Closing the ethnicity investment gap

City Hive CEO says democratise investing to create a fairer more inclusive industry

While 2020 will go down in the history books for various reasons, the poignancy of people across the globe coming together to protest racial injustice following the murder of George Floyd will stay with us for years to come.

Individuals and institutions alike were finally forced to confront the reality of the discrimination and disparities faced by people of colour, and the amount of work that needs to be done to create the more level playing field that we all need to thrive. Amid the protests and realisations, many in the investment management industry pledged allyship and solidarity and promised to have the difficult conversations and ask themselves some difficult questions.

However, as earnest as this desire for change was and as committed as they were to making things better, how many actually understand how they can use their power to help?

Inequality gaps in investing

I have written before about the gender pension gap. There is also an ethnicity pension and investment gap. According to research conducted by The People’s Pension, pensioners from ethnic minorities are on average 24.4% worse off than other pensioners. Furthermore, research shows ethnic minority participation in financial services in the UK, is low in proportional and actual terms.

This impacts the economy; a 2018 Randstad report highlighted that the UK economy could be £24bn bigger if ethnic minority workers saw the same rate of career progression as white people. There is also lower access to financial services for ethnic minorities in the UK – 33% of white people have no savings, compared with more than 60% of Black and Asian people. These factors inevitably increase the risk of growing inequality, while also leading to a loss of trust in financial institutions, as there is little to show that industry cares about addressing the disparities. 

The investment management industry needs to be more balanced. However, this doesn’t just apply to our individual workplaces, and how we treat our employees. It also applies to how we interact with our end users. If the investment management industry truly wants to be a force for good in the battle for equality, the solution lies in democratising investing and creating a fairer and more inclusive investment industry to help people from all backgrounds find their way to financial security.

Creating a more equal, inclusive and accessible financial and Investment system that everyone can access and benefit from should be the goal of all firms who claim ESG is in their DNA and whose values and commitments align with behaviours that are sustainable and responsible. So, while many of our conversations lie around making our teams and workplaces more diverse, we need to also think about inclusivity when it comes to the products, marketing and advice we offer, and the investors we target. 

Who are our investors?

Be honest – when you think of an image for the word investor is that person a woman, Black, Asian, visibly disabled or a person who identifies as LGBTQ+? While I of course can’t read your mind, I’m going to guess that your imaginary investor didn’t belong to any of these group. In fact, I’ll go as far as to suspect that your investor looked somewhat more like the stock image investor that you can easily find on google, rather than someone who is genuinely reflective of the society that we live in.

Our perceptions of investors are shaped by the messages we receive, which inevitably seep their way into who we all assume the end investor should be. While FCA regulations demand fair treatment of customers, via TCF, should we not be considering that unless our customers look like society, we are not fulfilling our obligations as an industry because we are not treating all possible groups of customers fairly?

If we truly want to address the inequalities that the Black Lives Matter movement and Talk About Black’s #IAM campaign brought to the forefront, we need to go beyond conversations and words, and redefine our concept of who our investors are.  It is crucial to understand the barriers different groups face and then actively seek solutions to remove them to ensure financial inequality does not persist further.

City Hive has taken this first step, with the support of White Marble, Schroders and a consortium of retail and institutional asset managers. We have undertaken some research to understand some of the blockers, barriers and action required to close the ethnicity investment gap and take tangible action to drive social equality. I look forward to sharing more on this in my next column.

Bev Shah is CEO of City Hive and an ESG Clarity editorial panellist.

Avatar

Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...