BlackRock’s ‘sweet spot’

Having indicated that it would back away from talking about sustainability issues at the beginning of the year, BlackRock has come roaring back with a report that declares gender diversity is a winning ingredient for successful companies.

The report says: “There is an intermediate ‘sweet spot’ on the women’s representation spectrum that matters for performance.

“In other words, it is diversity that counts, rather than the dominance of women or men.

“Neither under-representation nor over-representation of women—or men, for that matter—is optimal.”

The report, Lifting financial performance by investing in women, adds that female representation tends to “deteriorate” further up the career ladder “to the detriment of performance”.

A “persistent” glass ceiling is making it difficult for women to reach “the very top rank”, BlackRock argues. Importantly for a fund manager, it also concludes: “Investing in companies with more women-friendly cultures may help boost performance”.

BlackRock calls for “better disclosure” of representation to “help improve understanding of the financial linkages.”

Tom Gosling, executive fellow at London Business School, warns the BlackRock report will be subject to criticism, such as doubts about whether the representation-performance relationship is “correlation or causation”; or whether there are variables missing from the calculations.

Gosling reckons other studies that conclude that “demographic metrics” for performance have “poor” predictive power are more reliable.

“There’s a danger of studies of the type published by BlackRock being used to justify fairly blunt stewardship initiatives on diversity, based on the ‘add diversity and stir’ approach.

“But the real insights, performance benefits, and improvements to women’s working lives, are likely to be found in the more complex areas of culture and inclusion.” BlackRock’s next research brief has been written.

On the whole

The UK’s governance watchdog has published help for companies to improve their “materiality mindsets”.

No, this isn’t some new hot yoga mindfulness approach from the Financial Reporting Council, but a serious effort to assist companies to identify the “material”—more important—issues that companies should be reporting.

Mark Babington, executive director of regulatory standards at the FRC, says: “Given the complexity of some corporate reporting, companies should look holistically when deciding what information to give their stakeholders.” We can sense corporate reports healing already.

Capital suggestion

A timely reminder this week from Board Agenda’s favourite business boffin Alex Edmans that “growth” is not only about numbers on the bottom line.

Speaking at the annual meeting of the World Economic Forum’s Global Future Council in Dubai, Edmans said: “Growth is critical to increase social welfare and contribute to human flourishing, but we need to recognise that growth can be in many different types of capital.

“You can have growth in physical capital, but there’s also growth in human capital. There’s also growth in natural capital, such as environmental preservation and restoration. And finally, growth in financial capital, allowing people to save for the future.” Now that’s an idea that could, er…, grow on you.