This commentary represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece may be subject to further revision. Contributions to SIPA for the benefit of CGEP are general use gifts, which gives the Center discretion in how it allocates these funds. More information is available at Our Partners. Rare cases of sponsored projects are clearly indicated.

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Several emerging markets and developing economies (EMDEs)[i] have taken policy steps in recent years to increase the share of women on companies’ boards of directors, which has the potential to impact the energy sector—historically a sector ranked low by this measure globally, and particularly in EMDEs.[ii] This momentum is noteworthy not only because of the diverse set of countries moving in this direction but also because of the different policy approaches underway. Since 2020, for example, EMDEs as diverse as Chile, Egypt, Hong Kong, Indonesia, Morocco, Pakistan, and the United Arab Emirates have adopted varying policies to increase the share of women on boards (see Appendix A, Table A1, for a full list of countries and types of policies).  

What is driving this policy momentum in EMDEs to incentivize and mandate more women on boards (WOB) of companies? The most common rationale cited by regulators from EMDEs is improvements in corporate governance, as studied in academic[iii] and industry[iv] research on the topic. Some regulators have referred to specific aspects of governance, such as overall better decision-making,[v] greater compliance, and lower corruption risks[vi]—the latter a challenging area for EMDEs, in particular those with extractive industries such as oil and gas. Better management of sustainability factors within companies[vii] and alignment with sustainable development goals have also been part of the rationale for mandating WOB.[viii] Another reason cited is pressure from local institutional investor associations,[ix] which coincides with some of the stated engagement positions of global investors about the effect of WOB on governance and long-term performance.[x] In some European EMDEs, mandates for women on boards are coming as a result of EU membership.[xi]

Has this apparent policy momentum in EMDEs made any difference? According to MSCI, a global financial data provider, women occupied 17% of board seats of publicly listed companies in EMDEs in 2023, slightly up from 16% in 2022 but significantly below advanced economies, in which women occupied on average about 33% of board seats in 2023, up from 31% in 2022.[xii] This gap between EMDEs and advanced economies has been increasing, not declining, over time, despite policy action in several EMDEs.[xiii] For energy companies, according to Bloomberg data, the share of women on boards of directors in advanced economies in 2023 was 25%, compared to 14% in EMDEs, lower-than-average levels across all industries as seen in surveys such as MSCI’s (see Appendix B, Table B1, for WOB averages reported in five different surveys).

Given the cited benefits that EMDE policymakers associate with a higher share of WOB, this commentary will look at women’s representation on boards in these countries’ energy companies, a sector associated with governance and sustainability risks. A closer look at companies in this sector reveals overall gaps between EMDEs and advanced economies that have also been increasing over time.

Share of Women on Boards in Energy and Utility Companies: EMDEs versus Advanced Economies

The energy sector, as Bloomberg categorizes it, comprises companies that operate in upstream oil and gas, refining and transportation, storage of fuel products, and natural gas and liquefied natural gas (LNG), as well as integrated oil companies and oil service providers. This sector also includes coal, nuclear, and biofuel companies. For a more complete picture of companies operating in the energy space, the author also analyzed the board makeup of utility companies, which comprise independent power producers, renewable electricity providers, transmission services, and electric and gas utilities. The author examined Bloomberg data on the share of WOB for 1,160 energy companies and 927 utility companies globally.

Before sharing results of this survey, it is worth noting that data on WOB is not comprehensive and therefore the findings in this commentary are estimates. As noted in the figures to come, only about 40% of the companies listed by Bloomberg as energy or utility companies above the market capitalization of $100 million used in this study have any data on board gender diversity. This could mean an overestimation of the representation of WOB. Further, only 33% of EMDE energy and utility companies had data. For advanced economies, about 42% of energy companies and almost 60% of utility companies did. The number of companies included in this commentary, however, is larger than in most general surveys that track WOB for all industries (see Appendix B, Table 1).[xiv]

Despite the data shortcomings, three takeaways are noteworthy:

1. The share of women on the boards of directors of energy and utility companies has been increasing globally, but that growth masks an important gap between advanced economies and EMDEs.     

Women occupied about 22% and 24% of the board seats of energy companies and utility companies, respectively, globally in 2023 (see Figure 1). Given that the average board size for energy and utility companies is about nine and ten directors, respectively, this means an average of about two women directors per board.[xv] However, those averages conceal important differences between advanced economies and EMDEs. Women’s share of board seats for energy and utility companies in advanced economies in 2023 was 25% and 32%, respectively, whereas in EDMEs they were about 14% and 16%. This translates to an 11- and 16-point gap, respectively. And while energy and utility companies from advanced economies have seen a 7- and 8-point increase, respectively, in the share of WOB during the latest five-year period, 2019–23 (inclusive), the share of WOB in EMDEs rose much less. As a result, the gap between advanced economies and EMDEs has been increasing.

• 2. National oil companies from EMDEs and coal companies globally exhibit the lowest levels of WOB among energy companies.

A closer look at the specific subset of companies that Bloomberg categorizes as belonging to the energy sector reveals that it is in integrated oil companies (present at all stages of the oil and gas production chain) where the largest gap between advanced economies and EMDE companies existed in 2023. At 34%, WOB share in such companies from advanced economies exhibits a 22-point gap with their peers in EMDEs. Most of the integrated oil companies surveyed from EMDEs are national oil companies, and they report 12% WOB, one of the lowest shares in the energy sector. This is all the more relevant in the context of an increasing focus on national oil companies given their growing share of oil, gas, and refining products and thus on their greenhouse gas emissions, part of the sustainability factors policymakers cite as reasons for raising the share of WOB.[xvi]  

Coal companies appear to have the lowest share of WOB in the energy sector globally. Notably, this sector also has the lowest gap between EMDEs and advanced economies. Though the representation of WOB in advanced economies has increased since 2019, to 16%, it stands only five points above EMDEs’ 11% (see Figure 2).

Source: Author’s estimations, Bloomberg.[xvii]

• 3. Utility companies have increased their share of WOB in both EMDEs and advanced economies, to 16% and 32% (Figure 1), respectively, with a notable rise in renewable companies in the past five years.

While women’s share of board seats in most EMDE utilities’ sub-industries has increased since 2019, the marked rise in WOB in advanced economies across utility companies, particularly gas and electric utilities, was not matched, widening the gap (see Figure 3). The gap in WOB share of renewable electricity companies between EMDEs and advanced economies also widened, despite the material rise in the share of WOB of EMDE renewable companies since 2019. The fact that it rose considerably in both, though, could suggest that new energy industries globally might be integrating sustainability criteria faster than legacy ones.

Source: Author’s estimations, Bloomberg.[xviii]

A Policy Push in EMDEs to Address WOB Gaps

Policies to increase the share of WOB of companies in EMDEs have followed different paths. While mandating WOB quotas for publicly listed companies is a known policy approach, EMDEs have also pursued other policies, such as voluntary quotas, guidance by stock markets (or similar regulatory bodies), recommendations in corporate governance codes, and/or mandates for women on boards for state-owned companies.

Mandates for WOB in private-sector companies started in Norway in 2003,[xix] with several other EU countries following suit with quotas focused on publicly listed companies.[xx] India was the first EMDE to pursue such a policy in 2013 (see Appendix A, Table A1).[xxi] Since then, mandates on the share of WOB of publicly listed companies have been adopted by other EMDEs such as Argentina, Egypt, Malaysia, Morocco, Pakistan, Panama, and the United Arab Emirates with different levels of quotas for WOB. In some countries, such as Hong Kong, the goal is to rule out all-male boards by mandating at least one woman board member.[xxii] In others, like Chile and Morocco, the ambition has been as high as having women represent 40% of board seats, albeit with a long transition period of six to eight years.

Several EMDEs have taken a voluntary approach in relation to WOB in companies from the private sector. In some cases, this comes with a nominal quota that issuers in the stock market either need to comply with or explain against doing so, such as in Brazil, Kenya, Poland, Romania, South Africa, and Turkey. This voluntary approach should not be underestimated.[xxiii] Voluntary targets generally also come with required reporting of WOB, which as the previous section underscored remains an issue in many EMDEs.[xxiv] Voluntary mandates might also come with the establishment of diversity criteria in nominating policies for boards, which is the case in Brazil (enacted in July 2023).[xxv] Also, some advanced economies, such as Australia, Canada, New Zealand, and the United States,[xxvi] have followed a voluntary approach, which, along with investor pressure, has been effective at raising the share of WOB.[xxvii]

European EMDEs such as Poland and Romania currently have voluntary approaches, but as part of their EU membership will have to comply with the EU directive issued in 2022 requiring that by 2026 publicly listed companies of member states “have 40% of the underrepresented sex among non-executive directors or 33% among all directors.”[xxviii] This policy will be a much greater challenge for countries such as Hungary that do not have WOB policies. Hungary’s WOB share of 10%, for example, is one of the lowest in Europe; Poland’s is 24%.[xxix]

Mandates for state-owned enterprises (SOEs) have been an interesting policy approach given the large presence of SOEs in EMDEs, particularly in the energy and utility sectors. Kenya enshrined in its constitution a mandate of 33% WOB in its SOEs. Chile, Colombia, Panama, South Africa, and the United Arab Emirates have such mandates for SOEs at varying levels, with Indonesia the most recent country to move in this direction. Brazil is also considering legislation in this regard (see Appendix A).

Chile introduced a novel approach to raising the portion of women on boards last year by issuing a sustainability-linked bond committing to increase the share of WOB in private-sector companies as one of its key performance indicators.[xxx] By 2031, it commits to having at least 40% WOB representation for companies that report to the Financial Regulatory Commission, which includes all companies that issue stocks and bonds—a bold target, as women currently represent about 14% of Chilean corporate board members.[xxxi]

Conclusion

The energy sector exemplifies the large gap in the representation of women on boards of directors between companies from EMDEs and advanced economies. Whether policy efforts in EMDEs to increase WOB will significantly bridge the gap with advanced economies is not clear. At the very least, such policies could help accelerate a rise in WOB in EMDE countries, which continue to fall behind the average of their peers in advanced economies, particularly given the recent directive by the EU mandating 40% WOB by 2026. The regulatory momentum for WOB action by several EMDEs is happening alongside pressures from investors both globally and locally.[xxxii] The inclusion of board diversity as a corporate governance best practice is also raising reputational costs to companies with zero women on their boards.

High-emitting companies globally are under pressure from a multitude of stakeholders on their energy transition risks and opportunities, greenhouse gas emissions footprint, and other risks related to their sustainability performance. EMDE companies, particularly SOEs, might be more shielded from such investor pressure, but they are not immune to it—especially given that the spotlight is likely to increase on these companies in coming years, as most future global emissions growth is expected to come from EMDEs. Greater WOB share in energy companies could be a low-hanging fruit as far as improving corporate governance around exactly the kinds of risks these companies need to navigate in the years ahead.

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[i] This report refers to the country classification for EMDEs defined by the IMF and the World Bank in their World Economic Outlook Database. See  https://www.imf.org/en/Publications/WEO/weo-database/2023/October/groups-and-aggregates#oem.  

[ii] For a comparison of women on boards in different sectors globally, see MSCI, Women on Boards and Beyond: Progress Report 2023, March 1, 2023, 10, https://www.msci.com/research-and-insights/women-on-boards-and-beyond-2023.

[iii] Board gender diversity has attracted considerable academic attention, with studies exploring the impact of women on boards on both financial and non-financial performance. For an example of a study reviewing the existing academic literature on the topic, see Thi Hong Hanh Nguyen, Collins G. Ntim, and John K. Malagila, “Women on Corporate Boards and Corporate Financial and Non-Financial Performance: A Systematic Literature Review and Future Research Agenda,” International Review of Financial Analysis 71 (2020), https://doi.org/10.1016/j.irfa.2020.101554.

[iv] See Moody’s, “Gender Diversity on Boards Linked to Credit Quality, Especially in North America, Europe,”Moody’s Investor Service, March 2023, https://www.moodys.com/web/en/us/about/how-we-work/gender-finance.html#:~:text=Gender%20diversity%20on%20boards%20linked,especially%20in%20North%20America%2C%20Europe%20%C2%BB&text=Higher%2Drated%20companies%20have%20a,parity%20is%20still%20far%20away.

