The business case for diversity in leadership in financial institutions has been well-documented: diverse leadership improves financial outcomes, reduces groupthink and is a better reflection of the society the institutions serve. However, translating this understanding into meaningful action is easier said than done.
OMFIF’s 2024 Gender Balance Index revealed a concerning pattern of missed opportunities. Of the 63 institutions with leadership transitions in 2023, only nine appointed women to top positions. While qualifications and merit are crucial considerations in these cases, the share of women in leadership – 14% – was the same as the share in the previous year, highlighting the glacial pace of change.
Building the pipeline
Throughout 2024, OMFIF events consistently emphasised the need to develop the talent pipeline in order to increase representation of female leaders. The rationale for this is straightforward: cultivating talent at lower levels creates a robust pool of qualified women candidates when leadership positions become available.
The 2024 GBI report shows some progress, with the share of women across all senior staff roles in the index increasing to 31% from 29% in 2022 – marking the first time this figure has exceeded 30%. But representation continues to thin at higher levels, dropping to 26% for deputy governor and C-suite positions, and falling to 16% in top leadership roles.
In a conversation with OMFIF, Jenny Johnson, president and chief executive officer at Franklin Templeton, noted ‘it all starts with building a strong pipeline of strong female talent’. She added that it is ‘important for us to foster an inclusive environment to ensure female employees are empowered and enabled to be promoted into management positions based on their skills and potential’. The dual focus – recruitment and retention – reflects a growing recognition that getting women through the door is only the first step.
Organisations have responded by implementing various initiatives, from mentorship programmes and recruitment quotas to inclusive leadership training. These efforts are increasingly complemented by national policies aimed at boosting female representation in leadership.
From policy to practice
Several jurisdictions have introduced policies mandating minimum levels of female representation, yet results remain mixed. Last year saw new initiatives in Japan, Australia and Hong Kong aimed at improving board representation in listed companies. These efforts were a positive step forward, particularly as Asia Pacific has historically had the lowest regional GBI score. Elsewhere, the European Commission and the Financial Conduct Authority in the UK both introduced measures to improve gender balance at the board level in companies in 2022.
However, the effectiveness of these policies remains to be fully seen and evaluated. In May 2024 the FCA paused its efforts on diversity and inclusion proposals set out in its 2023 consultation, citing process complexity.
Even in countries traditionally considered leaders in gender equality, meeting targets has proved challenging. In Norway, a law was introduced in 2023 to mandate no more than 60% of one gender on the board of directors for large companies. While many companies are rushing to comply, there have been some unexpected consequences, with some companies reducing board sizes to meet quotas rather than expanding female representation.
Finding the right balance between organisational and regulatory approaches remains complex, particularly in politically and economically turbulent times.
Navigating political headwinds
The path towards gender parity faces mounting obstacles. A tougher macroeconomic climate has pushed diversity, equity and inclusion initiatives down the priority list, as institutions focus on navigating economic instability. Additionally, policy uncertainty stemming from the number of leadership changes globally in the past year have contributed to the slowdown.
While political representation of women does not directly correlate with gender diversity in financial leadership, the political climate influences regulatory frameworks and policy implementation. Without sustained political will, even well-intentioned initiatives risk stalling.
This is perhaps most evident in the US where companies, including those in the financial sector, are witnessing a DEI retreat. While this rollback of diversity measures is not a new phenomenon, it has become increasingly visible in the lead up to and following the results of the November 2024 presidential election. Last year, several companies reduced diversity programmes, downsized inclusion teams and softened language in corporate reports. In December 2024, an attempt by Nasdaq’s US exchange to improve diversity of directors on the boards of companies was struck down by a federal appeals court, marking a further setback.
The financial sector now stands at a crossroads. 2025 could either solidify progress towards parity or witness a regression in representation. Success hinges on whether organisations can maintain a focus on gender equality amid competing priorities and external challenges.
The stakes are high, but the opportunity to foster meaningful change remains within reach – if the commitment to gender diversity endures.
Arunima Sharan is Senior Economist, Economic and Monetary Policy Institute, OMFIF.
