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Female fund managers get more alpha

During most of the three decades that I have written for the FT, I have become wearily accustomed to the fact that finance was a male-dominated world. But when we launched Moral Money in 2019, I had a pleasant surprise: this sector is full of women in leadership roles, either running sustainability departments at banks (like Marisa Drew at Standard Chartered), or sustainability-linked funds (like Afsaneh Beschloss at Rock Creek) — or non-profit groups (like Mary Schapiro at the Glasgow Financial Alliance for Net Zero).

Why? A cynic might suggest that ESG-linked themes used to be viewed as a marginal niche — and thus the Alpha (or Beta) men who run banks and companies were happy to cede that space to women. A less cynical view is that women spotted the importance of ESG early on because they are less prone to the type of tunnel vision that has marked (and marred) the testosterone-fuelled world of traditional finance. Either way, one interesting question to ponder, as the world marks International Women’s Day, is whether this gender skew continues now that ESG has gone mainstream. Another is whether women-led funds really do outperform the male-dominated ones. See our story below, and tell us what you think.

For some gender-neutral news, check out our tale about China and coal as well. And then take note of two breaking stories we will return to next week: the EU has just unveiled its response to the US’s Inflation Reduction Act; and Apple will face five shareholder proposals at its annual general meeting today on racial and gender pay gaps, civil rights and its supply chain in China. The vote could set the tone for ESG disclosure efforts at other companies — so watch this space. (Gillian Tett)

Hire women, boost returns

Diversity can pay, according to Willis Towers Watson, which advises on $4.7tn (£3.95tn) in assets.

Fund management groups that hire more women achieve bigger returns than the most male-dominated teams, it found in research published this week.

Teams in the top quartile for the proportion of female staff outperformed those in the bottom quartile by nearly half a percentage point each year on average, equivalent to an extra 4.6 per cent every decade.

The adviser analysed performance data net of fees, relative to a relevant benchmark for each fund, for 1,500 fund management teams around the world from 2018 to 2022.

“At its simplest it’s this idea of cognitive diversity, the belief that more diverse investment teams will make better decisions, be more flexible, more adaptable,” said Chris Redmond, head of manager research at WTW.

However, the survey found that asset managers still have a long way to go in promoting women — teams where fewer than a third of people were women still made it to the top quartile for gender diversity.

In an effort to bring about change, WTW has threatened to remove its coveted “preferred” rating from asset managers if they do not show progress against diversity goals they set themselves, which include stronger parental leave policies and data disclosure, by 2025.

This could lead to fewer WTW clients — such as pension funds — investing their money through the offending institutions.

Fiona Manning, a fund manager at London-based Premier Miton, which has £11.1bn under management, is preparing to launch a sustainable emerging markets fund next month alongside a male colleague — a perfectly balanced albeit tiny team.

Diversity of thought, not gender, was the key to chasing returns, she said. “Today the focus is on gender because perhaps it is easier to access and understand but you could broaden that discussion out to ethnicity, educational background, neurodiversity.”

Women could bring a more patient focus on “consistency of returns” over the long run, which might be why sustainability funds, which invest over a longer timeframe, were noticeably more female, she said.

Another reason is that sustainability was considered less glamorous in the 2000s. Now, female asset managers are reaping the rewards of having been disproportionately pushed towards this space in the past, “with a lot of women who perhaps ended up shunted into the less glamorous areas of financial markets and asset management”.

Research suggests the gender premium could apply more broadly across the economy.

The European Banking Authority said this week that a sample of lenders and investors with more gender diversity in executive director positions had a 7.9 per cent return on equity compared with 5.3 per cent for all-male teams. (Kenza Bryan)

China emphasises coal to prioritise energy stability

China’s president Xi Jinping, centre, with premier Li Keqiang, right, and standing committee chair Li Zhanshu, left, at the opening session of the National People’s Congress in Beijing © REUTERS

The world’s largest carbon emitter delivered a blunt energy message at China’s National People’s Congress this week: coal would continue to be a key piece of the country’s energy mix.

Nikkei Asia’s analysis shows that Premier Li Keqiang used the term “energy” 14 times during his speech on the government work report — up 17 per cent from last year’s version. The most frequent keyword, “stability”, was used 33 times, confirming Beijing’s priority is to bring balance and strength to its economy battered by the Covid-19 pandemic. “We leveraged the role of coal as a major source of energy,” the report said.

Li Shuo, Greenpeace’s global policy adviser in east Asia, told Moral Money that he expected to see “a jaw-dropping speed of renewable deployment and further coal plant approvals at the same time”. He also warned that it would pose the ultimate question for the Asian country: how does the world’s second-largest economy reconcile its vision of carbon neutrality with more coal power projects?

President Xi Jinping announced in 2020 that he would lead his country to hit peak emissions before 2030 and achieve carbon neutrality by 2060.

In the NPC’s presentation, Premier Li reaffirmed to the world that China was still on the path of green transformation, despite its use of coal in power generation. “We must improve policies to support green development, develop a circular economy, promote resource conservation and efficient utilisation, push energy conservation and carbon reduction in key areas, and continue to fight the battle to protect our blue skies, clear water and pure land,” he said.

While China’s renewed green transition vow might be good news for the environment, its dominance in the renewable industry has raised another concern.

China exported a record amount of solar products last year, according to data from Chinese industry groups. More than half of exports went to Europe as the bloc raced away from Russian gas. China has the most extensive supply chains in the solar industry — accounting for more than 80 per cent of the global share in all solar panel manufacturing stages, the International Energy Agency said.

While many efforts to produce domestic renewable energy-related products are under way in Europe and the US, it may take time for the west to reduce its reliance on Chinese products.

Meanwhile, all countries which are seeking energy security in the turbulent geopolitical environment had hard choices to make, whether it was between foreign versus domestic production, or coal versus renewable, Li at Greenpeace told me. (Tamami Shimizuishi, Nikkei)

Smart read

Germany has thwarted the EU’s plans to ban cars with internal combustion engines by 2035, setting “a terrible example to other countries tempted to hold legislation hostage to national interests”, the FT’s editorial board has written following last week’s news of the German efforts. This development “also threatens the credibility of Berlin on the green transition, and that of the EU”.

Read the full article here

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