Investors want transparency on diversity

The momentum around diversity and inclusion in the investment industry continues as consulting firms put pressure on asset managers to report on diversity and institutional investors in Canada and the US commit to solving inequities related to diversity.

US consulting firm Verus has teamed up with eVestment, which is an institutional investment data and analytics company, to enhance its questionnaire to include diversity statistics at the firm and team level, as well as details on firm policies and initiatives to increase the level of gender and ethnic diversity within senior leadership and investment teams.

Verus has also sent a call to action to fellow consulting firms to invite them to join the initiative. It is thought that in teaming up with other consultants, the asset management industry may be more responsive to the data request.

President of Verus, Shelly Heier, said the firm believes that diversity of perspective and thought can contribute to better investment results.

“Many of our clients also share our passion to improve diversity in the investment industry, but it has been frustrating to not have any way to measure diversity and efforts for improvement. It’s long overdue to collect this information and we’re excited to have a partner in eVestment that is able to collect the information needed.”

Other consulting firms, such as Albourne, have also been at the forefront of promoting diversity and inclusion in asset management. In August this year Albourne teamed up with AIMA to develop a new diversity and inclusion questionnaire for all alternatives managers.

Asset owners are increasingly assessing managers on diversity and inclusion measures. Jonathan Grabel, chief investment officer of Los Angeles County Employees Retirement Association said diversity and inclusion is a fundamental part of the fund’s investment philosophy.

“LACERA actively assesses current and prospective investment partners on how they effectively access, develop, and retain diverse talent and cultivate inclusive workplaces to achieve the best outcomes.”

CalPERS, the largest pension fund in the US, has a commitment to diversity that is reflected in investment beliefs and in its strategic plan. Engagement with companies and advocacy with regulators is among the implementation techniques.

“We are very clear on our focus in this area,” says Henry Jones, the fund’s president.

In August 2016 the CalPERS investment committee adopted the fund’s sustainable investment strategic plan which among other things identified corporate board diversity and inclusion as a strategic initiative.

Over the past few years CalPERS has engaged 733 companies on the lack of diversity on its boards and since 2017, 53 per cent of those companies have added a diverse director to their boards.

In an interview that is part of a podcast series Sustainability in a time of crisis Jones also outlines the fund’s plan to look at racism in its portfolio.

“This is both a moral imperative and economic necessity and corporate accountability is vital. We welcome the attention brought to this issue in business, and tracking racism,” he said, adding that CalPERS is undertaking a new research project to identify where to focus attention to make progress.

“Mapping racism as a systemic risk means we should track this across the portfolio, but right now we don’t have the tools or the data. It is not unlike where we were on climate as a systemic risk, we didn’t have the information and had to build a data model and action plan with our partners. We need to do that with addressing racism and have commissioned research on this.”

Meanwhile Canadian institutional investors managing more than $2.3 trillion in assets have signed the new Canadian Investor Statement on Diversity & Inclusion.

The statement looks at the role that institutional investors can play in contributing to inequities in Canada by taking intentional steps to promote diversity and inclusion across portfolios and within their organisations.

Signatories to the statement, which include some of the largest institutional investors in the country, acknowledge the existence of systemic racism and its impacts on black and indigenous communities and people of colour, while further acknowledging the existence of inequities and discrimination based on other factors including, but not limited to, gender, sexual orientation, age, disability, religion, culture and socio-economic status.

Kim Thomassin, executive vice-president and head of investments in Québec and stewardship investing at CDPQ said long-term investors have an important role to play in engaging portfolio companies towards best practices in terms of diversity.

“It has been shown that diversity is a lever for improving performance, which is why CDPQ has positioned diversity and inclusion as a pillar of its sustainable investment strategy. Moreover, we understand how inclusion is closely related to equal opportunity and social justice. We encourage our peers to make this subject a priority,” she said.

Peter Lindley, president and CEO of OPTrust said investors can influence and create transformation by defining quantifiable measures.

“Dismantling systemic racism, discrimination and barriers to senior roles for Black, Indigenous and people of colour demands action. Representation matters and institutional investors should reflect the diversity of the markets in which we invest. OPTrust is committed to putting in the work and holding ourselves accountable to realise greater equity,” he said.