[v] As rationale for their policy, the government of Chile cited a number of studies that showed a higher representation of women in leadership positions bringing benefits such as a “higher return on capital, higher margins, improved financial performance, less corruption, and less fraud … improved risk management, heightened innovation, more diverse opinions, enhanced ability to respond to complex topics, and more involvement in corporate social responsibility.” See Ministry of Finance, Chile, “Chile Sustainability-Linked Bond Framework,” June 2023, 19, https://www.hacienda.cl/english/work-areas/international-finance/public-debt-office/esg-bonds/sustainability-linked-bonds/chile-s-slb-framework-june-2023-version.   

[vi] The Pakistan Stock Exchange explains as the rationale for its decision that “better decision making and lower corruption without any compromise on, if not improvement in, the financial performance.” See Securities and Exchange Commission of Pakistan, “SECP Regulation: Women Directors to More than Double in Three Years,” press release, July 8, 2017, https://www.secp.gov.pk/wp-content/uploads/2017/07/Press-Release-July-8-Women-directors-in-Pakistan.pdf.

[vii] Isabel-María García-Sánchez, Sónia Monteiro, Juan-Ramón Piñeiro-Chousa, and Beatriz Aibar-Guzmán, “Climate Change Innovation: Does Board Gender Diversity Matter?” Journal of Innovation & Knowledge 8, no. 3 (2023), https://doi.org/10.1016/j.jik.2023.100372.

[viii] An example of how such measures align with a country’s sustainable development goals agenda is the UAE, which cites “increasing female representation on boards of directors has a positive impact on those boards and their organisations in general, as supported by specialised studies and practical experiences internationally … contributes to achieving the 2030 Sustainable Development Goals, strengthens national governance values and principals, and enhances the country’s global competitiveness.” UAE Gender Balance Council, “Reference Guide for Nomination and Inclusion of Women Board of Directors,” April 2020, https://www.sca.gov.ae/assets/2b9f4422/reference-guide-for-the-nomination-and-inclusion-of-women-on-boards-of-directors.aspx.  

[ix] In its press release, Bursa Malaysia cites that the Institutional Investors Council Malaysia (IIC), which comprises large institutional investors, “clearly laid expectations for investee companies to comprise at least 30% women representation on their boards within three (3) years… in line with the large global institutional investors, such as BlackRock, who have started voting against companies with all-male boards.” See Bursa Malaysia, “Bursa Malaysia Applauds Progressive PLCs for Embracing Board Gender Diversity and Censures PLCs with All-Male Boards,” press release, June 2, 2023, https://www.bursamalaysia.com/bm/about_bursa/media_centre/bursa-malaysia-applauds-progressive-plcs-for-embracing-board-gender-diversity-and-censures-plcs-with-all-male-boards.  

[x] See, for example, State Street’s “Fearless Girl” board gender diversity stewardship initiative started in 2017, https://www.ssga.com/lu/en_gb/institutional/ic/about-us/what-we-do/asset-stewardship/fearless-girl, and Goldman Sachs’ board diversity initiative started in 2020, https://www.goldmansachs.com/our-commitments/diversity-and-inclusion/board-diversity/2022-update/index.html. This shareholder investor push has been captured by academic research on the impact of investor pressure on women on boards; see Todd A. Gormley et al., “The Big Three and Board Gender Diversity: The Effectiveness of Shareholder Voice,” NBER working paper no. 30657, November 2022 (revised April 2023), https://www.nber.org/system/files/working_papers/w30657/w30657.pdf.

[xi] European Commission, “Gender Equality: The EU Is Breaking the Glass Ceiling Thanks to New Gender Balance Targets on Company Boards,” statement, November 22, 2022, https://ec.europa.eu/commission/presscorner/detail/en/statement_22_7074.

[xii] See MSCI, Women on Boards and Beyond: Progress Report 2023.

[xiii] WOB data by MSCI shows that the gap between companies from emerging markets included in their MSCI EM index and those from advanced companies included in the MSCI world index was about 13 points in 2019 and almost 16 points in 2023. See MSCI, Women on Boards and Beyond: Progress Report 2023, 7, Exhibit 1.

[xiv] The averages contained in this report resulted from 456 energy companies and 396 utility companies for which data on WOB was available, representing 321 energy companies and 191 utility companies from advanced economies and 139 energy companies and 205 utility companies from EMDEs.

[xv] The average global size of boards was 9 directors for energy companies according to a sample of 470 companies in the energy industry and 10 board seats for utility companies out of a sample of 258 companies for which data was reported by Refinitiv, accessed March 20, 2024.

[xvi] Luisa Palacios and Catarina Vidotto Caricati, “Assessing ESG Risks in National Oil Companies: Transcending ESG Ratings with a Better Understanding of Governance,” Center on Global Energy Policy, Columbia University, May 2023, https://www.energypolicy.columbia.edu/publications/assessing-esg-risks-in-national-oil-companies-transcending-esg-ratings-with-a-better-understanding-of-governance/.

[xvii] Bloomberg Equity data, screening all energy, percent women on board, calendar years 2019–23 subindustry names and country and territory, accessed February 28, 2024.

[xviii] Bloomberg Equity data, screening all utility, percent women on board, calendar years 2019–23, subindustry names and country and territory, accessed March 4, 2024. Water utility companies were excluded.

[xix] Marianne Bertrand, Sandra E. Black, Sissel Jensen, and Adriana Lleras-Muney, “Breaking the Glass Ceiling? The Effect of Board Quotas on Female Labor Market Outcomes in Norway,” NBER working paper no. 20256, June 2014 (revised July 2017), https://www.nber.org/papers/w20256.

[xx] Spain introduced gender quotas for corporate boards in 2007; Belgium, France, Italy, and the Netherlands in 2011; Germany in 2015; Austria and Portugal in 2017; and Greece in 2020. All of the quotas are expressed in terms of share of total board seats, with France, Italy, and Spain requiring women to hold 40% of corporate board seats, followed by 33% for Belgium and Portugal; 30% for the Netherlands, Germany, and Austria; and 25% for Greece. See Policy Department for Citizens’ Rights and Constitutional Affairs, Directorate-General for Internal Policies, European Parliament, “Women on Boards Policies in Member States and Their Effects on Corporate Governance,” December 2021, http://www.europarl.europa.eu/RegData/etudes/STUD/2021/700556/IPOL_STU(2021)700556_EN.pdf.

^[xxi] Ruth V. Aguilera, Venkat Kuppuswamy, and Rahul Anand, “What Happened When India Mandated Gender Diversity on Boards,” Harvard Business Review, February 2021, https://hbr.org/2021/02/what-happened-when-india-mandated-gender-diversity-on-boards.

[xxii] The Hong Kong Stock Exchange (HKEX) first ruled no new issuers with all-male boards as of 2023, with all listed companies required to comply by 2024.  See Hong Kong Stock Exchange, “Exchange Publishes Conclusion on Review of Corporate Governance Code,” press release, December 10, 2021, www.hkex.com.hk/News/Regulatory-Announcements/2021/211210news?sc_lang=en.

[xxiii] Heike Mensi-Klarbach, Stephan Leixnering, and Michael Schiffinger, “The Carrot or the Stick: Self-Regulation for Gender-Diverse Boards via Codes of Good Governance,” Journal of Business Ethics 170 (2021), https://doi.org/10.1007/s10551-019-04336-z.

[xxiv] While lacking voluntary quotas for WOB, some EMDE countries have begun to require disclosures of board gender diversity as a measure to incentivize and promote board diversity. One example is South Africa: the Johannesburg Stock Exchange recently adopted a specific requirement for listed companies to disclose targets for gender and race representation at the board level. See Deloitte, Women in the Boardroom: A Global Perspective, seventh edition, February 2022, https://www2.deloitte.com/sg/en/pages/risk/articles/women-in-the-boardroom-global-perspective-seventh-edition.html.

[xxv] Brazil’s “comply or explain” rule also contains a requirement for companies to include diversity criteria in the nomination process for boards of directors and C suites, contained in the Brazilian stock market’s ESG annex. See https://www.b3.com.br/data/files/3B/31/0A/CF/394798101DBF7498AC094EA8/Regulamento%20de%20Emissores%20_20.07.2023_.pdf.

[xxvi] There are no federally mandated rules for publicly listed companies in the US. However, the Nasdaq issued a regulation in 2021 that at least one woman or another minority serve on the board of directors of listing companies by the end of 2023 (for new listings, this applies for the end of 2024). See Andrew Ramonas, “Contested Nasdaq Board Diversity Rules Take Effect: Explained,” Bloomberg, December 21, 2023,

https://news.bloomberglaw.com/esg/contested-nasdaq-board-diversity-rules-take-effect-explained. Several states have adopted quotas for gender diversity on boards of companies and other organizations, including California; the California law was overturned by the lower courts. 

[xxvii] For example, the US saw an increase in the share of WOB from an average of 26% in 2019 to 32% in 2022. OECD Employment Database, “Female Share of Seats on Boards of the Largest Publicly Listed Companies,” accessed March 5, 2024, https://stats.oecd.org/index.aspx?queryid=54753.   

[xxviii] European Commission “Gender Equality: The EU is Breaking the Glass Ceiling Thanks for New on Gender Balance Targets on Company Boards.”

[xxix] OECD Employment Database, “Female Share of Seats on Boards of the Largest Publicly Listed Companies,” accessed March 5, 2024.

[xxx] Ministry of Finance, Chile, “Chile Sustainability-Linked Bond Framework.”   

[xxxi] Ibid., 18.

[xxxii]  Gwladys Fouche, “Norway’s Wealth Fund Pushes for More Women on Emerging Market Company Boards,” Reuters, March 6, 2024, https://www.reuters.com/sustainability/society-equity/norways-wealth-fund-pushes-more-women-emerging-market-company-boards-2024-03-06/; Ross Kerber, “State Street Calls for Women on Corporate Boards Worldwide,” Reuters, January 12, 2022, https://www.reuters.com/business/state-street-calls-women-corporate-boards-worldwide-2022-01-12/.

 

This commentary represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece may be subject to further revision. Contributions to SIPA for the benefit of CGEP are general use gifts, which gives the Center discretion in how it allocates these funds. More information is available at https://energypolicy.columbia.edu/about/partners. Rare cases of sponsored projects are clearly indicated.

Prominent women leaders have played a critical role in the success of global climate negotiations and have contributed to a fuller understanding of the gendered vulnerabilities linked to climate change. The adoption of gender perspectives on climate action ensures that such action not only addresses (rather than reinforces or worsens) gender inequality but also has the greatest possible positive impact on people and the planet.[1] If the 27th global climate Conference of the Parties (COP27) in Sharm el-Sheikh, Egypt, in November 2022, is to produce policies that meet the scale of the climate crisis, attending nations must consider the gender balance of their delegations and hosted speakers.

Women’s political leadership is integral to climate change political awareness and government action.[2] In many societies around the world, women and girls disproportionately bear the impact of climate change. The United Nations (UN) estimates that around 80 percent of those displaced by climate change are women and girls.[3] This gendered differentiation has fostered women’s leading role in climate activism generally, as well as their prominent positioning in nongovernmental organizations focused on climate action.[4] Women have been involved in the United Nations Framework Convention on Climate Change (UNFCCC) process since its inception. While the number of women participants has fluctuated through the years, the quality of women’s participation has been notable.

Part of women’s contribution to global climate diplomacy has been their integration of a gender perspective, which has been shown to increase the efficiency and efficacy of climate policy by ensuring that it addresses rather than hinders gender equity.[5] If climate policies are to meet the moment, they will need to go beyond economic and technological considerations to address more holistic ones linked to human values, such as equity and the interests of underrepresented groups.

This commentary, part of the Women in Energy Initiative at Columbia University’s Center on Global Energy Policy, analyzes the contribution of women to climate diplomacy and the important role of a gender framework in promoting successful climate action, now and going forward. It concludes with a set of policy recommendations for national governments and international bodies invested in resolving the climate crisis.

