One of the key attractions of the emerging markets is their huge talent pool. From a diversity perspective however, the reality on the ground is wide ranging and women’s participation in the workforce for example, is a challenge. If we assume the male-to-female ratio in any given society is 50/50, one can imagine how one-sided talent is when a company’s workforce is 80% male for instance. While it is impossible to measure purely from a hypothetical example, such a business will miss out on a substantial talent pool through its selection bias, and ultimately performance stands to suffer. To thrive in a competitive environment innovation is required, which is often borne out of a diverse set of participants involved in the decision making.
Inclusive growth – engaging to drive change
In our company selection and analysis, we bring forward how our companies can be great investments by taking care of stakeholders. Within this we include the parts and/or groups in the society who have been overlooked by economic growth and haven’t benefitted as significantly as the wider population due to gender, religion, or societal standing. We are keen that our companies address these specific discrimination issues by encouraging and enforcing rules to select the best candidates available from their societal pool. We engage on these subjects as needed, firstly to understand the limitations and secondly to help remove barriers. When our engagement fails to move the needle, we adjust our required rate of return upwards and eventually sell the position to replace it with companies that consider the whole society. One of the key pillars for enhanced long-term returns relies on diversity.
A focus on India
One of the markets where we find lots of great investment ideas is India – a country with female labour force participation of around 12%. Let’s look at what some of the companies we invest in are doing to address the gender gap in the workforce, where they are in their journey, and what we are doing to nudge them to get better.
Torrent Pharmaceuticals recognise that gender diversity is a critical challenge they need to tackle. Only 12% of their employees are women, but with the goal of improving this, 28% of new recruits in FY21 were women. They also acknowledge the problem in their sustainability report. They have 3,600 people in their workforce on the ground and find it difficult to improve the ratio mainly due to the nature of the job (lots of travelling, time away from home, etc.), so this work tends to attract more male employees. It’s the same in the manufacturing units in India, where the workforce is heavily skewed to male employees. In India the management targets 15% female participation in their workforce, and they will up that to 17% as the next milestone. Torrent is better than peers but recognise they are not good enough, so management are reviewing how to change the manufacturing floor and field working environment to attract more women. Their gender balance is a lot better in overseas operation, with a 50/50 split in both the US and Brazil, two key international markets for the company. At a board level, the gender balance is also better, with 2 of the 7 Directors being women. This is a great illustration of a company that has both significant room for improvement and is open to engagement on how to improve.
IT specialist Infosys has a presence in 60 countries with employees from 154 nationalities, and we have also been engaging with them on Diversity and Inclusion. 39.5% of the company’s employees are women, and they have set a 2030 goal of increasing that figure to 45%, using specific policies and programmes, such as more flexibility on its work from home policy, to help attract and retain female talent. Overall, we are happy with the journey that Infosys is on to improve gender balance in its workforce. Only 22% of the company’s board members are women, so there is clearly some scope for improvement here, and we are engaging on this subject with them now.
Like Torrent, Nestle India’s management is putting a lot of focus on diversity issues. Presently, around 23% of the company’s employees are women, compared to 15% back in 2015, an improvement with room to do more. A hallmark of this has been the commissioning of its ninth factory in Sanand, Gujarat, India in November 2021. The new plant will mainly focus on Maggi, its popular instant noodle range, and will have a female workforce of 62%. This is the highest percentage of women that we have seen in any manufacturing facility in India, so it’s a significant achievement. Nestle India also has a good gender balance on its board, 60% of Independent Directors are women.
We need to do more
It is equally important that we uphold the high standards that we expect from our companies to ourselves. From this perspective, we are far from the end of our diversity and inclusion journey. Despite being a diverse team from nationality and race perspectives, we are far from representing all the fabrics of our society. We recognize we and our broader industry have more work to do, so we encourage our clients to keep us accountable as we go forward to ensure we create a fairer, more inclusive, and equal society.