Norway's $1.6 trillion sovereign wealth fund, the world's largest, will call on emerging market companies in which it invests to appoint more women to their boards, top officials told Reuters, making the policy global for the first time.
One of the world's largest investors, the fund holds stakes in around 8,800 companies globally, owning about 1.5% of all listed stocks. It has set the pace on a range of issues in the environmental, social and governance (ESG) field.
Since 2021, the fund has pushed companies to boost the number of women on their boards and to consider targets if fewer than 30% of directors are female, focusing first on Europe and the United States, and expanding the policy to Japan last year.
The policy will now be applied to companies in emerging markets, including from nations such as India, South Africa, Brazil and Egypt, the fund said in its updated voting guidelines shared with Reuters ahead of their publication on Wednesday.
It would mean that companies such as Qatari telecoms firm Ooredoo, Indonesian industrial company ESSA and Brazilian logistics firm Hidrovias do Brasil, which have currently no female directors, could be affected.
The fund's push could be a challenge in countries where the pool of candidates is smaller than in the developed world, and comes amid some signs of a public backlash in the U.S. against the drive to bring diversity to the top of organisations.
Since 2021, the fund has seen "great improvements" on gender diversity on boards, its chief governance and compliance officer, Carine Smith Ihenacho, said in an interview, highlighting Europe, where a combination of state regulation and best practice guidelines has boosted female director numbers.
Yet, "we have been thinking for a long time that we also need to vote in countries where this is actually more of an issue," she said.
"In some developed markets and emerging markets that is where we are really seeing women lagging behind."
In practice, this means that if a company in emerging markets does not include at least one director of each gender, the fund will vote against the election of the chair of the nomination committee - or the chair of the board if there is no nomination committee - at an annual general meeting.
In developed markets, the fund will continue to vote against if the board does not include at least two directors of each gender.
Laggards
The new voting guidance is expected to affect some 5% of companies in the fund's equity portfolio, said Amy Wilson, the fund's head of stewardship.
"Our voting policy is there to address laggards and bring up the lowest performers, to close the gap up with our expectations," said Wilson.
Overall, around 60% of companies in the fund's portfolio are still below the expectation of at least 30% representation of each gender on boards, she said.
The fund has been "pleased" to see progress on gender diversity at Hollywood studio Warner Bros Discovery and pan-European bourse Euronext, it said.
Both had one female director each in 2022, leading the fund to vote against the companies. They now each have three female directors.
The fund also toughened its policy for South Korea, Singapore and Poland, which had been exempt from the gender requirement even though the Norwegian investor had already classified the three nations as developed economies.
Those nations, along with Japan, will be required to have at least one member of each gender on the board, reflecting slower progress overall on gender diversity on boards, a "less mature pipelines of senior women", and "smaller pools of female directors", Wilson said.
So far, the fund has not divested from a company because it did not respect its gender diversity requirement and nor is it planning to, Smith Ihenacho said.
"I think on this issue it is much better to be a vocal investor," she said.
The fund's policy has had some unexpected outcomes. In one case, the fund had to vote, two years in a row, against the chair of the nomination committee of a company that did not have a single man on its board.
The firm? Lingerie company Victoria's Secret.