Recent Gains for Women in Diplomacy

Academic research on women’s participation in global negotiations highlights its positive impact on diplomatic outcomes. For example, women’s participation in peace negotiations contributes to more durable agreements.[6] Similarly, parties to peace and constitution draft negotiations since 1990 were more likely to reach an agreement when women’s groups were influential in the negotiations process than when women’s voices were not included.[7]

Women’s contributions to peacemaking have been linked to women’s greater willingness than men to organize across cultural and sectarian divides.[8] Women have also contributed to diplomatic efforts by staging mass protests and mobilizing public opinion campaigns that influence outcomes. For example, civic campaigns led by women in Northern Ireland were essential to the success of the 1998 public referendum on the Good Friday Agreement and pushed for inclusion of important local community priorities that have supported the postconflict recovery there.[9]

In recent years, a growing number of countries have begun to institutionalize gender equality as a foreign policy priority through the use of special envoys, action plans, and foreign aid targets.[10] In 2014, Sweden undertook a comprehensive plan to promote women’s leadership in foreign policy and commit explicitly to policies that advanced gender equality. Other major countries, including the United States, have followed suit. As of today, more than 100 United Nations member states, roughly half of all UN members, have adopted national action plans on women, peace, and security.[11]

The track record of women’s political leadership is significant to climate policy and policy making. There is a positive association between the level of women’s representation in a country’s legislative body and the stringency of its climate policies, directly resulting in lower carbon dioxide emissions.[12] Taking one example, in her capacity as German chancellor, Angela Merkel played a pivotal role in organizing the integration of scientific targets into climate agreements, starting with the G8 in 2007. Additionally, women’s political representation contributes to higher spending on international health and foreign aid, as well as expenditures more directly relevant to women’s needs.[13] That’s important for climate change deliberations where direct climate finance and aid from developed nations to the global south for adaptation and mitigation responses are essential to facilitating global agreements and implementation. Ultimately, women’s critical role in climate policy stems in large measure from the fact that women, on average, tend to care more about climate change than men.[14] Women leaders also tend to have and maintain better access to local community networks that can inform negotiating positions and broaden understanding of social issues that need to be resolved to promote successful accords.[15] This is particularly important for climate change policy where geographic impacts are unequal, and knowledge of localized effects is evolving. Higher participation from women in climate negotiations can boost the collective intelligence and broaden the perspective of the negotiating group, thus leading to more positive outcomes.[16]

There is a vast academic literature on how gender factors into climate vulnerability. In particular, studies show how existing inequality and power imbalances in various societies can inhibit the resilience of women and girls to climatic events and impacts.[17] Gendered patterns of adaptation to climate change events and challenges are related less to feminized intrinsic vulnerability of women to climate risks than to cultural and socioeconomic contexts in which resource scarcity and disaster response and planning might disadvantage women. In many locations, for instance, women are less likely to own land and other resources that might protect them in a climate-related disaster[18] or may have less access to institutional support and information than their male counterparts.[19] Gender-focused work in Bangladesh shows higher rates of mortality during natural disasters for women, who, in certain locales, are not allowed to participate in public meetings and therefore are less apt to receive disaster and emergency preparedness information or receive medical and food assistance in the aftermath of such an event.[20] Similarly, evidence from sub-Saharan Africa suggests the rising challenge of resource scarcity disproportionately harms women and girls, whose daily work is more homebound and highly dependent on access to water and wood fuel, making them less able to migrate for employment or food access.[21] Thus, some scholars argue that a rights-based approach to climate change policy is needed to ensure gender representation, equity, and empowerment.[22]

The differentiated gendered experiences and requirements related to climate change highlight the importance of elevating diverse women leaders—not only from different countries but also from different settings, such as cities and rural regions—in global climate negotiations. Drawing on their deep links to local communities, women leaders can provide a deeper understanding of needs related to climate finance and adaptation response, energy access and mitigation, and institutional capacity building. They have also tended to take a more activist role in demanding climate action by governments.[23]

Women in Climate Negotiations

Similar to foreign diplomacy, climate change diplomacy has benefited from the enormous contributions of women leaders. For example, Patricia Espinosa, former UN climate chief, was among those who catalyzed the $100 billion climate fund at the Cancun Agreements to aid the developing world’s climate response. Angela Merkel presided over the first UN climate conference in Berlin in 1995 as Germany’s environment minister, and then as chancellor she played a pivotal role in convincing the G8 to agree to the necessity of carbon emissions-reduction targets based on the science of the Intergovernmental Panel on Climate Change in 2007. Laurence Tubiana, special representative of France to COP21 in 2015, played a key role in negotiating the Paris Agreement, among other important women leaders, including Christiana Figueres, former executive secretary of the UNFCCC.

More broadly, women’s participation in climate negotiations has grown since the first COP in 1995, though not necessarily in linear fashion.

Women Heads of Delegations

Since the UNFCCC began tracking women’s participation in climate negotiations, the percentage of women heads of delegations has been continuously low (see Figure 1). Between 2008 and 2011, for instance, it remained below 20 percent. The peak was only 26 percent at COP23 in Bonn in 2017, and the three COPs since then have followed a downward trend.

Figure 1: Percentage of female heads of delegation, 2008-2021

Women Delegates

At the first COP in 1995, only 18 percent[24] of the delegates in attendance were women. Between 2008 and 2012, an average of 32 percent of UNFCCC delegates were women, thus marking an improvement.[25] As mentioned previously, however, this progress was not linear (see Figure 2). Given that women make up 50 percent of the global population, it was also insufficient. At COP23 in Bonn, women made up 37 percent[26] of the climate delegates present. Among the 11,306 national delegates at COP24 the following year, 38 percent[27] were women, increasing by only 1 percent despite increased policy commitments and activities meant to promote equal gender participation. Most recently, at COP26, only 35 percent of attending delegates were women. At the meeting, Barbados Prime Minister Mia Mottley stated that “both ambition and needed faces are not present in Glasgow.”[28] Despite increased initiatives and efforts toward gender equity, the gender balance is still lopsided.

Figure 2: Percentage of female party delegates, 2008-2021

Women’s Participation in Constituent Bodies

The UNFCCC’s gender composition report has two components: the gender breakdown of national delegations to COP meetings, which was previously discussed, and the gender breakdown of technical and decision-making bodies, which are known as constituted bodies. Although the changes to the gender balance in the latter bodies are inconsistent, often fluctuating from year to year, several of them reached over 50 percent women’s participation: in 2018, the Adaptation Committee had 56 percent women’s membership, and the Paris Committee on Capacity-Building had 58 percent. In 2021, the Adaptation Committee reached 63 percent women’s membership,[29] though the Clean Development Mechanism Executive Board saw only 10 percent, highlighting the aforementioned inconsistency.[30]

Positive trends in women’s participation at constituted body meetings were reported in 2019 but reversed a year later. In 2019, 8 out of 13 constituted bodies had women’s representation surpassing 38 percent.[31] In 2020, however, only 5 out of 15 constituted bodies met that threshold.[32] In 2019, 2020, and 2021, women governmental delegates occupied 33 percent of all positions in constituted bodies, showing that women’s participation has not progressed substantially since 2018. In some cases, women’s membership in constituted bodies decreased.[33] Nevertheless, at the virtual May/June Subsidiary Body for Implementation meetings in 2021, there was equal registration of male and female government delegates. At plenary meetings in the same year, which are meetings attended by all delegates, men made up 60 percent of active speakers and spoke 74 percent[34] of the time in the plenary, showing that there is a difference between equal registration and equal participation.

As part of their leadership work, women have injected an integral gender perspective into climate action at the highest levels. At the first COP in Berlin in 1995, an international women’s forum—Solidarity in the Greenhouse—was convened in parallel to the official meeting and presented a letter of requests to the chair of the COP, Angela Merkel. The goal was to integrate gender perspectives, viewpoints, and considerations into policies to be endorsed through the UN COP processes. At COP6 in The Hague, Netherlands in 2000, a side event on “feminine values” related to climate change brought increased attention to the role of women in the negotiations. The next COP in Marrakech, Morocco, included a formal endorsement in which, going forward, the UN Secretariat should determine the gender composition of the UNFCCC and Kyoto Protocol bodies and promote more nominations of women. At COP13 in Bali in 2007, a worldwide network of women for climate justice was established. The president of the Bali conference, Indonesian Minister of Environment Rachmat Witoelar, declared a commitment to mainstream gender equality into COP processes and outcomes.

By COP21 in Paris in 2015, gender-specific references were incorporated into the Preamble, Purpose, Adaptation, Finance, and Capacity-Building sections of the draft agreement, building on work developed at plenary meetings at the Lima Work Program on Gender in 2014. COP decision 1/CP21, which annexes the Paris Agreement, explicitly mentions gender equality and empowerment of women as fundamental to climate action. At COP25, parties agreed to a five-year enhanced Lima work program (36.CP7) regarding gender participation and a related gender action plan.

These efforts are a good starting point, but more can be done to elevate gender analysis and integrate inclusive perspectives into diplomatic discourse and solution building for the global climate crisis. As this commentary lays out, drawing more women diplomatic leaders and activists into global climate policy work not only enables them to contribute more robustly to climate processes and frameworks but also offers opportunities to fashion solutions that will be more sustainable and just.

Recommendations: COP27 and Beyond

The following policy recommendations can help to achieve this important outcome.

The United Nations, in its Women Watch fact sheet on climate change and gender, calls on governments to “incorporate gender perspectives into their national policies, actions plans, and other measures on sustainable development and climate.”[35] If governments wish to heed this call, they will need to carry out systematic gender analysis, including for nationally determined contributions and national adaptation plans, and establish gender-sensitive benchmarks, including for climate negotiation roles. Countries should also work to ensure women are equally included on the docket for plenary speeches at the COPs to increase visibility of diverse perspectives and give women leaders equal access to this important element of the negotiating process.

As influential geopolitical actors in climate negotiations, the United States, China, and the European Union are well positioned to take a bolder stance on promoting women’s leadership in global climate talks, including by ensuring equal representation in climate change bodies. The United States took the important step of establishing an ambassador-at-large position at the US Department of State with a singular focus on global women’s issues, including women’s economic empowerment and women’s roles in disaster responses, health, and climate adaptation. Other governments should follow suit, and the ambassadors at large should be included in national delegations to COP meetings. Governments should also incorporate training on gender equality and climate change for all delegates attending UNFCCC meetings and workshops and monitor their officially sponsored side events to ensure gender equality on panels and among presenters.

Particular care must be given to the inclusion and equal participation of indigenous women. Although making up only 6.2 percent of the worldwide population, indigenous people protect 80 percent of remaining biodiversity and 25 percent of land surface worldwide. Indigenous women have been leading the resistance against natural resource exploitation and climate change, from the Kainai women’s blockade against Murphy Oil in 2011 in Southern Alberta to Aleta Baun and the Mollo peoples’ protests against mining in 2007 on Timor Island, which eventually forced all mining companies to leave the area. The voices and perspectives of indigenous women on the front line of the fight against climate change can help sharpen the policy proposals of the United States and other governments and widen their impact.

Similarly, the perspectives and knowledge bases of young women climate activists must be incorporated into policy action and applied by policy makers. One idea is to give young women climate activists and groups a platform at international negotiations, where they can also receive formal training and preparation for serving as delegates. For instance, youth women forums could be run in parallel to COP, giving participants the chance to debate and formulate policy proposals that can then be incorporated into official COP meetings.

To ensure that women are adequately prepared to participate fully in international climate deliberations, the United Nations should expand training programs for women delegates, especially those from least developed countries where resources may be constrained, including virtual or hybrid programming. The United Nations should also consider providing travel support for women to attend and speak at official events as well as side events at COPs. For their part, major donors to the United Nations’ system should ensure that sufficient finance has been targeted toward achieving gender equality in official global climate meetings, both for COP and for constituted bodies. Such funding could be used to target training and travel assistance to support the mission of reaching 50 percent participation in climate-related activities.

