Feature – Diversity


“So, engagement is a first important step, but divestment should be a real tool to consider,” Shekaran said.


Join the club Diversity has a new and stronger investor voice with the crea- tion of the Asset Owner Diversity Working Group and the Asset Owner Diversity Charter, where 19 signatories represent- ing £1.8trn are committed to considering diversity and inclu- sion when appointing fund managers.


Price was a key architect of this game-changing initiative. “It was great to see the support this initiative has received, includ- ing from consultants,” she said. “Since its launch we have had a lot of interest in the industry taking on two additional signa- tories and we have also been working with different platform providers. “We want to reach more asset owners across the globe – in the US and Europe. We want to keep developing it over time, to keep the conversation going.”


I asked her how fund managers have responded, as it poten- tially puts them in the firing line. “Overall, the reaction has been great,” Price said. “The proof of the pudding will be the responses we get to the questionnaire, which will be rolled out in 2022.” So, the Asset Owner Diversity Charter is a good point to be at, but what are the next steps for institutional investors to address diversity? “Education is an important first point: understand- ing why diversity is important, the financial aspects of it, but also how it aligns with their values,” Shekaran said. “The charter is a good way of getting started because it outlines how you can start incorporating diversity and inclusion into your practices in a meaningful way,” she added. But Price does not want it to stop here. “I would love to see it embedded in the tender process,” she added, “and is part of the investment decisions managers make.” For Sarah Maynard, global head of external inclusion and diversity at the CFA Institute, there is an impetus on company leaders and investors to take a stand and embed diversity into their strategic objectives – similarly to how ESG has developed. “There are many small steps, but leadership and governance matters,” Maynard said. “So, it needs to be embedded in the business strategy.


“There also needs to be measurement. Measurement that gives real transparency, which is important.”


Boardroom diversity


When it comes to boardrooms, a big question is, why are they not more diverse? Arun Kelshiker, advisory board member at Cambridge Sustainable Investment Partners, had plenty to say on the topic.


“There has been a lot of research that shows there is an increase 44 | portfolio institutional | December-January 2022 | issue 109


Group think can be an issue with


boardroom decision making and having diversity in the room makes for a far richer conversation, far better governance and risk


management.


Arun Kelshiker, Cambridge Sustainable Investment Partners


in company performance – both enhanced performance and other risk metrics, governance and the like – which are sup- ported by a more diverse environment,” he said. He cited McKinsey’s diversity report, which highlights compa- nies in the top quartile for gender diversity in their executive teams as being 21% more likely to report above average profita- bility than companies in the fourth quartile. The report also highlights that companies in the top quartile for ethnic and cultural diversity are a third more likely to report a profit out- performance than bottom quartile companies. Analysis by Bank of America revealed that S&P500 companies with above median diversity on their boards saw a 15% higher return on equity than companies that did not have those traits. And for a racially diverse workforce, it was 8% higher. “Clearly the numbers are supportive of enhanced company per- formance linked to a more diverse and inclusive representation on the board and within senior leadership,” Kelshiker said.


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