Is it still a white man’s world?

Welcome back. Our colleagues in Brussels have just published a fascinating interview with Stéphane Séjourné, the newly appointed vice-president of the European Commission in charge of EU industrial policy.

Faced with the rise of protectionism (especially in the United States), the EU should consider implementing its own “Europe first” strategyto support its most important industries, including clean technology, Séjourné argued.

It is a difficult time for Europe’s green drive, with the bankruptcy from the famous and generously funded Swedish battery company Northvolt. In Wednesday’s edition, we will take a deeper look at what companies and investors can expect in terms of green policy under the second administration of European Commission President Ursula von der Leyen, which officially began yesterday.

Meanwhile, in today’s newsletter we look at a new paper that suggests capital market reform, not trade barriers, should be the main focus of EU officials seeking to maintain momentum around the energy transition. of the block.

First, one might wonder whether U.S. corporations’ once-heralded efforts to promote board diversity have been losing steam as they face political backlash against so-called “woke capitalism.” We bring you new data that sheds some light on that issue.

New data offers a mixed picture on diversity on board

It has been more than four years since the murder of George Floyd sparked a wave of corporate promises promote diversity, equity and inclusion. More recently, some of America’s largest companies have backed away from those promises amid a conservative political backlash (notably Walmart last week). Has the corporate DEI train derailed?

TO new report published by the Conference Board think tank using data from ESGAUGE provides some useful insights into that question. Among other statistics, it shows the change in non-white representation on corporate boards since 2020.

The share of non-white (including Hispanic/Latino) directors at S&P 500 companies rose from 20.4 percent in 2020 to 25.6 percent in 2023, but then nearly remained stable, increasing just 0.1 percentage point the following year. This compares to a 41.6 percent non-white population in the United States.

Equally striking is the wide gap between representation on boards of directors overall and representation in senior positions: Non-white people hold only 13 percent of top director positions and 12 percent of chair positions. of the boards of directors. In fact, non-white representation in senior director positions has declined for two years in a row, from a high of 15 percent in 2022.

One interpretation of the above data could be that many companies have approached non-white board representation with the goal of window dressing, rather than leadership. Companies have added non-white directors to improve their DEI credentials or satisfy quota requirements imposed by Nasdaqgoes this argument, while keeping real power on boards of directors firmly in the hands of white men.

That’s too cynical a read, according to Rusty O’Kelley, who co-chairs America’s board of directors and head-hunting firm CEO Russell Reynolds. Companies continue to look for more diverse boards, he told me, “because they want to make sure they have thought about all types of risk, that they see all types of opportunities, and that they reflect all their stakeholders.”

“What takes time is for leadership roles to change and then for people of color to be elected to those roles,” he added.

Since almost half of the companies in the S&P 500 have combined roles of president and CEOThe overwhelming white representation in board chair positions is partly a reflection of the lack of diversity in senior executive ranks as well as board hiring practices.

The same can be said on the gender front. Only 11 percent of S&P 500 board chairmen are women, compared to 33.7 percent of directors. But the proportion of female presidents has more than doubled since 2020, while the proportion of senior directors has doubled from 11 per cent to 22 per cent.

While these trends in female representation may seem promising, all of these figures are well below the 50 percent ratio that would indicate gender parity.

Globally, the numbers are even lower, according to a study published this year by Deloittewhich analyzed more than 18,000 companies in 50 countries. Women held 23 percent of board positions, and only 8 percent of presidencies.

At the current pace of change, Deloitte found, gender parity will be achieved for director positions in 2038, for president positions in 2073, and for CEO positions no earlier than 2111.

The ecological argument for an EU capital market reform

At $360 billion last year, the EU’s investment in the energy transition was far ahead of the US ($303 billion) and every other country except China ($675 billion), according to a BloombergNEF Analysis.

But the same analysis (like others, including the from the International Energy Agency) suggested that this level of green investment will need to more than double by 2030 for the world to reach net zero emissions targets. How can this be financed?

In Europe, only through a comprehensive reform of capital markets, with a much larger role for asset managers and a proportionally smaller one for banks. That is the argument in a new paper by the Berlin think tank Themis Foresight, commissioned by the German bank Norddeutsche Landesbank.

The paper argues that the EU’s green investment is being limited by its over-reliance on banks (whose assets are worth 163 percent of EU GDP) and its relatively small level of equity financing for companies, which worth 66 percent of GDP. In contrast, in the United States the respective figures are 87 percent and 157 percent.

Europe has overtaken the United States in low-carbon investments thanks to more aggressive green policies, including an EU-wide carbon pricing scheme and ambitious decarbonization targets for sectors such as energy and automotive.

But to boost the flow of green finance to another level, Themis argues, the EU must undertake a “major reform” of its financial system, among other things by forging a capital markets union, creating a single set of laws and regulations to regulate green financing flows. capital throughout the block.

The debate over such a measure has hummed for a decade. This report argues that a capital markets union could unlock significant growth in the EU asset management sector, which could provide a less expensive and more flexible source of capital for green companies than comparatively averse banks. risk.

On risk, the report calls on governments to boost green investment by offering project loan guarantees. He argues that hedging the risk of projects, rather than shelling out capital for them, would be a smart way to respond to political backlash against governments investing huge sums in greening the economy. (That’s an argument that holds as long as only a modest proportion of guaranteed loans end up in default.)

“When governments intervene to offer guarantees or risk-sharing mechanisms for green projects, this can fundamentally change the risk-return profile of these investments,” which could double private sector investment in green projects, the document maintains.

smart readings

Uncertain outlook What will be the lasting legacy? of Joe Biden’s Inflation Reduction Act for low-carbon energy in the United States?

Branching out Indian steelmaker JSW plans to launch its own brand of electric vehicles.

Price surveillance The acting head of the UK Climate Change Committee says the government need to reduce energy costs as it strives to achieve net zero goals.