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The progress that Canada’s largest banks have made toward equality for women in senior roles is under threat from the pandemic just as investors ramp up pressure on financial institutions to do better, according to a new report from credit rating agency DBRS Morningstar.

After decades of progress, the participation rate of women in Canada’s labour force fell to 82.3 per cent in 2020, from 83.5 per cent a year earlier. Women are more likely to leave a job or cut their working hours to care for family, which has magnified the impact of the pandemic.

There is no clear data yet on the impact that has had on women in the banking sector. But without action to address concerns around flexible work arrangements, parental leave and opportunities for promotion, banks could face a structural setback in the drive toward gender equality that could persist even after the pandemic ends, according to DBRS.

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“There is a danger,” said Maria-Gabriella Khoury, the report’s author, “unless companies go in with a mindset that they’re going to be flexible.”

Banks are facing increasing scrutiny over their performance on environmental, governance and social (ESG) factors, as well as calls for more transparency and consistent reporting of key metrics. If they don’t act, that exposes their reputations to risk and could invite pressure from regulators and shareholders, Ms. Khoury said.

“The cost is becoming greater as both clients and investors become more aware of these factors and these issues. We see a lot of investors putting pressure on companies, on banks, to increase transparency and improve where they are lagging,” she said.

Women make up 55 per cent to 58 per cent of the work force at Canada’s six largest banks, but on average they represent only 35 per cent of executives – including 36.8 per cent at Toronto-Dominion Bank and 46 per cent at Royal Bank of Canada, according to DBRS data.

By some measures, that means banks in Canada are doing better than their peers, though they are still falling far shy of meaningful equality. The Organization for Economic Co-operation and Development average for representation of women in executive roles is 31 per cent. On the Toronto Stock Exchange, the average for companies other than banks is only 17 per cent.

Most major banks have set targets to boost the proportion of women in their senior ranks to between 35 per cent and 48 per cent in the next two years, in addition to broader diversity and inclusion goals. But Ms. Khoury notes that not one of the Big Six banks has had a woman as chief executive officer, even after smaller banks and credit unions have paved the way by hiring female leaders. And there are no specific targets for the most senior roles that serve as a staging ground to become CEO.

As long as women are underrepresented in the executive inner circle, it is less likely that they will reach the top job. “The future CEOs get groomed, they’re usually chosen from that pool of the executive team,” Ms. Khoury said. “As a woman, you have a 30-per-cent chance.”

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The wage gap between women and men in finance, insurance and real estate has also been largely stagnant for 20 years. And though it has narrowed since a federal Pay Equity Act was introduced in 2018, the average pay gap widened again in 2020, to $6.35 an hour. Canada’s banks still do not report detailed pay-gap data.

“There is room for improvement and it would be great if we see Canada leading in most of these areas,” Ms. Khoury said.

Editor’s note: An earlier version of this story incorrectly said women represent an average of 34 per cent of executives at Canada’s six largest banks and 25 per cent of executives at Toronto-Dominion Bank, according to a DBRS report. DBRS has revised its report to say women represent an average of 35 per cent of executives at the banks and 36.8 per cent of executives at TD Bank.

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