Board diversity is a source of financial outperformance and helps to create sustainable value; and, while women’s representation on the boards of companies is increasing, geographic variances remain marked, according to a recent study.

The study published by BNP Paribas Asset Management (BNPP AM), its second annual survey, compares more than 3,000 companies in which it invests with around 17,800 listed companies included in the Institutional Shareholder Services (ISS) database, as of end-December 2022.

Women hold, on average, 27% of board seats at companies in which BNPP AM invests, an increase of two percentage points from 2021 (25%), which compares with an average of 20% for companies in the ISS database, also two percentage points higher than in 2021 (18%).

Geographic differences remain marked, with Europe, South Africa and Australia coming out as the most advanced in terms of board parity, although all regions are improving.

Within BNPP AM’s portfolios, the most notable changes were in Asia and Latin America, both rising from 12% to 14%, as well as in North America (up from 28% to 30%) and in Europe (up from 34% to 36%). There were similar trends within the broader ISS universe, where the most significant increases were in South Africa (up from 28% to 32%) and Australia and New Zealand (up from 26% to 30%).

Nonetheless, national disparities remain. Within Europe, the trend is positive in France, with an average of 44% of board members being women at investee companies, compared with 40% for the ISS universe. Norway (40%) and Italy (41%) also stand out, compared with ISS averages of 40% and 38% respectively.

In North America, investee company female representation levels in both Canada (33%) and the United States (30%) are substantially higher than for the ISS universe (27% and 23% respectively), notably due to BNPP AM’s strict voting policy. 

In contrast, investee company rates in Asia are generally lower, although Malaysia (28%), Singapore and India (both 19%) compare favourably with Hong Kong (16%), Japan (13%) and Indonesia (8%).

“Geographic differences should be viewed in the context of economic, socio-cultural and regulatory factors,” says Michael Herskovich, BNPP AM’s global head of stewardship. “Companies with large market capitalizations tend to integrate diversity issues more easily than smaller companies. Similarly, the existence – or absence – of legally-imposed quotas, as we have recently seen in Europe, also impacts the growth of female board membership.”

The European Union directive adopted in November 2022 requires all large companies listed on EU stock exchanges to take measures to increase the presence of women in leadership roles and at board level by July 2026.

“Investors have a crucial role to play in increasing female board representation, by both expressing their position through voting and intensifying dialogue with issuers,” Herskovich concludes. “Although regional differences remain, we are nonetheless very pleased with the progress that has been made, demonstrating greater consideration of diversity issues globally.”