Fund managers challenged to improve diversity disclosure
A group of UK asset owners are inviting others to sign a new Diversity Charter to tackle a lack of diversity across the fund management industry.
The Charter has been devised by some of the largest pension schemes in the UK, forming a group called the Asset Owner Diversity Working Group, Co-chaired by Helen Price, Brunel Pension Partnership and David Hickey, Lothian Pension Fund. This includes representatives from Brunel, Nest, RPMI Railpen, West Midlands Pension Fund, Lothian Pension Fund, and London CIV. Together they represent more than GBP125 billion assets under management.
Fund management suffers from a severe lack of diversity. The Diversity Charter offers a toolkit for analysing how asset managers are performing on diversity and inclusion – and where they can improve.
By signing up to the Asset Owner Diversity Charter, signatories are committing to take account of diversity and inclusion records from fund managers when choosing new partners. Diversity questions will form part of the overall assessment scores for each bidder, meaning fund managers wanting to work with these clients will have to disclose information and demonstrate real devotion on how they are tackling diversity and inclusion within their workforce.
Signatories also commit to including diversity as part of ongoing manager monitoring, a questionnaire will be provided to managers annually for completion. A key aim of the group was to create standardisation to improve disclosure. The charter questionnaire has been developed to be progressive and equip signatories to hold firms to account for ongoing progress. It goes beyond asking about the strategic approach, to identify how managers look at diversity and inclusion across five key areas, industry perception, recruitment, culture, promotion and leadership.
Helen Price, Stewardship Manager at Brunel Pension Partnership, says:
“Diversity continues to be a problem for the financial industry. Information on race, age, ethnicity, sexuality and socio-economic backgrounds are not being consistently collected in a way that equips the industry to identify barriers and make meaningful progress.
“We expect fund managers to manage diversity as a material investment issue, but we question how well they’re doing this if they’re doing little to address it in their own organisations.
“Given the slow pace of progress in this area we want to help raise the bar on diversity disclosure across the investment industry by requesting data that is meaningful to us, their clients, but also to the managers themselves.
“By asking for this information fund managers will have to confront poor performance and begin taking much needed action on diversity.
“The world’s top 10 fund managers are responsible for an estimated $40 trillion. If they change behaviour and promote the importance of diversity, they could have a serious impact across countries and economies.”
Diandra Soobiah, Head of Responsible Investment at Nest, says: “As asset owners we want to work with fund managers to encourage diversity balance at all levels of their company and help build a fairer and more equitable investment industry that better represents our members. 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.
“Launching this new charter is a step in the right direction. It gives managers a chance to highlight positive diversity and inclusion practice already taking place, while putting them on a journey to addressing existing challenges and becoming truly diverse.
“Any fund manager unwilling to disclose should be a serious red flag for investors.”
David Hickey, Portfolio Manager at Lothian Pension Fund, says: “It is reasonable for pension scheme members to expect the money in the scheme to be run by a cross section of investment managers that reflect the diversity in the scheme. At the moment, this is not the case across Pension schemes in the UK. Fund management front offices are currently dominated by white men, and we are not benefitting from the talent pools available in the populations of white women, Asian men, black women – the dominance of a single group suggests a problem with hiring and with culture.