In September, the Financial Conduct Authority and Prudential Regulation Authority unveiled a consultation paper setting out proposals to boost D&I, noting the diversity standards will be "flexible" and "proportionate", with greater requirements placed on larger companies.
These will include the development of a D&I strategy setting out how companies will achieve their objectives and goals; the collection, reporting and disclosure of data against certain characteristics; and the setting of targets to address underrepresentation.
In a Treasury Committee hearing on Wednesday (15 November), representatives from the Investment Association, UK Finance, the Alternative Investment Management Association and the Association of British Insurers said the proposals had been welcomed by members.
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Adam Jacobs-Dean, global head of markets, governance and innovation at AIMA, told MPs that its members, mainly hedge funds, had embraced the reality the regulator is now focusing more on non-financial misconduct, which he deemed "absolutely critical".
However, he said there is more that can be done in articulating what the proposals mean in practice, arguing it is "not helpful to leave it entirely to firms to try and navigate something that is not necessarily always clear cut".
Karen Northey, director of corporate affairs at the Investment Association, said its members support the FCA's direction of travel. However, she noted the association had yet to do a "deep dive into the specifics", particularly into how to collect the data required.
UK Finance's Sarah Boon, managing director of corporate affairs and strategic policy, said any regulation must be "proportionate" to understand how it can impact smaller members.
"There is definitely some greater clarity that is needed in a couple of the areas of the consultation," she said. "There definitely needs to be greater clarity about where the dividing line is between people's private lives and their working lives, which is currently slightly unclear."
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UK Finance has been engaging with the FCA with regards to the data requirements, she said, which will need "really sensitive positioning" within all of its members, so they can "respond appropriately".
"One of the things in the consultation that has been pulled out is that for colleague surveys, is that ‘don't knows' could be an indication of bad culture," she said.
"That is not necessarily the case for the members that we have spoken to, so that is another thing that we are discussing with the FCA."
Boon noted that while members agree on the regulator's policy intent, it will be crucial to be transparent about how the requirements are supervised in practice, with adequate training in what they should be examining on a "consistent basis".
Persistent gender pay gap
At the hearing, which was part of the TSC's Sexism in the City inquiry, MPs raised concerns over the limited progress made on removing gender pay gaps in the UK asset management sector since its last evaluation in 2018.
The Investment Association's equity, diversity and inclusion data survey, published today (16 November), found that the median gender pay gap has dropped from 31% in 2018 to 25% in 2022, while 16% of firms reported an increase.
The median gender pay gap represents the difference between the midpoints in the ranges of hourly earnings of men and women.
Meanwhile, the median bonus gap has fallen from 55% in 2018 to 46% in 2022. This means women working in the asset management industry receive 46% less in bonus compensation than men, excluding outliers.
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Between 2018 and 2022, the IA said there has been "little change" in the gender balance across pay quartiles. On average, the highest paying jobs continue to be dominated by men with marginal movements in the gender balance in the lowest paid jobs.
John Baron, Conservative MP for Basildon and Billericay, said progress has been "painfully slow" and moves to increase female representation in the asset management industry have not been "good enough".
"I wish I could pinpoint the one thing that we had to change because of my own vested interest, I would love to change that for my daughter and others," said the IA's Northey.
"But I think that if I had to say the overarching driver of what needs to change, that would be culture. A lot of that is culture within individual firms, so it starts at the beginning of someone's career."