Consulting firms at the centre of driving change around diversity disclosure in asset management turn the focus onto their own organisations with a commitment to reporting by the same standards. President of Verus, Shelley Heier, who is the driver of the IIDC explains the impact.
In late 2020, we issued a call to action to our fellow institutional investment consulting firms to unite around the importance of gathering diversity data on asset managers.
Our focus was not simply on data at the firm ownership level, the traditional metric of evaluating diversity, but on leadership and investment team levels as well. As a result 24 consulting firms, representing $32 trillion in assets, are now members of the Institutional Investing Diversity Cooperative (IIDC).
The IIDC holds two core beliefs: first, that diversity of investment teams leads to better results and, second, that diversity in our investment industry can be realized only if investment firms cultivate diverse talent and offer opportunities for advancement at all levels. This means developing diverse talent in portfolio management and analyst roles where future leaders and owners of asset management organizations will come from.
One year into this initiative, our data partner eVestment reports that 947 asset managers have provided diversity data on nearly 9,000 products. This is over 37 per cent of the active products in their traditional manager database. Membership in the IIDC has grown from 17 original founding members to 24 today, and more are engaged in discussions to join.
To further underline the importance of diversity data, compel the asset management industry to provide their data, and meet asset owners’ increasing appetites for this data across their vendor landscape, we at the IIDC have agreed to apply the same diversity reporting standards to ourselves. All IIDC members will gather and report on their diversity profiles using the same definitions that have been set for asset managers. While asset managers will focus on investment product teams, consultancies will report on diversity of ownership, leadership, and investment professionals.
Reaching agreement with 24 independent consulting firms was not easy and was likely representative of conversations happening in the executive offices of many asset managers as they grapple with if and how they provide their diversity data.
First, getting the data is hard! Small firms don’t have the HR systems to track employee census data in this way. Large firms have very complex HR systems and changing them is incredibly complex. The data we want is different from the EEOC’s. It will be a big task to get the data, and it will take time to do it well.
Second, this is scary! How will the data be used? Will this result in binary decision making? “We know we have a lot of room for improvement but we’re in a non-diverse region” or “given the size of our firm it will take a long time to move the dial, will we be blacklisted in the near-term?” The concerns shared in our IIDC meetings tended to end with something like “but we are actively making the right changes in our recruiting practices, our inclusion efforts, and our pay practices, and we believe these will result in real change.”
Yet in spite of these concerns, all our conversations reaffirmed that a more diverse investment management industry – asset managers and consulting firms alike – is a valid goal which can be achieved by doing a better job at attracting, retaining, and promoting diverse talent. Because we shared this vision, we were able to bridge our fears and the many logistical challenges we face by acknowledging that we need to start somewhere. Therefore we agreed to not worry about rigid application of this standard yet, and just like we are with asset managers, engage in telling the what and how along with the numbers. Providing more transparency on practices and being willing to be measured is an important first step in progress.
In the future, we will provide asset owners a good bookmark for where our industry diversity was in 2021 and how much progress we have made since then. This measurement of progress and emphasis on the teams impacting investment performance will require our industry to invest more significantly in the recruitment, retention, and cultivation of diverse talent. As they say, you get what you measure. We have to start measuring to get the progress we need.
Shelly Heier is president of Verus.
To access the consulting firm diversity template visit www.iidcoop.com.