Most pointedly, given that COP27 in Sharm el-Sheikh, Egypt, in November 2022 is expected to have a significant focus on climate adaptation and climate adaptation finance, as well as women’s proportionally high participation in disaster recovery, small-scale agriculture, and social care roles, women’s voices should be featured at the meeting in all aspects, including as delegates, plenary speakers, participants, and speakers in the many side events that will be associated with the climate meetings.

Notes

[1] Rebecca Pearse, “Gender and Climate Change,” WIREs Climate Change 8 (2017): 451, https://doi.org/10.1002/wcc.451.

[2] Astghik Mavisakalyan and Yashar Tarverdi, “Gender and Climate Change: Do Female Parliamentarians Make Difference?” European Journal of Political Economy 56 (2019): 151–164, https://doi.org/10.1016/j.ejpoleco.2018.08.001.

[3] Emily Chan, “Why We Desperately Need More Female Leaders Making Decisions on Climate Change,” Vogue, November 10, 2021, https://www.vogue.com/article/female-leaders-cop26-decisions-on-climate-change.

[4] Somini Sengupta, “Young Women Are Leading Climate Protests. Guess Who Runs Global Talks,” New York Times, November 8, 2021, https://www.nytimes.com/2021/11/06/climate/climate-activists-glasgow-summit.html.

[5] Minu Hemmati and Ulrike Röhr, “Engendering the Climate Change Negotiations: Experiences, Challenges, and Steps Forward,” Gender & Development 17, no. 1 (2009): 19–32, https://www.tandfonline.com/doi/full/10.1080/13552070802696870.

[6] Jana Krause, Werner Krause, and Piia Bränfors, “Women’s Participation in Peace Negotiations and the Durability of Peace,” International Interactions 44, no. 6 (2018): 985–1016, 10.1080/03050629.2018.1492386.

[7] Marie O’Reilly, Andrea Ó. Suilleabháin, and Thania Paffenholz, “Reimaging Peacemaking: Women’s Roles in Peace Processes,” International Peace Institute, June 2015, https://cve-kenya.org/media/library/Reilly_et_al_2015_Reimagining_Peacemaking_Womens_Roles_in_Peace_Processes.pdf.

[8] Council on Foreign Relations, “Women’s Participation in Peace Processes: Why It Matters,” website interactive, accessed August 22, 2022, https://www.cfr.org/womens-participation-in-peace-processes/why-it-matters.

[9] Council on Foreign Relations, “Women’s Participation in Peace Processes: Northern Ireland Case Study,” website interactive, June 2020, https://www.cfr.org/womens-participation-in-peace-processes/northern-ireland.

[10] Jamille Bigio and Rachel Vogelstein, “Understanding Gender Equality in Foreign Policy,” discussion paper, Council on Foreign Relations, June 2020, https://www.cfr.org/report/understanding-gender-equality-foreign-policy.

[11] Women Peace and Security Programme, “1325 National Action Plans,” http://1325naps.peacewomen.org/.

[12] Mavisakalyan and Tarverdi, “Gender and Climate Change.”

[13] Ibid.

[14] Chan, “Why We Desperately Need More Female Leaders.”

[15] Council on Foreign Relations, “Women’s Participation in Peace Processes: Why It Matters.”

[16] Susan Buckingham, “Call in the Women,” Nature 468 (2010): 502, https://doi.org/10.1038/468502a.

[17] Pearse, “Gender and Climate Change.”

[18] Margaret Alston and Kerri Whittenbury, eds., Research, Action, Policy: Addressing the Gendered Impacts of Climate Change (Dordecht: Springer, 2013).

[19] Ibid.

[20] Khurshed Alam and Md. Habibur Rahman, “Women in Natural Disasters: A Case Study from Southern Coastal Region of Bangladesh,” International Journal of Disaster Risk Reduction 8 (2014): 68–82, https://doi.org/10.1016/j.ijdrr.2014.01.003.

[21] Tasokawa Kakota, Dickson Nyariki, David Mkwambisi, and Wambui Kogi-Makau, “Gender Vulnerability to Climate Variability and Household Food Insecurity,” Climate Development 3 (2011): 298–309, https://doi.org/10.1080/17565529.2011.627419.

[22] Beth Bee, Maureen Biermann, and Petra Tschakert, “Gender, Development, and Rights-Based Approaches: Lessons for Climate Change Adaptation and Adaptive Social Protection,” in Research, Action, and Policy, Addressing the Gendered Impacts of Climate Change, eds. Margaret Alston and Kerri Whittenbury, (Dordecht: Springer, 2013), 95–108.

[23] Sengupta, “Young Women Are Leading Protests.”

[24] George Carter and Elise Howard, “Pacific Women in Climate Change Negotiations,” Policy Forum, March 9, 2021, https://www.policyforum.net/pacific-women-in-climate-change-negotiations/.

[25] Katharina Höne, “The ‘Doha Miracle’? Where Are the Women in Climate Change Negotiations?” E-International Relations, January 18, 2013, https://www.e-ir.info/2013/01/18/the-doha-miracle-where-are-the-women-in-climate-change-negotiations/.

[26] Brianna Craft and Samantha McCraine, “Women in the UN Climate Negotiations: Are We Tipping the Balance?” International Institute for Environment and Development, March 7, 2019, https://www.iied.org/women-un-climate-negotiations-are-we-tipping-balance.

[27] UNFCCC, “Women Still Underrepresented in Decision-Making on Climate Issues under the UN,” November 27, 2019, https://unfccc.int/news/women-still-underrepresented-in-decision-making-on-climate-issues-under-the-un.

[28] Maria Tanyag, “We Need More Female Leaders in the Fight against Climate Change,” The Guardian, November 11, 2021, https://www.theguardian.com/commentisfree/2021/nov/11/female-leaders-climate-crisis-cop26-diverse.

[29] UNFCCC, “Overrepresentation of Men in UN Climate Process Persists,” October 12, 2021, https://unfccc.int/news/overrepresentation-of-men-in-un-climate-process-persists.

[30] Ibid.

[31] UNFCCC, “Women Still Underrepresented.”

[32] Ibid.

[33] UNFCCC, “Overrepresentation of Men in UN Climate Process Persists.”

[34] Ibid.

WASHINGTON DC, Apr 8 2021 (IPS) – As the world looks to address issues of gender equity, development and climate change, the importance of increasing the participation of women in the energy sector is gaining attention. To date, this topic has generally been framed around the underrepresentation of women in the energy workforce.

But this ignores an important reality: millions of women already participate as producers of energy – specifically of bioenergy for poor households.  To support sustainable development and gender goals, more attention needs to be given to these women energy producers who have remained largely invisible in much of the energy discourse.

Women account for only 22% of the jobs in the oil and gas industry and only 32% in the renewables sector.  When it comes to managerial and other decision-making positions, the share of women is even lower; for example, their representation in energy company boardrooms is less than 5%.

In response, several programs have been launched to increase women’s participation in the energy sector. These programs are succeeding in raising awareness about the need for more women in the sector, building networks to support women practitioners, and giving visibility to the women already working in energy – albeit with a focus on the formal, professionalized segments that constitute the energy industry.

But this focus on addressing underrepresentation in the formal segments of the sector – a very important effort — can generate the misperception that women are in fact not active in producing the world’s energy. Many assume their role is largely limited to consuming energy (e.g., at home, at work, or for leisure), not supplying it.  And therein lies an overlooked reality: millions of women worldwide are producers of biomass, a form of bioenergy.

About 2.5 billion people globally rely for cooking on the traditional use of solid biomass, notably fuelwood, charcoal and dung.  This figure includes 680 million people in India and 800 million throughout Sub-Saharan Africa.

Biomass is also used by the poor for other purposes, such as heating homes in colder regions.  In many lower-income countries, biomass can constitute over 90 percent of the energy that poor households use.  It is provided through small-scale commercial ventures, but much is also generated by households for their own use.

Around the developing world, women play a central role in producing this bioenergy, notably by gathering wood and making charcoal. In fact, this is a segment of the energy sector where women are often overrepresented.

As the World Bank reported last year, “across most of Sub-Saharan Arica and in parts of China, women are the primary fuel wood collectors,” which is also the case in areas of South Asia. This is time-consuming and physically demanding work that can involve “collecting and carrying loads of wood that weigh as much as 25-50 kilogrammes” and can “take up to 20 or more hours per week.”  Unfortunately, we lack hard data about the number of women engaged in this energy production.

Biomass has already been receiving attention in development circles because of the problems associated with its use in traditional cookstoves, such as negative health impacts on notably the women who cook and the burdens of collecting firewood.

To address this issue, the United Nations has adopted as one of its Sustainable Development Goals the replacement of traditional biomass use with clean cooking technologies. This targeting of biomass and its harmful impacts does not, however, negate the role its women producers play in the energy sector (just as the climate and environmental concerns surrounding coal do not erase the role of miners).

Several actions can help to make these women producers more visible in the energy discourse.

First, recognizing the role they play in energy supply can help to shift the notion and perception of dependency: women actively participate in the production, not just the use, of household energy.

Failing to understand women’s contribution to global energy production will continue to perpetuate the myth of women as mainly (dependent) energy users, which can hamper efforts to ensure their full participation in decision-making and leadership roles within all levels of society.

Second, there is a paucity of data regarding these women producers – a situation that reflects the lack of attention they receive and also contributes to their lack of visibility.

How many women work in producing biomass (generally as unpaid labor)? How many women will be affected by changes in biomass production systems?  What will they do in a changed world?  This type of information can help address their needs and to plan for their engagement in the energy transition.  We need more data.

Third, it is important to acknowledge and properly value this work in producing household bioenergy, and to report it in energy workforce statistics. When a company produces electricity for its own use, it is called a “self-producer.”

When a woman produces biomass for use in her home, it all too often goes nameless.  The recognition of this women’s labor would also help in the effort to “achieve gender equality and empower all women and girls,” the UN’s fifth Sustainable Development Goal.

Fourth, in developing programs and initiatives to shift households from traditional biomass use to clean cooking technologies, it is important not only to consider the effect on women as consumers, but also address the impact on women as energy producers to ensure that their needs are being met.

Moreover, because these efforts to shift how households use biomass will also affect greenhouse gas emissions, the topic has entered the climate discourse. As world leaders discuss how to limit climate change at the upcoming summit convened by US President Biden or thereafter at the international COP negotiations, it is important to ensure that the situation of these women producers — their voices, concerns, and aspirations — are adequately taken into account when planning the clean energy transition (just as the concerns of coal miners and others are also considered).

Acknowledging the central role that millions of women play in producing the world’s bioenergy can lead to a greater empowerment of women across the sector.

As efforts to boost the participation of women in energy mature, it will be important to better recognize and analyze the contributions of these women producers, and to design policies that will help improve their standards of living, including as part of the clean energy transition.

This commentary represents the research and views of the author. It does not necessarily represent the views of the Center on Global Energy Policy. The piece may be subject to further revision. Contributions to SIPA for the benefit of CGEP are general use gifts, which gives the Center discretion in how it allocates these funds. More information is available at Our Partners. Rare cases of sponsored projects are clearly indicated.

As pressure mounts on energy companies to address environmental, social, and governance (ESG) concerns, now front and center for many large investors, the “social” aspects of ESG are coming to the fore. “Social” considerations gained attention during the 2020 shareholder proxy season, as witnessed by an intensification of focus on human capital and talent management in generating long-term value.[1]

The COVID-19 pandemic has brought worker well-being, safety, and fair compensation across the economy directly into the public eye. Similar to the 2009 financial crisis, the current economic downturn has disproportionately impacted women and people of color. McKinsey’s Women in the Workplace 2020 report calculated that overall, women’s jobs are 1.8 times more vulnerable in this current crisis than men’s jobs.[2] The immediacy of COVID’s disparate impacts has been accentuated by the increased attention to racial justice and gender equality in wider public discourse in the United States and beyond. As downsizing has taken place in energy companies during COVID, workforce diversity and inclusion policies have come under greater investor scrutiny.[3]

Given these trends, energy companies are under pressure to take bolder ESG initiatives to ensure continued access to investment by institutional investors.[4] For example, one new area within the “S” dimension of ESG that is being incorporated into portfolio strategies is searching for opportunities based on workplace gender equality. Coined in the late 2000s as “gender-lens investing,” a new class of impact investors is considering gender issues in financial analysis to better inform investment decision-making.[5]

This commentary discusses the approaches ESG-oriented institutional investors and engaged impact investors are taking to make apparent the gender and broader diversity standards that companies, including energy companies, will need to meet to maintain access to their capital. This commentary also considers the role a diverse workforce and leadership can play in promoting other ESG goals, such as environmental performance. It then takes a step back to examine early investing through venture capital. This is important because many energy companies begin as smaller ventures backed by risk finance. The role of venture capital in energy start-ups means that the onus is not just on the energy companies themselves to consider gender issues in long-term sustainability and profitability but also on early-stage investors of the energy industry to recognize the potential in women-owned and women-run start-ups and the biases holding them back.

