Yearly Archives: 2021

Racial diversity—iniquity and interdependence

Whilst gender diversity has been a growing priority for several years, investors have not approached racial diversity with similar enthusiasm and urgency. In the UK, the Parker Review and Baroness McGregor-Smith’s recommendations urged public policy makers and private organisations to focus on increasing ethnic minority representations on boards in FTSE 100 companies [1] and publishing ethnicity pay gap figures. [2] However, little progress has been made. The topic of racial diversity in the investment industry was recently raised in an open letter in the UK from a group called Black Women in Asset Management, challenging the industry to move beyond statements on solidarity and anti-racism. [3] The extensive Black Lives Matter protests, catalysed by the killing of George Floyd, have highlighted our interdependence in the midst of a global health crisis and the urgent need for action. It is time to ask what institutional investors can do to address the increasingly evident racial iniquities and their inconsistency with commitments to responsibility in business and investment.

Unequal opportunities

Institutional investors face a significant cultural challenge in addressing the problems of racism, unequal opportunities and an associated lack of racial diversity in their industry. It is no longer sufficient that they simply declare what they expect of investee companies in respect to diversity. They need to act upon this and embrace diversity within their own investing institutions or asset management businesses. They have an opportunity to draw parallels between the power of diversification in their investments and diversification in their hiring and management of talent, as adding significant value in both contexts. Investment teams with diverse backgrounds contribute with a larger variety of perspectives, which will ultimately increase the quality of investment decision-making.

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