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://cgepstaging.wpengine.com/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.

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/.

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