Gender Lens and Diversity as an Investment Screen

Several diversity factors have been shown to positively impact investment outcomes. Early studies show that companies commended for diversity have had an initial positive stock price move in the aftermath of such announcements.[6] Also, Quantamental Research, a unit of Standard & Poor’s Global Market Intelligence, found that Russell 3000 companies with female chief financial officers generated $1.8 trillion more in gross profit between 2002 and 2019 than the average for sector competitors, as well as generated more share value appreciation.[7] And the Institutional Shareholder Services Group (ISS) 2020 report The Five Tenets of Diversity: Values Create Value found that firms whose corporate boards have at least two women board members outperform the average Russell 3000 companies’ returns over three, four, and five year periods.[8] A study by Diversity also links diverse collaborations that include women and underrepresented minorities (as opposed to heterogenous teams) with higher overall fund returns for venture capital firms.[9]

In recent years, as racial and gender inequality have stood out in US public discourse, ESG investors have become increasingly concerned that poor performance on diversity will have a negative impact on long-term corporate performance.[10] Shareholders filed proposals for corporate engagement on over 400 environmental, social, and sustainability issues during the 2020 proxy season, including on gender and racial diversity.[11] Last year, 77 percent of Fortune 100 companies voluntarily highlighted human capital initiatives, up from 32 percent in 2017. Now 69 percent of those companies have explicitly assigned diversity, corporate culture, and workforce issues to board or management committee oversight, up from just 28 percent in 2017.[12]

In line with these trends, several US states have passed board diversity standards, with California requiring all publicly traded companies with principal executive offices in the state to have two to three women board members by 2021, depending on the size of the board. Similar bills have been introduced in Illinois, New Jersey, and Massachusetts.[13] Nasdaq, the US electronic stock exchange known for growth-oriented, innovative companies, has also weighed in with proposed new rulemaking that would require companies listed on its exchange to have at least one woman and one person who identifies as an underrepresented minority on their board of directors.[14] Nasdaq is also tightening rules for required disclosure of diversity information. As encouraging as these recent movements are for ESG investors, the United States still lags other developed countries/regions, such as Europe and Canada, when it comes to diversity on corporate boards. For example, while 13.4 percent of Russell 3000 companies still don’t have a single woman on their boards, Norway has been mandating a 40 percent minimum female representation on public corporate boards since 2008.[15]

Research also has demonstrated a link between gender diversity on corporate boards and environmental performance, broadening the relevance of diverse boards to a wider aspect of corporate performance. A 2017 evidence-based study by Central China Normal University, using S&P Compustat data on publicly listed companies on the New York Stock Exchange and corporate databases from MSCI (boards), ISS (board diversity), and KLD (environmental policy), found that “the more likely firms in a given industry are to cause environmental pollution, the more salient will be the beneficial effect of gender diversity on boards on firms’ environmental policy in the industry.”[16]

In some cases, ESG investors are beginning to screen out companies or industries with poor records on gender equality from their equity portfolios, fearing that diversity issues are an indication of a deficit in management oversight as well as a potential disadvantage for firms in competing for workforce talent. This could have direct bearing on energy companies who have lagged other industries in recruiting and retaining women and promoting them to senior ranks. Women’s share of the energy workforce ranges from 23 percent to 32 percent.[17] Women represent less than one-fifth of senior executive positions at energy companies. Minorities are even less represented in energy company leadership.

The investment decision of divesting (selling one’s ownership stake) versus engaging with companies is a critical one. There is no right answer. However, it is worth noting that constructive engagement by institutional investors has brought positive change to energy companies in other areas, such as environmental practices, in recent years.[18] The advocacy group Ceres reported that shareholder engagements spurred company commitments to address specific climate-change-related issues such as greater disclosure, higher greenhouse gas emissions reduction targets, and improved strategic planning related to the energy transition.[19]

Investor Engagement on Transparency of Gender Roles and Pay

Some investors are engaging companies by issuing shareholder initiatives to advance gender parity. Some efforts are focused around disclosure and reporting, with shareholders asking companies to disclose compensation data to reveal whether a gender pay gap exists across the firm. In a famous case in 2019, Citigroup Inc. responded to shareholder engagement initiatives by improving the transparency of its reporting on compensation issues.[20] The bank disclosed that women were receiving 29 percent less in compensation than men on a global median basis corporate-wide, based on underrepresentation in the bank’s top ranks. Women account for 37 percent of senior positions at Citi, compared to 50 percent of the total workforce. When adjusting for job function, level, and geography, women earn 99 percent of men, the bank added. Currently, 27 percent of Fortune 100 companies report a measure of workforce diversity data, including the percentage of women and minorities across the workforce and in certain leadership and management categories.[21] Only 10 percent of firms have announced concrete forward-looking targets for senior level roles, and only a few firms disclose specific pay ratios related to diversity.

A new law in Canada (C-25) enacts an important change for public companies in that country. Stopping short of imposing quotas, which are highly debated across industries, the new law requires companies to report various diversity metrics for both their boards and senior management.[22]

Shareholder Activism on Corporate Culture Accountability in the C-Suite and on Boards

Research shows that firms with highly satisfied employees outperform in terms of shareholder return.[23] Positive culture is promoted when there is a well-articulated alignment between a company’s purpose and its core values and daily operations.

Accountability for corporate culture extends to the C-suite and board of directors, which set an example for the larger entity. The National Association of Corporate Directors 2017 report on corporate culture notes that directors should review board culture on a regular basis and make culture an explicit criterion in the selection and evaluation of the chief executive officer. In particular, it recommends that compensation committees review recognition and reward systems to ensure they are promoting company values, including diversity and pay equality.[24] Increasingly, public company shareholders are considering “say-on-pay” resolutions, which assert shareholders’ rights to vote on the remuneration of corporate leaders. Higher scrutiny and engagement on executive salaries is a building block to consider pay inequity and to monitor and promote improved corporate performance on culture, equity, and inclusion. For the energy industry, where corporate performance on diversity and inclusion culture is lagging and there is scope for improvement in corporate culture, shareholder action on executive pay and social factors could intensify moving forward.

Beyond establishing a link between executive pay and performance related to corporate culture and diversity, shareholders can take, and are taking, a more proactive role in ensuring gender balance in the selection of independent board members. The Council on Institutional Investors, an influential governance group of important asset owners and asset managers, has begun tracking independent directors who receive less than majority support but still remain on boards.[25] This is significant because shareholders vote each year to renew each independent board member serving on the board of directors of public companies. Concerns about diversity and performance are now leading activist investors to use this annual vote to express dissatisfaction with board composition that lacks female representation.[26] Specifically, these activist shareholders vote against the renewal of directors who are members of board nominating committees who are failing to propose a diverse slate of independent board members for the board where they serve. It is the job of nominating committee members to propose new appointments when there is a vacancy for new independent board members. Average opposition to nominating chairs at all-male S&P 1500 boards was about 30 percent in 2019.[27] Proxy advisory firm Glass Lewis & Co. is now recommending against reelecting directors who chair nominating committees at Russell 3000 companies with all-male boards.[28] Two of the largest asset management firms, BlackRock and State Street, have begun to vote against all-male boards with no plans to add women.[29] BlackRock sent out warning letters in 2020 to companies with fewer than two women directors on their boards. And Goldman Sachs announced last year that it will not take companies public and work with them as IPO underwriters if the companies have all-male boards of directors.[30]

The prevalence of all-male boards or boards with few women and underrepresented minorities raises questions about the energy industry’s ability to attract investment dollars from ESG-oriented institutional investors managed by firms like BlackRock and State Street. That’s a problem for an industry that is already reeling from falling stock valuations amid lower prices, flagging cash flows, and high debt. In 2019, women represented just over 12 percent of board seats for energy companies in the Russell 3000 Index, where almost a third of energy companies still had all-male boards.[31] Only 6 percent of energy board seats could be characterized as ethnically diverse.

Women-Owned Companies and Access to Venture Capital

In a 2019 report, the International Energy Agency (IEA) found that more energy investment funding than ever is going to energy venture capital deals. The IEA noted that risk-taking capital like venture capital (VC) is an essential complement to government and corporate spending.[32] The IEA study observed that large energy companies and large technology companies are increasingly buying up or taking an equity stake in energy start-up firms to expand their investment portfolios in clean energy and energy innovation. Because energy infrastructure tends to be expensive and long-lasting, access to risk funding is all the more critical to energy entrepreneurs.[33]

The importance of venture finance in energy innovation raises questions about whether there are disparities in access to VC funding for women-owned start-ups. To the extent that many energy company strategies for the future include acquisition of interesting energy start-up firms, a lack of funding for women-owned and minority-owned energy start-ups can perpetuate the lack of diversity inside existing energy companies. Disparities in women’s access to venture funding also discourages the development of diverse talent pipelines, which are linked in large measure to visibility of opportunity.

In 2020, 2.1 percent of overall US venture capital[34] and 1.8 percent of European VC went to companies whose CEO was a woman, despite a sizable increase in the number of women-owned businesses.[35] Studies have shown that gender bias can be present during the pitch process to VC firms. Research on the TechCrunch competition found that women were asked different questions than their male counterparts, with men more often given the opportunity to discuss upside potential for their ventures, while women were asked questions of a more preventive nature (e.g., how they would avoid potential losses and mitigate risk).[36] Entrepreneurs asked questions about upside received six times more money than those asked about risk mitigation. By contrast, Boston Consulting Group found, in a recent survey of MassChallenge[37]-accelerated businesses, that start-ups founded or cofounded by women generated 10 percent more in cumulative revenue over a five-year period than male-founded firms.[38] Meanwhile, less than half of US startups had at least one woman in an executive position in 2020, according to Silicon Valley Bank’s annual survey.[39]

While venture capital is not the only asset class with significant female underrepresentation, it is receiving increased attention because reform in this sector could directly help fix the “pipeline issue” of a lack of female- or diverse-owned companies, including in the energy industry. Having more women-owned or women-started ventures supported by the VC industry would increase the number of firms that could grow over time to become medium- and large-sized women-owned or women-run companies.

Some VC firms have shifted to a digitally mediated process to reduce gender bias in early stage screening. Also, some newer VC firms are emerging that specifically focus on companies with female founders. One such example is the Vinetta Project, which recently launched an initiative with JPMorgan to help close the gender funding gap.[40]

Since barriers to female founders accessing capital in the venture space are well understood and documented, there have been encouraging signs of mitigating this issue. For example, Caisse de dépôt et placement du Québec (CDPQ), one of the largest Canadian pension funds, launched a new initiative in 2020 called Equity 253, an investment fund aimed at increasing diversity and inclusion in the SME space (small and medium enterprises).[41] Specifically, companies eligible for this program will be required to have 25 percent of their board of directors, management teams, and shareholders comprised of diverse people.[42]

The venture space is not the only part of the investment chain lacking in women leadership. The dearth of women-leading companies further along in their life cycle, such as in the growth equity and private equity businesses, is equally perplexing.

To address the disparities in early finance, some investors are specifically seeking out investment opportunities in women-owned companies or companies known to advance women through their internal governance structures. Several large Wall Street firms have launched gender-lens investing products or initiatives, and experts believe the market could expand to over $30 billion in products by 2025, especially as more women become leaders in family offices (investment firms focused on the portfolios of ultrahigh-net-worth families) or as asset owners.[43]

One way to reduce bias across energy funding ecosystems is to ensure there is sufficient diversity among the officers in pension funds and family offices whose capital is allocated to be deployed by venture capitalists, private equity managers, and large asset management firms. By promoting a diverse composition of investment professionals making investment decisions, it would likely reduce bias and result in allocation of capital to companies, including energy companies, with better long-term prospects—which, as discussed, are companies that have sustainable business models and are led by diverse management teams and boards.

