past 15 years, there ought to be an index that benchmarks where companies stand on gender issues. We thought that this made perfect sense for us: Bloomberg is founded on principles of transparency and providing access to data and analytical tools. We are experts at gathering data, standardizing it, normalizing it and then adding analytics on top.
We saw that our clients – investors – were increasingly looking at Environmental, Social and Governance (ESG) data to evaluate a company’s value, reputation and performance. The whole sector around socially responsible investing really started in the early 70s: Pax World created the first Socially Responsible Investing (SRI) fund and when you look at investor demand over the past 40 years, demand for it has grown significantly. Standard setting, starting with the Global Reporting Initiative in 1977 and then the UN's Principles for Responsible Investment (PRI) established in 2006, has fueled this growth. Today there are over 1,500 members in PRI with roughly $62 trillion in combined assets, and approximately one in every six dollars is invested in SRI.
The bottom line is, where investors are paying attention, companies are paying attention. And Bloomberg needed to be a part of that. So we launched the GEI earlier this year.
Gaudiano And Hunt: How does the GEI differ from other indices that focus on Socially Responsible Investing?
Sun: Much of the conversation around gender quality comes from an ideological standpoint. The innovation here is the index itself, and its data-driven approach.
The GEI collects data from financial services firms in four areas. First is gender statistics. We are looking to track how companies demonstrate their commitment to Diversity & Inclusion in the workplace, which includes Board, management and overall workforce by gender.
Second, we look at company policies. Which policy goals are set to maintain and improve a diverse working environment and to promote women professionally, including gender-neutral family support, retention, mentorship programs, flexible work practices and parental leave?
Third, we look at community engagement and whether companies publicly support women in various ways, including sponsoring external education programs, supporting gender equal legislation or supporting organizations that advocate for gender equality.
And last, we probe about product offerings. This category demonstrates full commitment beyond a company’s own employees. We are looking to see how committed a company is to women’s empowerment, which includes for example creating financial resources and opportunities for women clients and women-owned businesses. These are the initiatives that promote economic growth throughout communities and families.
Gaudiano And Hunt: Can you explain how you selected the companies for inclusion in the GEI and how calculated the scores?
Sun: For the 2016 GEI, we sent out the survey to about 100 firms that met our eligibility criteria: they had to be in the financial services sector, including asset management, banking, specialty finance, institutional financial services and insurance. They must be publicly traded on a U.S. exchange, with a market cap of at least $15 billion.
In terms of deriving a GEI score, we give points for disclosure by answering the questions. Extra points are awarded for best-in-class answers. The index uses a modified market cap-weighted model by multiplying the company’s current market cap with its Bloomberg GEI score. The membership weights are rebalanced quarterly.
The 2016 index included 26 inaugural members.
Gaudiano And Hunt: And how did the companies in your 2016 Index fare, compared to other companies across the financial services sector, or even across all industries?
Sun: When we look at the statistics for financial services firms in general, the percentage of women on boards stands at 12%. For GEI members it’s much higher at 26%. Further, in viewing the percentage of women in the workforce we see that GEI members have already achieved parity. That is, they stand at 50% workforce representation, while women represent only 36% of the workforce within the Bloomberg World Index [Authors' note: a sector-neutral global index maintained by Bloomberg]. However, another salient finding is that the number of women at the executive level is only 14% for GEI members vs 12% within the Bloomberg World Index, showing that while financial services firms in the index may be ahead of the market in overall workforce parity, the challenge of promoting women up the ranks is even more acute proportionately—women are either not being promoted or they are dropping out voluntarily.
Gaudiano And Hunt: You mentioned that you are expanding the universe of eligible financial service firms for the GEI. How has your thinking evolved on this?
Sun: From the outset, we decided to take a global lens on gender equality. First of all, this is Bloomberg and we are a global company. And second, we wanted to be able to capture regional differences. The hypothesis was that we’d find that the Europeans would be more progressive in their gender practices than the US and Asia. For example, Scandinavians are more progressive and generous with parental leave. What surprised us was that while they are progressive, the US and North America far out-indexed them in fertility and in education benefits. We also noted regional differences in the focus on issues to support women. For example, in Scandinavia they are focused on “returnship;” in Asia it’s elder care; in Australia it's child care; and in the US it’s parental leave and fertility. By keeping the GEI focused on financial services only, we are able to make these kinds of pure peer-to-peer comparisons and get insights into the interplay between legislation and corporate policies.
