Learning from Europe’s ‘Mature’ ESG Movement to Drive Diversity in the U.S.

With increased investor attention on ESG, which ranges from sustainable investment, social impact to corporate governance, companies around the world are moving to integrate greater diversity and gender equality in their workplace. As U.S.-based firms, including Nasdaq, strive to advance diversity, inclusion and belonging, they can learn from Europe’s “mature” ESG movement, according to Nasdaq President and Chief Executive Officer Adena Friedman.

“I think that what’s been great about the ESG movement is that it’s become quite mature in Europe, and because of all of the maturity in Europe, it’s come roaring into the U.S. as well, and the U.S. has played a very fast catch up,” Friedman said, adding that companies should increase focus on all stakeholders, including employees, suppliers, clients and local communities.

“If you do all of that, you will end up providing the right long-term outcome for your shareholders, so I think it’s just an obvious area of focus for us, but it’s become an area of focus for all the corporates in the U.S. and Europe,” Friedman shared with Nasdaq Stockholm President Fredrik Ekström during a virtual fireside chat, co-hosted with the Swedish House of Finance.

Friedman noted Nasdaq’s efforts to advance ESG across the past decade and its most recently launched Purpose Initiative, which aims to drive inclusive growth and prosperity by supporting women and under-represented minority communities with the tools they would need to grow and sustain their businesses.

In addition, Nasdaq put forward a diversity proposal to the Securities and Exchange Commission (SEC) that’s focused on providing a standardized disclosure framework to drive greater transparency on corporate governance. Under the proposal, most Nasdaq-listed companies would be required to meet, or explain why they do not meet, an objective of at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an under-represented minority or LGBTQ+. For companies with five or fewer directors, they would need to have, or explain why they do not have, at least one diverse board member.

“It’s really trying to move and encourage companies to move forward and having their board look more like their employees, look more like their clients, and at the same time, not doing it with a hard quota,” Friedman said.  

The new proposal comes as diversity and inclusion are still very much works in progress in the U.S. and much can be learned from the advancements made by European countries like Sweden and other Nordic countries on these issues.  

“What I like about the approach that Sweden has taken is that they’ve done it through a disclosure regime and then encouragement and setting goals and targets to try to encourage companies to really focus on it, and make it a part of their governance practices, but not having it be a hard quota,” Friedman said, pointing to the Swedish government’s years-long goal to get 40% of corporate boardrooms to be filled by women. 

“The U.S. is much further behind on that, so I think that we have an opportunity in the U.S. to take the lessons of Sweden and try to apply them through the Nasdaq proposal,” she shared.  

Ekström echoed that there has been “good development” made in gender equality in the Swedish markets and corporates over the 10 years. However, progress has slowed in the past year, he said.  

Because of this slowdown, Ekström stressed the need for a renewed focus on this ESG goal again, adding that continuation of education is crucial when it comes to helping corporates make progress in their journey. To this end, Nasdaq partnered with AllBright Foundation, a non-profit working to advance equality and diversity in corporate boards, and the Swedish Private Equity & Venture Capital Association (SVCA) in December 2020 to provide an educational platform around gender equality and diversity. 

“We hope to have four or five educational sessions this year, evaluate and move forward, and hopefully move the needle and get more progress also in the area of the Nordics, but it has slowed down, and we want to get momentum back,” he shared. 

Agreeing with Ekström, Friedman said that with renewed attention on the advancement of diversity, “I think that 40% is quite attainable.”

More broadly, Friedman has seen leaders in the financial services industry “work very hard to shape their culture to give more women more opportunities,” noting that “it’s pretty exciting to see how much has changed” in the past three decades. However, she acknowledged that “change doesn’t happen overnight.”

“Our next step is obviously to continue that progress and to make sure that equal opportunity truly becomes equal, but also to really focus now on other elements of diversity, and to make sure that we make those same shifts to make it so everyone in the community feels that our industry is a place that they can thrive,” she said. 

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ESG Leadership

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