Recommendations

Energy companies seeking broad investor support, including from the ESG community, will need to increase transparency and improve disclosure regarding human capital, including publishing data on workforce diversity and compensation. Companies should also assign board-level oversight responsibilities for promoting an inclusive corporate culture, workforce diversity, and equal pay. Boards should tie executive compensation to diversity performance and should issue explicit statements on the company’s philosophy and aims for corporate culture. Executive leadership should ensure diversity objectives are part of management’s annual performance reviews. Companies should consider using annual employee surveys or other means to study and track improvement of business culture.

Venture capital firms should consider incorporating gender-lens investing strategies when funding start-ups. To combat bias early in the decision-making phase, they can employ a “blind” application process by removing names from proposals and not requiring the founder, male or female, to pitch the product. Instead, VC firms can review proposals solely on the numbers and results, or have a third-party partner deliver the pitch.

Conclusion

2020 was a remarkable year in terms of bringing diversity, inclusion, and equity to the forefront of ESG investor priorities. However, the implementation and measurement of tangible results is key to establishing success.

The energy industry faces unique challenges from the increased scrutiny of ESG factors in investment decision-making. As ESG-oriented investors turn their attention to social factors, many energy companies are not well positioned to make the case that their corporate culture and governance structures reach the level of diversity needed to promote higher returns known to be associated with a well-run, diverse workforce and C-suite. The ability to change this limiting situation rests not only with energy companies but also with venture capital firms, which can remove social bias from financial elements of the energy innovation process. Meanwhile, shareholders are playing an important role in spotlighting the benefits of diversity, and firms that need to access capital markets will increasingly have to focus on cultivating a corporate culture that promotes a diverse executive leadership and workforce.

Acknowledgments

This commentary represents the research and views of the authors. It does not necessarily represent the views of the Center on Global Energy Policy. This work was made possible by support from the Center on Global Energy Policy. More information is available at https://energypolicy.columbia.edu/about/partners.

Notes

[1] Jamie Smith, “Four ESG Highlights from the 2020 Proxy Season,” Ernst & Young, July 28, 2020, https://www.ey.com/en_us/board-matters/four-esg-highlights-from-the-2020-proxy-season.

[2] Sarah Coury, Jess Huang, Ankur Kumar, Sara Prince, Alexis Krivkovich, and Lareina Yee, “Women in the Workplace 2020,” McKinsey & Company, September 30, 2020, https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace.

[3] Maitaine Sardon, “Sustainability Investors Shift Their Focus to Social Issues,” Wall Street Journal, October 19, 2020, https://www.wsj.com/articles/sustainability-investors-shift-their-focus-to-social-issues-11602342000.

[4] April Lord and Henrietta Worthington, “Incorporating ESG into the Oil and Gas Industry,” JD Supra, December 2, 2020, https://www.jdsupra.com/legalnews/incorporating-esg-into-the-oil-and-gas-60433/.

[5] “How Gender Lens Investing Is Gaining Ground,” Knowledge@Wharton, Wharton School, October 2, 2020, https://knowledge.wharton.upenn.edu/article/how-gender-lens-investing-is-gaining-ground/.

[6] Amy McMillan-Capehart, Joshua R. Aaron, and Brandon N. Cline, “Investor Reactions to Diversity Reputation Signals,” Corporate Reputation Reviews 13 (2010): 184–97, https://doi.org/10.1057/crr.2010.20.

[7] Lindsey White, “Study: Female Execs Generated Higher Profit, Stock Price Returns than Male Peers,” S&P Global Market Intelligence, October 16, 2019, https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/study-female-execs-generated-higher-profit-stock-price-returns-than-male-peers-54788813.

[8] Sean McPhillips, Anthony Campagna, and Brett Miller, “The Five Tenets of Diversity,” ISS, December 15, 2020, https://www.issgovernance.com/library/the-five-tenets-of-diversity/.

[9] Paul Gompers and Silpa Kovvali, “The Other Diversity Dividend,” Harvard Business Review, July/August 2018, https://hbr.org/2018/07/the-other-diversity-dividend.

[10] Maitane Sardon, “Sustainability Investors Shift Their Focus to Social Issues,” Wall Street Journal, October 10, 2020, https://www.wsj.com/articles/sustainability-investors-shift-their-focus-to-social-issues-11602342000https://www.bsr.org/en/our-insights/blog-view/investors-are-committing-to-action-on-diversity-now-what.

[11] Hazel Bradford, “2020 Proxy Season Includes 400-Plus ESG Resolutions—Report,” Pensions & Investments, March 19, 2020, https://www.pionline.com/governance/2020-proxy-season-includes-400-plus-esg-resolutions-report.

[12] Steve W. Klemash, Rani Doyle, and Jamie C. Smith, “Four ESG Highlights from the 2020 Proxy Season,” Harvard Law School Forum on Corporate Governance (blog), Harvard Law School, August 23, 2020, https://corpgov.law.harvard.edu/2020/08/23/four-esg-highlights-from-the-2020-proxy-season/.

[13] Michael Hatcher and Weldon Latham, “States Are Leading the Charge to Corporate Boards: Diversify!,” Harvard Law School Forum on Corporate Governance (blog), Harvard Law School, May 12, 2020, https://corpgov.law.harvard.edu/2020/05/12/states-are-leading-the-charge-to-corporate-boards-diversify/.

[14] Andrew Ross Sorkin, Jason Karaian, Michael J. de la Merced, Lauren Hirsch, and Ephrat Livni, “Nasdaq Pushes for Diversity in the Boardroom,” New York Times, December 1, 2020, https://www.nytimes.com/2020/12/01/business/dealbook/nasdaq-diversity-boards.html.

[15] Matteo Tonello, Corporate Board Practices in the Russell 3000 and S&P 500, 2020 ed., Conference Board, 2020, https://conferenceboard.esgauge.org/boardpractices.

[16] Ji Li, Fuqiang Zhao, Silu Chen, Wanxing Jiang, Tao Liu, and Shengping Shi, “Gender Diversity on Boards and Firms’ Environmental Policy,” Business Strategy and the Environment 26 (March 2017): 306–17, https://doi.org/10.1002/bse.1918.

[17] National Association of State Energy Officials and Energy Futures Initiative, 2020 U.S. Energy & Employment Report, 2020, https://www.usenergyjobs.org/s/USEER-2020-0615.pdf.

[18] Ceres, The Role of Investors in Supporting Better Corporate ESG Performance: Influence Strategies for Sustainable and Long-Term Value Creation, February 2019, https://www.ceres.org/sites/default/files/reports/2019-04/Investor_Influence_report.pdf.

[19] Ceres, Shareholders Spur Action on Climate Change: Company Commitments From the 2014 & 2015 Proxy Season, October 2015, https://www.ceres.org/sites/default/files/reports/2017-03/Ceres_CoCommitTracker_100615.pdf.

[20] “Citi Says Female Employees Earn 29 Percent Less than Men,” Reuters, January 16, 2019, https://www.reuters.com/article/us-citigroup-pay/citi-says-female-employees-earn-29-percent-less-than-men-idUSKCN1PA28B.

[21] EY Center for Board Matters, Four ESG Highlights from the 2020 Proxy Season, Ernst & Young, July 2020, https://assets.ey.com/content/dam/ey-sites/ey-com/en_us/topics/board-matters/ey-cbm-four-takeaways-from-the-2020-proxy-season.pdf.

[22] “Diversity Disclosure for Boards of Directors and Senior Management Comes into force,” Government of Canada, last updated July 18, 2019, https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs08317.html.

[23] Alex Edmans, “28 Years of Stock Market Data Shows a Link between Employee Satisfaction and Long-Term Value,” Harvard Business Review, March 24, 2016, https://hbr.org/2016/03/28-years-of-stock-market-data-shows-a-link-between-employee-satisfaction-and-long-term-value.

[24] Report of the NACD Blue Ribbon Commission on Culture as a Corporate Asset, NACD, October 3, 2017, https://www.nacdonline.org/insights/blue_ribbon.cfm?itemnumber=48186.

[25] Council of Institutional Investors, “FAQ: Majority Voting for Directors,” January 4, 2017, https://www.cii.org/files/issues_and_advocacy/board_accountability/majority_voting_directors/CII%20Majority%20Voting%20FAQ%201-4-17.pdf.

[26] EY Center for Board Matters, Four ESG Highlights from the 2020 Proxy Season.

[27] Jamie Smith, “Five Takeaways from the 2019 Proxy Season,” Ernst & Young, July 23, 2019, https://www.ey.com/en_us/board-matters/five-takeaways-from-the-2019-proxy-season.

[28] Glass Lewis, 2020 Proxy Season Review, 2020, https://www.glasslewis.com/wp-content/uploads/2020/09/2020-Proxy-Season-Review-United-States.pdf.

[29] Saijel Kishan, “BlackRock to Push Companies on Racial Diversity in 2021,” Bloomberg, December 10, 2020, https://www.bloomberg.com/news/articles/2020-12-10/blackrock-plans-to-push-companies-on-racial-diversity-in-2021.

[30] Kim Elsesser, “Goldman Sachs Won’t Take Companies Public if They Have All-Male Corporate Boards,” Forbes, January 23, 2020, https://www.forbes.com/sites/kimelsesser/2020/01/23/goldman-sachs-wont-take-companies-public-if-they-have-all-male-corporate-boards/.

[31] Matteo Tonello, “Corporate Board Practices in the Russell 3000 and S&P 500,” Harvard Law School Forum on Corporate Governance (blog), Harvard Law School, October 18, 2020, https://corpgov.law.harvard.edu/2020/10/18/corporate-board-practices-in-the-russell-3000-and-sp-500/.

[32] Simon Bennett, “Non-traditional Energy Companies Lead a Record Year for Corporate Investment in Energy Start-Ups,” IEA, September 27, 2019, https://www.iea.org/commentaries/non-traditional-energy-companies-lead-a-record-year-for-corporate-investment-in-energy-start-ups.

[33] Andrew B. Hargadon and Martin Kenney, “Misguided Policy? Following Venture Capital into Clean Technology,” California Review Management 54, no. 2 (Winter 2012): 118–35, https://doi.org/10.1525/cmr.2012.54.2.118.

[34] “The US VC Female Founders Dashboard,” PitchBook, last updated February 4, 2021, https://pitchbook.com/news/articles/the-vc-female-founders-dashboard.

[35] “The European VC Female Founders Dashboard,” PitchBook, last updated February 5, 2021, https://pitchbook.com/news/articles/the-european-vc-female-founders-dashboard.

[36] Dana Kanze, Laura Huang, Mark A. Conley, and E. Tory Higgins, “Male and Female Entrepreneurs Get Asked Different Questions by VCs—and It Affects How Much Funding They Get,” Harvard Business Review, June 2017, https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get.

[37] Founded in 2010, MassChallenge is a US-based global network of accelerators that offers start-up businesses mentors and other resources. It has backed 1,500 firms, which have raised more than $3 billion in funding.

[38] Katie Abouzahr, Matt Krentz, John Harthorne, and Frances Brooks Taplett, “Why Women-Owned Startups Are a Better Bet,” Boston Consulting Group, June 2018, https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.

[39] Silicon Valley Bank, 2020 Women in US Technology Leadership Report, 2020, https://www.svb.com/globalassets/library/uploadedfiles/content/trends_and_insights/reports/women-in-us-technology-leadership-2020-silicon-valley-bank.pdf.

[40] Geoff Nudelman, “20 Minutes with the Vinetta Project Founder and CEO Vanessa Dawson,” Barron’s, June 1, 2020, https://www.barrons.com/articles/20-minutes-with-the-vinetta-project-founder-ceo-vanessa-dawson-01591034507.

