Capital markets move trillions of dollars within the global economy. Just looking at Canada, Canadian financial institutions and pension funds held $7.8 trillion in assets at the end of 2018. In fact, Canada is ranked third among OECD countries in total assets of funded and private pension plans. Seventeen Canadian pension funds rank among the largest both in North America and globally, as reported by Pension & Investments World 300.^[1]

Hence it is not a small industry. Indeed, investment banks, corporate banks, institutional investors and the broader financial services industry employ over 700,000 people across Canada and account for some of the highest paying jobs in the economy. However, it is not as diverse. Capital markets has a history of being highly male-dominated and a reputation for being unwelcoming towards women and diversity particularly in senior leadership roles.^[2][3][4][5]

This is nothing new to many leaders in investments and it is a problem that requires a solution. This is because asset management industry, including asset managers as well as institutional investors, has been facing increasing pressures from their clients, boards as well as other stakeholders to deliver returns in a more sophisticated and higher pace environment accompanied by technological disruption. They also face pressures to create a sustainable future for the next generations not just in their investments but also in their own organization. And research after research shows that only those companies with a broader and more diverse and inclusive workforce will be positioned well to succeed in the future and deliver the required outcomes.

As competition to deliver has amplified so has the competition to attract the best investment talent out there. The successful investment entity of the future will be differentiated by its culture and its ability to attract the best talent regardless of any gender, race, color, ethnicity, religion or age. An inclusive culture that leverages diverse views effectively will be an important element determining an investment firm’s success. Indeed, in CFA Institute’s Investment Firm of the Future report published in September 2018, 53% of CFA Institute members said the business case for improved diversity in the industry is strong or very strong, but only 14% said the speed of uptake of diversity and inclusion practices will be fast.

There are some potential reasons and explanations provided by investment focused firms when asked the question why diversity declines so visibly in senior ranks. These range from “there isn’t enough diversity in the candidate pool” to “women are not suitable for investments” to “we have a lot of diversity across the firm but they don’t seem to stick around for senior roles”. There is a lot being researched and discussed in investments to address this issue, but the data doesn’t seem to be changing in favor of diversity. The industry seems to be stuck when it comes to Diversity Equity and Inclusion (“DEI”).

Why is this, and what can be done to change it? What is working and what isn’t when it comes to recruiting, promoting, and retaining top talent? How do firms attract a diverse candidate pool and successfully recruit diverse candidates? What does an “inclusive” work culture look like? Have we moved beyond D&I as a “check the box” initiative?

The tools and solutions are out there. Yet, the tools that work in the Human Resources (“HR”) land do not necessarily function well or cannot be implemented in investment management functions. This is because DEI efforts are generally created and driven by HR teams who are at arm’s length from investment teams and by executives who don’t classify as “diversity” as opposed to being created by actual investment practitioners who actually represent these groups defined as diversity. While HR and senior leaders can be a great driver of these initiatives, structuring and implementing DEI in such a niche area would only succeed if these initiatives are adopted to actual investment teams by investment professionals themselves who have actively worked in that field and are part of a diversity group. The numbers confirm that.

Some of the tools that EKR applies in its DEI advisory include the following:

• work with senior executives and HR to implement gradual structural interventions that create an open and inclusive culture

• eliminate biases in promotions and retention by creating implementable promotion and retention processes directed at DEI

• create tangible DEI focused hiring and promotion targets to be incorporated into executives' performance targets

• eliminate biases in hiring by creating DEI focused hiring processes that include ensuring a balanced interview panels and balanced profile of hires

• apply the ‘Rooney Rule’ (having a balanced universe of candidates)

• create an investment skills inventory for specific job descriptions in investments

• create diversity focused job descriptions

• post jobs to wider networks that go above and beyond the traditional network of the hiring managers

• create DEI focused succession planning particularly for the senior roles

• create an internal Diversity & Inclusion Council to oversee and measure the processes and progress of these initiatives

Please connect with us to discuss our DEI solutions in more detail.