The Financial Conduct Authority and the Prudential Regulatory Authority, for instance, recently set out proposals to boost diversity and inclusion, including requirements for firms to "develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals", "set targets to address under-representation", and "collect, report and disclose data against certain characteristics".
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This last point in particular was echoed by a panel of leading lobbying and financial services industry groups, including the likes of LGIM, Nest, State Street, Invesco, Newton IM, and CIPD, who took part in a roundtable hosted by Reboot, looking how the industry can better work together to support race equity.
Research suggests there is a £3.2bn pay gap between ethnic minority workers in the UK versus their white peers, but with a persistent lack of transparency among UK employers on ethnicity pay, and given the accepted under-representation, that figure could be higher.
In 2020, the number of UK companies voluntarily disclosing their ethnicity pay gap was around 10%. That figure was significantly lower for financial services at just 4%. Against this backdrop, to date, the pace of progress in benchmarking diversity beyond gender in business generally remains painfully slow.
Runnymede Trust's ‘Colour of Money' report in 2023 showed ethnic minority workers were far more likely to be in the lowest paid jobs, living in poverty and earning less than white British employees, and while 18% of people in England and Wales belong to black, Asian, mixed or other ethnic group, according to Business in the Community, only 6% are represented in senior positions.
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Indeed, Reboot's Race to Equality: UK Financial Services report found seven out of 10 or 68% of ethnic minorities had experienced bias at work in the last year, and half of those surveyed believe those from ethnically diverse backgrounds are not offered as many career opportunities as white colleagues - with 31% of those from an ethnic minority background saying this had made them consider leaving financial services.
While these surveys show some indicative trends, it is difficult to uncover the full magnitude of ethnic pay differentials and prejudices in the corporate world. Additionally, with the financial services industry at the heart of our economic system, it has a duty to become part of the solution.
The Asset Owner Diversity Charter is an example of how change can be affected, with asset owners and consultants in the UK coming together to agree a consistent set of metrics for collection across fund managers.
A quantitative and qualitative questionnaire asks for a breakdown of the board, executive, senior management, front office roles, named portfolio managers, promotions, new hires, graduates and turnover by race. This is helping standardise the framework for disclosure of diversity within asset managers.
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The panel discussed this as an example of asset owners putting consistent pressure on their asset managers, and how this model could be replicated by these managers in communications with portfolio companies to help standardise the industry's approach.
In March 2023, the BITC called on prime minister Rishi Sunak and Labour opposition leader Keir Starmer to introduce mandatory ethnicity pay gap reporting for UK employers with more than 250 employees.
ShareAction with Reboot, 30% Club, Runnymede Trust as part of a steering group alongside other minority-led organisations, has been specifically targeting financial services companies in the FTSE 100 since July 2022.
It used a combination of annual general meetings questions, follow-up meetings and investor engagement to encourage companies to disaggregate their data, conduct an analysis behind any potential gaps and publish a strategy to reduce the gap.
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More specifically, it questioned 17 big firms at their AGMs and secured commitments from players, such as NatWest, Phoenix Group, Hargreaves Lansdown, and Admiral Group to publish data or break it down in order to compare data across different ethnic groups.
It is important to ensure momentum continues. Here are six possible steps for asset managers to help tackle the racial inequality problem:
• Use your role as shareholders to actively engage with portfolio companies on their DEI data, including ethnicity pay gaps
• Be consistent with the data/metrics you ask for
•Make it a board level priority
•Engage and educate your own employees on the role of data collection
•Maximise the data you have available to identify and tackle the gaps
•Lead from the top, and do not be afraid to talk about race and ethnicity
The asset management industry has a unique role to play in fostering greater diversity, influencing not only the portfolio companies they own, but also the wider industry.
If more financial services firms willingly publish data on pay gaps, we can begin to build momentum and demonstrate the feasibility of reporting.
In doing so, the sector could showcase the value of reporting for all industry sectors and potentially help pave the way to a fairer society, better businesses and a more successful economy.
Noreen Biddle Shah, is founder of Reboot and head of corporate communications at Numis, and Justin Onuekwusi, chief investment officer at St. James's Place