[41] Paula Sambo, “Caisse Launches $250 Million Fund to Boost Diversity in Smaller Businesses,” Financial Post, October 20, 2020, https://financialpost.com/entrepreneur/quebec-pension-launches-fund-to-boost-diversity-in-smaller-firms.

[42] “Equity 25: A Fund for Diversity and Inclusion,” CDPQ, accessed February 12, 2021, https://www.cdpq.com/en/equity25-3.

[43] Beth Braverman, “Answering 5 Questions about Gender-Lens Investing,” Impactivate, May 7, 2019, https://www.theimpactivate.com/answering-5-questions-about-gender-lens-investing/.

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Corporate boards provide a governance structure for decisions regarding the future direction and objectives of the corporation on behalf of shareholders. It is the board’s responsibility to ensure that the company is run efficiently to maximize shareholders’ returns. As part of this oversight function, the board approves or sends back for amendment management’s recommendations for strategy and examines complex issues such as audit, compensation, and nomination and governance. Management reports to the board about its progress in meeting objectives.

Academic research shows that companies with boards with higher levels of diversity create a richer and deeper conversation around the boardroom, facilitating better monitoring of management, improved innovation of ideas, and ultimately superior performance. Carolyn Wiley and Mireia Monllor-Tormos demonstrate that boards in which women comprise 30 percent or more of the membership achieve higher financial performance in the science, technology, mathematics, and finance sectors—including energy—than firms with less or no diversity.[1] Board diversity expands perspectives and reduces groupthink, creating a positive effect on the board’s monitoring functions. This is in contrast with boards where a single female board member may be perceived negatively and treated with distrust or doubt.

In recent years, institutional investors in energy firms—both passive, exchange-traded fund investors such as Vanguard, BlackRock, and State Street as well as active, fundamental investors such as Fidelity, Capital Research, and T. Rowe Price—have successfully engaged energy companies to add women to their boards of directors to enhance performance. The number of shareholder proposals related to board diversity has been rising in recent years, with a sharp acceleration seen in 2019.

Some US states have initiated regulatory actions to require more diversity on corporate boards. For example, in September 2018, then California governor Jerry Brown signed a bill into law that requires publicly traded corporations headquartered in the state to include at least one woman on their boards by the end of 2019 and three women on boards greater than six by the end of 2021. At the time the governor signed the bill, a quarter of California’s public boards did not have any women, a situation that was almost completely reversed at the close of 2019. Similar legislation has been proposed in Michigan, New Jersey, and Pennsylvania. But the record on the use of hard targets as a way of achieving board diversity is still under debate as a means to achieve diversity goals. Researchers Kenneth Ahern and Amy Dittmar found that Norway’s 2006 hard target of a 40 percent requirement of women on corporate boards of directors led in some cases to younger and less experienced boards, with negative effects on performance.[2] This is in contrast to the same diversity being achieved through voluntary measures within the Fortune 1,000, where enhanced governance and performance were achieved through improved diversity.[3]

WORKSHOP SUMMARY

The Women in Energy program at Columbia University’s Center on Global Energy Policy recently convened a workshop to discuss the role of the board of directors and how a diverse composition affects board deliberations and effectiveness. The workshop addressed the main issues that energy companies are facing at the moment, discussed and highlighted the benefits of having diversity at the top—in both the C-suite and at the board level—and offered solutions and recommendations on how that diversity can be achieved.

Participants included shareholder and corporate advisory experts; academic, finance, and management scholars; business consultants; independent board members of energy companies; leaders from executive search firms; and energy corporate C-suite leadership.

The workshop began with reporting on the current status of diversity on corporate boards in the energy sector, which still lags broader industry in the United States on diverse workforce and leadership. In the first eight months of 2019, the percentage of board seats held in the Russell 3,000 index of companies stood at 20.2 percent overall, whereas women represented 14.9 percent of board seats in the energy sector. Ethnic diversity was lower in both categories: 10.5 percent of seats in the Russell 3,000 could be characterized as ethnically diverse, with only 6.2 percent of seats on energy sector boards. Utilities have fared better at 27 percent of seats held by women and 14 percent of directorships held by ethnic minorities.

The workshop then covered a variety of topics, including promoting inclusive board culture; fostering talent pipelines; the role of environmental, social, and governance (ESG) issues in promoting access to capital; and current business challenges to energy leaders. This workshop report reflects the highlights of the discussion, which was held under Chatham House Rule. In some instances, the authors have supplemented the highlights with citations to works that provide deeper insights into certain issues.

Board Culture

Workshop presenters and participants emphasized the importance of corporate culture in fostering the success that can come from diverse boards, leadership, and workforce.

Corporate culture comes from the top. It is typically set by the CEO, who needs to make sure not only that there is agreement among board members but that all voices have been heard and all concerns have been debated. One important aspect of creating diversity on boards is to have everyone contribute toward the achievement of this goal. One cannot expect the new diverse person on the board to produce the “diversity” improvement by themselves, but rather through everyone’s interactions.

Do energy boards foster a culture for exchange of ideas and where assumptions can truly be discussed and challenged? This is a very important question, and the energy sector is making progress, albeit from what many investment analysts suggest has traditionally been a relatively low baseline. It was noted that European companies are required by law to have separate chairperson and CEO roles, and this may encourage new approaches to changing energy businesses than their North American counterparts. However, the separation of the chairperson and CEO title alone does not necessarily ensure a better culture for the exchange of ideas.

Research has shown that firms with employees with high satisfaction outperform others on quality, profitability, productivity, and shareholder returns.[4] To develop this kind of positive culture typically involves a visible alignment between a company’s purpose and core values and its daily culture, which should be linked to reward systems for employee conduct. Not only should the company’s code of conduct be clearly articulated, but accountability must extend from the CEO and top management to the board and all employees. Robust corporate culture requires effective communications processes across the organization as well as externally and exhibit a resilience to changing business realities and competitive pressures.

Small group experiments show executives tend to work harder to hear and listen to comments if they are in a diverse environment. Diversity allows for each participant to think more inclusively about each team member’s input. In a homogenous group, there is more personal concern about not rocking the boat by raising a different point of view. Work done by Columbia University professor Katherine Phillips shows that diverse teams actually make better decisions and create better outcomes with the issues they have to solve.[5]

Board evaluation processes can be used to review board working culture to ensure that boards are getting the benefits of diversity. Boards set an example for the company, and as part of their monitoring responsibility, they should be attuned to making sure that what the company says on diversity aligns with what employees are observing and experiencing. To facilitate, boards can offer a written policy on their role related to the culture of the corporation. The National Association of Corporate Directors published a report on corporate culture as an asset in 2017 and noted that directors should review board culture on a regular basis and use board composition and succession planning as an opportunity for continuous improvement. They also recommended the following:[6]

• Directors should make culture an explicit criterion in the selection and evaluation of the CEO and set the expectation that CEO and senior leaders do the same in their own leadership development and succession planning.
• Boards and compensation committees should review recognition and reward systems to ensure they reinforce the desired culture and avoid unintended outcomes that could undermine the culture.
• Boards should set the expectation with management that regular assessments of culture will include both qualitative and quantitative information and incorporate data from sources outside the organization.

Board Candidate Talent Pipeline

Workshop participants discussed the important challenge of how to build a pipeline of qualified, diverse board candidates. One has to consider whether there is a problem with current selection criteria. How does one view “value” criteria, and are they “male”? Do search firms look for women who resemble men in their work style and behavior? Academic literature argues that such an approach would not create the right diverse dynamics around the boardroom table that would produce the optimum level of the benefits to diversity. The industry also faces the problem of the same women serving on multiple boards instead of having stretch candidates from other backgrounds. Most proxy advisory services have taken note, and advisers such as Institutional Shareholder Services and Glass Lewis are now recommending voting against board members that sit on more than three public boards.

One reasonable path for creating a stronger pipeline of diverse candidates is for companies to promote visibility of their senior women, which would position these women to serve on boards, create powerful professional networks, and forge strong alliances. As a general observation, women are typically underused in firm brand and reputation building. There is a large potential to tap women leaders to attract interest from business media, television, and conference organizers. For example, Bloomberg recently mandated that its employees cannot participate in any panel that does not have at least one woman speaker. Increasing the visibility of women leaders in firms also has the benefit of attracting diverse talent to the firm’s overall job pool and helps promote retention of mid-level diversity.

Another aspect that was discussed in depth was the executive search process, both for the C-suite and for the board. The conclusion was that executive search firms do not have a great track record of creating transformational change inside their client companies, diversity and inclusion considerations included, and that ultimately, the relentless drive toward increasing diversity has to come from companies themselves. It was suggested in the discussion that companies should require that search firms provide a larger, more diverse slate of candidates that broadens choices and gives flexibility in recruiting talent that goes beyond the usual metrics of experience as a former CEO or chief financial officer. Companies can also consider their board tenure policy as a means to freshen a board to enhance diversity. Search firm professionals also say they can play a key role in coaching and mentoring prospective talent, especially where start-up firms are concerned. Mentoring can include training on how to create value once on a board.

What makes a good board member? By definition, board members have two main duties to the company whose board they serve on: duty of loyalty and duty of care. First and foremost, board members should act with full loyalty and utmost care, and they are bound to the highest standard, known as fiduciary duty. There is significant experience and training that board members should have as related to these responsibilities. With those duties in mind, board members are in charge of designing the company’s mission and vision. In conjunction with that, a good board member should discuss every aspect of the company’s strategic plan and path to execute on that plan. Critical consideration should be given to aspects of diversity, inclusion, employee engagement, and long-term sustainability of the business. Another important aspect, especially in the case of the independent directors of public companies, is the close understanding of public shareholders’ views of the state of the company and its challenges, strengths, and areas of weakness. Business leaders said they look for big thinkers on strategy and a strong financial background.

Board of Director Concerns: Critical Issues in the Energy Sector

1. Access to capital in light of increasingly important ESG considerations

Industries are not guaranteed access to capital. In fact, industry can have increased problems attracting top capital and moving forward to stay relevant. This is particularly relevant to many aspects of the energy industry. For example, coal mining–related companies have been removed from many investors’ portfolios. As a result, the cost of capital of funding new projects has become prohibitively expensive, to the point that the coal industry is on a path of secular decline in the US and Europe. Recently, parts of the oil and gas sector are facing similar pressures. Some of the largest and most reputable institutional investors, such as sovereign wealth funds, public pensions, endowments, foundations, and other large money managers, have started relying heavily on ESG considerations, and some have gone as far as completely divesting out of traditional oil and gas companies and projects in their portfolios.

The response of energy companies has been to adopt better ESG practices in their businesses and to respond to shareholder concerns about their more transparent disclosure of ESG policies and practices.

Many of the oil and gas supermajors, especially the European ones, have now set clear goals to decarbonize their products, partially or fully, in alignment with the targets of the Paris Agreement on climate change. Workshop participants noted that this will require added diversity of thought into the workforce, into management teams, and ultimately into the boards of the energy companies. A diverse board can position a company to be significantly better equipped to monitor and challenge the status quo and find innovative and profitable paths for the companies to achieve their decarbonization goals. From a governance standpoint, board diversity also has significant positive benefits—for example, helping management avoid groupthink and reducing other biases that have been proven to lead to poorer decision-making.

Access to capital is also promoted when companies focus of improving their diversity metrics because shareholders and potential investors will increasingly consider this metric as a sign of a well-run company. As mentioned above, diversity ultimately creates better outcomes and yields better results for shareholders.

2. Digitization of the energy sector

The business community has reached a critical moment where industry will have to make a switch, pivoting toward digitization and automation, in all sectors. This tipping point is creating a significant change in all aspects of business. There is a thesis that this will create a huge bifurcation in the future and fortunes of energy companies: those who are willing, able, and successful in adapting to a new digitized reality, and those who will exhibit inertia and be slow to change. The former will survive, and the latter will likely underperform and potentially cease to be sufficiently competitive to survive, participants said.

Companies’ ability to pivot successfully will be highly dependent on the ability to attract the right workforce, to retrain existing workforce, and to embrace change. Workshop participants noted that this has become a significant challenge for energy companies and believe their ability to attract a diverse and inclusive workforce is now paramount.

