A lot of words have been spoken and printed supporting equity, diversity and inclusion (ED&I) from the highest levels of organisations with a consensus that it “makes good business sense” and is “the right thing to do”. But what are firms actually doing?
Fund buyers, asset owners and retail clients now increasingly want more visibility on how a company is acting to ensure a good culture that permeates the company as well as its investment practice.
Investment management companies are already fielding questions about their approach from these stakeholders as well as potential and current employees, including how they ensure that policies are equitably applied and doing the intended job.
There is increasing pressure for investors to disclose, review and understand data connected to ED&I, which may soon be formalised by regulators. However, many investors confronted by ever more data, need to understand how these are important and material to the investment process.
See also: – The dos and don’ts of diversity data
How can you give something that feels like an HR issue a more holistic view that will, in fact, tell you about the culture of the business and how this informs its investment approach and execution?
Link values, commitments and communication
External corporate behaviour is intrinsically fed by internal purpose and values; you need to assess both to understand a company’s culture. Investors need to be able to attract and retain the best talent in order to best service their clients and create the robust risk and impact adjusted returns.
One of the key roles manager research teams undertake is assessing the intentions and actions of an asset manager, looking for alignment in their respective vision and values. ED&I data has become a key part of this process, although the data may be patchy and, often, not tell a great story.
The Financial Conduct Authority, while backing moves for more disclosure, has also stated that data is only part of the picture. With a lack of agreed terminology or set of questions, finding the bigger picture can be a lengthy process.
The answer lies in creating a demonstrable link between the external commitments investors are making and to their internal values and practice, and then being able to communicate that to stakeholders.
Not only is the firm’s culture essential to provide direction, support and meaning to employee behaviour but employees can also help to reinforce and deliver the firm’s goals if they are clearly linked back to the company’s values.
This primarily means treating culture and its ED&I components as a strategic business priority, which includes resources, targets and accountability.
It means leaving space to challenge those processes in order to keep learning and improving. And it also means transparency when it comes to collaborations, expected outcomes and measures that will support increased public trust in institutions and industry.
These are valuable indicators to stakeholders and can be deployed as accountability tools.
I want to see the industry become more equitable, diverse and inclusive – both for the people working in it but also for those who need access to investment on the retail and institutional side.
I can also see a lot of energy being expended on disclosure that does not support the business to provide any context, or to understand where it stands and how it can change.