In terms of building the index, we initially contacted the largest financial institutions because we believed that once they participated then everyone else would take note. With our first year behind us, we are now opening the eligibility for the index to the top 400 or so global firms by decreasing the market cap threshold to $1 billion. The thinking behind this is that a lot of financial innovation and getting more women into formal banking services is happening at a regional level, and we wanted to make sure that we caught that shift.
Gaudiano And Hunt: What is driving demand for this type of data, specifically this focus on gender diversity?
Sun: Let me give you some data points on demand. I was in Copenhagen a few weeks ago for a meeting with the Scandinavian banks and the banking association there. I made a presentation to the Danish Diversity Council and I showed the group a chart on investor SRI demand. An interesting note here is that while there were people from HR, the key participants were treasurers, investor relations people and country managers. Why? Because when shareholders care, Boards have to listen and management needs to respond.
While it has been anecdotal that women and Millennials are the largest investor groups that asset managers are courting today, the following data makes their interest in SRI and diversity clear. When you look at the breakdown in terms of the percent of ownership or interest in SRI, females outweigh males. Women are expressing a very strong interest in wanting to align their investments with their values. And when you look at demand by demographics, specifically by age, you see that today 28% of Millennials own SRI funds and another 57% have expressed interest in ownership. And for women, 15% own SRI funds and 38% are interested. This represents a commanding share of wallet that asset managers cannot ignore.
And last, another investor group, high-net-worth individuals – those with $10-plus million – tripled their SRI investments in just one year since 2015, moving from a 9% allocation to 27%! By introducing the GEI when we did, we will be able to help investors determine how and why gender diversity impacts performance.
Gaudiano And Hunt: Do you see signs that society as a whole is starting to embrace gender equality?
Sun: Yes. For one thing we can look at politics, where there are more women in positions of power and leadership: Merkel, May, Sturgeon, Park, Yellen, and possibly Clinton.
You can also see the shift in popular culture: the recent movie, Equity, where Anna Gunn plays a senior investment banker who has to contend with institutional sexism on Wall Street. There hasn’t been a movie about Wall St. with a woman in a leading role since Working Girl in the late 80s. And usually they are shown in secretarial or more compromised roles, never as a lead or as a protagonist.
Gaudiano And Hunt: And what about you personally? How has your work on GEI intersected with your personal life?
Sun: When we launched the index, there were more than 200 people in attendance, with equal parts investors, corporate clients, Diversity & Inclusion and HR representatives, and people from the ESG field. Both Mike Bloomberg and Peter Grauer, Bloomberg's Chairman, participated: Mike opened, Peter closed. I introduced them, and presented the GEI.
The launch also had a personal undercurrent for me: in a twist of irony, I was there taking a break from maternity leave to talk about gender equality! That put into sharp relief why these GEI issues matter. It matters where your company puts its commitment, whether it’s borne out in statistics or in the policies that show a commitment to a diverse workplace.
As a new mom to a baby girl, Avery, who was only three months old at the time of the launch, the index had become more meaningful to me than when I had pitched it a year ago. At the Bloomberg event, I shared a story about how I didn’t have our baby nurse for the one week leading up to the GEI launch. As I was getting ready to join a conference call on the index, Avery exploded in a fit of tears. Being unsuccessful at consoling her, I took a selfie of us, with her mouth wide open, howling, and sent it to my husband, with the caption: “GET HOME RIGHT NOW.” And that’s gender equality. It’s emblematic of what working parents have to contend with and why it matters to have companies that support them.
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In creating the GEI, Bloomberg set out to create a platform that expands the diversity conversation beyond HR, to engage all parts of a business. The focus on data and performance across four key areas is a welcome evolution from the more ideological approach seen in other indices, and it reflects Ms. Sun’s observation that “when shareholders care, Boards have to listen and management needs to respond.” And that, we would agree, is the real point of leverage for moving the needle.