To recruit the kinds of new talent that will be needed, experts at the workshop suggested that companies’ mission statements will need to resonate with the new generations, particularly younger millennials and Generation Z, who will most likely be the main agents of change in these companies’ digital transformation. Business leaders presenting at the workshop provided a rich source of examples, precedents, and policies that are important in attracting the new generation of the workforce and bringing purpose, diversity, and inclusion to the work population. Emphasis on industry’s culture of technology innovation, large data sets, and extreme engineering is a key tool for successful recruiting, senior leaders pointed out. But oil and gas executives and chairs of the boards noted that it is often difficult to articulate the reality that oil and gas demand is not going away overnight, and the industry can provide good jobs and sustainable products well into the future. One cultural barrier to younger workers is an orientation to want to participate in less hierarchical management teams that promote innovation and less stratification. Traditionally, the oil sector has been a top-down management structure.

The energy sector (particularly the conventional side of the sector) is facing a particularly difficult challenge attracting this workforce, given the strong fundamentals and growth expectations of the technology sector. Smart and focused policies have to be implemented to win the war on digital talent. The silver lining is that the green, sustainable, renewable segments of the energy industry (such as wind, solar, and storage) are seeing good interest from the new generation of workers. As the baby boomer generation retires from the sector, companies are now focusing heavily on recruiting millennial workers, who often have different job expectations and experiences than senior managers. Companies will have to actively articulate the data analysis and technology-heavy elements to the industry and offer more flexible work environments to compete with technology companies for new STEM graduates, consulting firms suggested at the workshop. Company leaders at the workshop said that as they work toward these new elements to recruiting and retention practices, they are having more success competing for talent.

Conclusion

The last part of the workshop focused on perspectives from energy board members and CEOs. Leaders said they continue to find that the pool of diverse candidates, both in senior management and director positions, is very limited, suggesting more change is still needed. Speakers in this last session shared their best practices, lessons learned, and key takeaways from the diversity journeys they each have embarked upon. One company mentioned how women’s attrition from the industry to go into the financial world, especially as it relates to Wall Street or private equity, is significantly lower than their male peers, pointing out a key advantage of senior women leaders. Business leaders added that they need to act fast after identifying a top candidate for board service to ensure the individual accepts the position instead of joining a competing board. Scholars also suggested that research indicates that women will show more loyalty for their employers if they are treated equally and are given the right opportunities to rise through the ranks.

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The Nature of the Energy Industry Future Workforce Challenge

Building diverse, inclusive work environments has become a priority for businesses across the globe—bringing benefits that include higher productivity and improved performance, as well as increased creativity and broader perspectives that lead to better decision-making. While the energy industry has made progress toward diversification, more work is needed. Toward the goal of promoting diversity in the sector, the Women in Energy program of Columbia University’s Center on Global Energy Policy (CGEP) and Pioneer Natural Resources convened a workshop, Future Workforce in the Energy Sector, on November 8, 2018. The meeting convened executives of energy companies and thought leaders from industry and academia.

Participants agreed that the energy sector, under its current hiring and retention practices, was unable to capitalize on the full benefits of a diverse, future-focused workforce. The event devoted significant time to discussions of recruitment and retention of groups underrepresented in the industry (such as women, minorities, and millennials), while tapping expertise from energy companies and other industries that have been the most successful in recruiting and retaining talent.

The following document provides a brief background on women and millennials in the energy industry before summarizing the discussion and findings from the CGEP workshop. As the event was held under the Chatham House Rule, participants will not be identified.

Background

Women represent between 22 percent and 34 percent of the workforce in the energy industry, with percentages at the highest ranks even smaller.[1] In the oil and gas sector, representation tends to be lower. In the clean energy sector, however, it is generally higher, with women making up 32 percent of the wind and solar workforce. All sectors say they are having trouble recruiting women and minorities with science, technology, engineering, and mathematics backgrounds, despite a rising number of diverse graduates.

Almost a quarter of the US employees of the natural gas and electric utilities industry will be approaching retirement within five years, necessitating a huge influx of new personnel to the sector in the next few years.[2] To enhance recruitment and retention, companies have gotten more creative. In the utility sector, firms have tried partnering with industry and labor unions to establish apprenticeship programs—targeting students in underserved communities and creating educational programs that reach out to students in middle schools. The recruitment processes of private companies have also been tailored to ensure diversity is built into the pipeline of candidates being interviewed on college campuses.

There are many benefits to diversifying a workforce. It is harder to come to a consensus in small work groups that are not homogenous, but they are more apt to reach correct answers. This notion was the conclusion of a decade of research on small work teams by Columbia University’s Graduate School of Business professor Katherine W. Phillips.[3] Phillips’s research shows homogenous groups can come to a consensus faster and they feel more confident in their conclusions than diverse teams (although they are not necessarily reaching the correct conclusions). In fact, they have a higher chance of getting the wrong answer than diverse groups, which take longer to deliberate and feel “less confident” of their outcomes. Phillips noted, “Diversity gains do not only result from bringing different perspectives to the table.” Simply adding social diversity to a group forces people to think differences of opinion might exist among themselves, and that belief prompts changes in behavior and pushes people to work harder to come to a consensus and be more open-minded to new ideas; this leads to better outcomes. Other important factors for garnering the benefits of diversity include shared goals, team building (with minimized status differences), and shared impact; these are features common to the tech sector.

Phillips’s research is confirmed by other studies and extends to findings related to the benefits of having diversity in the C-suite and boardroom. A large statistical study published in the Academy of Management Journal in 2017 found that companies with women in these senior ranks contribute to the long-run performance by lessening the chances of risky strategies being adopted.[4] 

Workshop Summary

Creating a More Diverse Workplace

Harvard Business Review surveys of strategic approaches to diversity indicate that command and control programs—such as grievance systems, performance evaluations, and hiring test assessments—are not succeeding. In some cases, these programs are even creating unintended backlashes from members of groups that tend to be advantaged in the society, who fear discrimination and unfair treatment within organizations with prodiversity messages.[5] Instead, executives of energy companies that attended the CGEP workshop suggested—in line with academic findings—that other formal programs (such as resource groups, task forces, childcare subsidy, or on-site programs) and returnship programs for employees who choose to stop working for a period of time (e.g., to take care of a sick relative or after the birth or adoption of a child) have proven more effective in retaining and fostering a sustainably diverse workforce.

Participants of the workshop noted, “There are also programs and internal systems that can be set up to promote contact between groups, which leads to acceptance of a more diverse workplace.” These programs include cross-skilling (training workers in multiple skills set to work on different projects within an organization), self-managed teams (small groups of employees who, together, plan and execute day-to-day activities or projects with minimal supervision), and third-party coaching and mentoring programs. There are other important measures corporate leadership can take: senior management can assemble task forces, and CEOs can promote social accountability. Such actions have been shown to be statistically more effective than other steps, such as mandatory diversity training.[6] In the energy industry, success has been recorded when CEOs invite department heads and members of unrepresented groups to discuss approaches for improving recruitment, promotion, and overall diversity performance across the company.

Millennial Workers

The matter of recruiting and retaining young workers has become an increasing challenge for the energy industry. In an internal study on the subject, one workshop participant found that a cultural shift was needed to improve its workforce turnover rate for millennial workers. “Workplace flexibility, transparency, and an orientation that incorporates well-being are principal practices that are attractive to younger generation workers,” the participant noted. Because millennials are more engaged with digital working methods, the company created specific innovation challenges to give younger workers an opportunity for higher performances and greater productivity. Their study suggests younger generations are expecting more from their relationship with their organization than past generations and they seek a workplace that is authentic and inclusive.

One program that is garnering more interest among corporations is “reverse mentoring,” where knowledge sharing flows in both directions. Younger employees share technology, organizational issues, career planning, and other capabilities and preferences. In return, they gain generational perspectives on industry subject matter and become aware of past experiences. Reverse mentoring is an innovative and cost-effective means to cross-train employees for shared support and mutual training in the digital age. Reverse mentoring can also promote diversity by demonstrating the knowledge and skills of younger workers, thereby mitigating perceptual biases of older leaders and increasing the promotability of individuals of diverse backgrounds.

Companies observed younger workers prefer more regular evaluation and feedback processes than traditional annual reviews. The younger workers also resist “need-to-know” processes and the lack of transparent communication that restricts information to a small pool of decision makers. Companies that pool large numbers of younger workers are thus moving toward greater transparency and inclusion in information and decision-making processes. In particular, pay transparency and equality have become increasingly important as has incorporating trade-offs between overworking and compensation. Millennials do not value money less than other generations. They are, however, cognizant of the value of different elements to the work environment, such as remote working and volunteering and their relationships to compensation levels. Participants said they preferred settings with team cohesion, value international assignments, and access to stretch goals (additional and more challenging goals to be obtained if a project’s objectives are met).

Energy companies are discovering that with the digitalization of the energy sector, they are competing with companies like Google and Facebook for potential employees. Attendees noted that to attract young workers, who value oil and gas companies’ commitments to social responsibility and sustainability, companies need to promote the positive impact of their work.

Barriers Specific to Energy

According to workshop participants, the energy industry has experienced several downturns in recent years, and the cyclicality has had a disproportionate impact on women. During downturns, many companies scale back on diversity programs. Downsizing can affect the female workforce due to the lack of adequate structures and sponsorship from middle management. Some women executives from energy companies said they also found that biases impacted women in periods of downsizing due to the perception that women “have a choice” about whether to stay in the workforce or not. “Whether this ever was or currently is a real choice for some women,” as one executive noted, “from a cultural perspective, the perceived ‘choice’ to work has not always existed for many women.” Separately, it was also noted that in affinity networks inside companies, a vertical, with a higher percentage of women, led by a rising female executive can be adversely affected if the woman does not succeed to the C-suite.

Workshop participants stressed that energy-related technical job postings, especially for higher-level positions, do not often generate a single applicant that would qualify as diverse. One executive noted that most senior women in her organization were in finance or human resources departments, but the way the organization worked, candidates for promotion needed to be in a technical or engineering field to get promoted. This discrepancy in the pipeline for promotions becomes more apparent at the senior level—as there is a larger gender gap at the senior level compared to the entry level, where women comprise close to 50 percent of the employees at that level in her company. Participants said companies needed to have institutionalized programs to overcome the limitations of the internal and external candidate pipeline—including leadership development, cross-training of high-potential workers, and screening processes that eliminate unconscious bias (one company noted it used résumé screening software). To promote diversity and garner its benefits, workshop participants stressed that companies needed to have formal systems and processes that minimize bias and engage employees to embrace diversity. These systems need to be transparent, be consistent, and offer clear measures for accountability. As one executive noted, “What gets measured, gets done.” The executive also said more needed to be done to force the upper management at certain oil and gas firms to push for greater accountability in hiring practices.

Visibility of women in management is also enabling, not only within the companies but also in public industry events. One start-up firm led by women suggested that the visibility of diverse senior management gave them an advantage in recruiting young women. Another firm said funding and supporting women’s organizations and networks gave them greater visibility on available talent. Shareholder investor groups are also pushing management to improve practices on diversity and inclusion, especially on the board and executive levels. More diverse board members notice when management presentations are homogenous, and this also forces change.

Conclusion

The energy industry needs to adopt diversity and inclusion initiatives that are tracked and measured to ensure it is recruiting the best talent available as it replaces the aging workforce. The energy challenges of tomorrow require a diversity of perspectives to tackle global and local issues. Diverse workforces also promote the kind of creative solutions needed to solve 21st-century energy challenges. Baby boomers and Generation Xs alike are already benefiting from more flexibility, pay equity, and greater transparency—steps companies have taken to meet the needs of today’s younger generation of workers.

Throughout the workshop, participants stressed the need for female role models and increased visibility of women in the energy sector, both inside companies and externally in more public settings where the energy industry is present. This visibility is important for the recruitment of more women and people of color into the industry. Workshop participants agreed with studies showing that as companies are seen promoting women and people of color into senior roles, retention of a more diverse workforce of high-potential employees improves. Company boards and investor stakeholders can play a role in helping the energy sector become more inclusive. CGEP’s Women in Energy program will also look to convene future workshops on these topics.