Feature – Diversity Hub
the important process of people managing the money and diversity is becoming a key part of that in terms of understand- ing and evaluating a fund manager team.”
Drivers of change
Where then, can real change come from? “There are three driv- ers,” Onuekwusi says. “One is the government, in terms of col- lecting data across the financial industry. Then there is the reg- ulator. Last year’s discussion paper from the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and Bank of England gave some indication that it is going to be powerful when it finally comes out, in terms of thinking about how companies go about their business in addressing diversity. “And, of course, asset owners, who decide where money goes, have a real role to play,” he adds. “Together they are something of a trinity: the government, the regulator and asset owners, and they are important for driving change.” The triumvirate of FCA, PRA and the Bank of England seems keen to tackle the issue. “Diversity and inclusion can reduce groupthink, encourage debate and innovation, and thereby improve outcomes for consumers and across markets, sup- porting financial stability.”
A first step has been made. FTSE companies are now required to ensure that at least one third of their board members are female and, since the Parker Review, they are also obliged to include at least one director from an ethnic minority back- ground. By the end of 2020, 89 of 100FTSE companies had complied with the new rule. But there are those working to make blue chip companies do more in this area. For example, Share Action, a responsible investment charity, is targeting the financial sector to tackle the ethnic pay gap.
If such thinking is followed through it could be a game changer, especially in influencing and boosting diversity within asset management teams.
Standing together
And from the asset owner perspective, the push for more diverse asset management teams is being spearheaded by the Asset Owners Diversity Charter, which was created by the vari- ous pension schemes behind the Asset Owner Diversity Work- ing Group, including Nest, Railpen, London CIV and Brunel Pension Partnership among others.
As part of this wider push, diversity questions form part of the selection process – meaning that fund managers wanting to work with these asset owners have to disclose information on, and demonstrate their commitment to, diversity and inclusion within their teams. Signatories also commit to include diversity as part of their
48 | portfolio institutional | November 2022 | Issue 118
If you are going to go out with a strong ESG message, then the S of ESG is clearly important and it is hard for asset managers to hold others to account when asset managers are not holding up a mirror up to
themselves. Justin Onuekwusi,
Legal & General Investment Management
ongoing manager monitoring with a questionnaire provided to managers annually for completion. A key aim of the group is to create standardisation to improve disclosure. This again could be an industry game changer in assessing diverse asset management teams and tracking how proactive particular asset managers are on the issue. The charter contin- ues to grow, and is now supported by 23 signatories, who col- lectively manage more than £1.7trn worth of assets. Its finan- cial clout is real and substantial. “As asset owners we want to work with fund managers to encourage diversity at all levels and help build a fairer and more equitable investment industry that better represents our members,” says Diandra Soobiah, head of responsible invest- ment at Nest. “Having a diverse range of skills, backgrounds and experience will lead to better investment decisions and financial outcomes for our members in the long term,” she adds.
Importantly, the charter has the government’s support with Guy Opperman a vociferous backer when he was pensions minister. It will be interesting to see if Alex Burghart, his replacement, will continue to support this initiative.
Adding value
And boosting the assets in diverse investment funds – and cre- ating a larger set of opportunities for investors – starts with
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