Aleksandar Ivanovic, Head Client Coverage, Head of EMEA and Switzerland, UBS Asset Management: As we emerge from the pandemic, there is a real opportunity to address some of the inequalities that have widened across society.
The increased focus on diversity and inclusion of women and minority professionals has encouraged many companies to reassess their approach.
So how is the investment industry increasing their focus on inclusivity and will this be an opportunity to build back differently post-pandemic?
Will businesses become more equitable, and is adopting Diversity, Equity and Inclusion (DEI) initiatives a ‘nice to have’ or a business imperative?
How do you approach DEI?
Luba Nikulina, Global Head of Research, Willis Towers Watson: In terms of our approach, I think the important part there is the question why we need to be spending a lot of time on it. Why do we need to include it in the objectives of our senior leaders? Why do we need to do much more than we did in the past? And frankly, more than we do right now? The real change has come with the realization that actually doing this will lead us to better outcomes. They could be investment outcomes. They could be business outcomes, but having this allows us to achieve better results. And to be able to achieve this diversity, of course we need equity and inclusion.
It's a prerequisite, but of course you cannot change the world overnight. There is still a lot that needs to be done.
Rich Nuzum, Global President, Investments & Retirement, Mercer: We look at it through two lenses, one is how do teams come together to make better decisions amidst ambiguity and amidst stress, and then the second is a stakeholder capitalism, social license standpoint. What do clients expect? So, let me let me give you another layer on each of those.
I think it's really well established in the research and I imagine every participant in this discussion could reflect on groups they've been part of. And if you think back, the more diverse the group, the more options are generated, which means more ability to capture return in an investment sense, and then also because you're generating more options because the group is more creative for being more diverse you recognize more of the risks that could happen.
Aleks: Talking about what clients expect and the marginal edge and better outcomes, to what extent would you say being a leader in DEI is absolutely essential in today's day and age and why?
Rich: I think it's a mistake for a company to try to brand itself as a leader in DEI because the danger of getting hit with accusations of rainbow washing is so strong. I think it's smarter to say on DEI we're going to do the following things. We're committed to diversity, equity, inclusion in our workforce to drive these outcomes and then go 80/20 on the actions relative to the words. Under-promise and over-deliver.
And that can be difficult because CEOs like to lead. They may be tempted to do the Kennedy moon shot announcement. We're going to put a man on the moon by this date and everybody at NASA is thinking "how are we going to do that"? And we've seen some leaders go out and make DEI announcements. You know our workforce will get from 10% to 20% racial minority by X day, even though we're in the tech industry and their employees and mid-level managers and line managers are thinking, "how do we possibly do that within that frame of time"?
Now there's a benefit to the moon-shot announcement, but the danger in a social media enabled world and in the investment management industry is that your clients look at that and are they see the announcement and they expect you to get there. And if you fall short, they're going to hold you accountable. And so you get the accusations of rainbow washing and that actually detracts from the focus.
Luba: I think that there is an opportunity to create a bit of competitive edge and Rich and I, we do compete for clients.
We do compete for attracting talent, the best talent. I know that we are moving in the same direction of ensuring that the way we operate our business in a diverse and inclusive way and that we prefer to work with diverse and inclusive firms in the asset management community. And then can we just push the boundary a bit more there?
What could we do as a firm to become even more inclusive to attract the best talent? What could we do as an investment consultant to figure out in this massive asset management universe which firms are there at the edge and encourage them to move faster on this journey of the stakeholder capitalism and the diverse decision making that we all seem to agree leads to better outcomes. So, it's also an opportunity for many of us compete and try to do better, move the needle even further in this field.
Aleks: What are your areas when it comes to diversity and focus points as it relates to WTW?
Luba: There are obviously a number of lenses for looking at diversity. And then there are also a number of levers that you can pull to ensure that you create the right environment for the diverse talent to thrive. And, as I mentioned in my initial remarks, the conversation has moved on quite significantly after the realization has settled in that this actually makes absolute sense, not only from the societal expectation’s perspective, but also from the commercial and investment perspective. And just thinking about some steps on our journey.
Data in this area is quite difficult to gather so we are collecting data on educational background, age, disability, gender, ethnic diversity. This data is somewhat different in different geographies, so it's a bit more difficult to analyze it globally.
"You can only manage what you measure so getting the right data is crucially important."
Aleks: Rich where do you see the DEI effort heading? And what do you think you can achieve within Mercer within the next five to 10 years? A long time, of course, but maybe there are some pockets of things that you can share with us today.
Rich: I'm breaking my own rule, but we're focusing on two main things. One is a) 30 by 30 goal. So we've looked at the gender diversity of investment managers, and I'm sure UBS is looking at the same thing at the company level, but we're picking investment managers so we looked at the gender diversity of investment managers and I agree with Luba about the rising importance of data.
We don't have that data for all the managers that fill out our questionnaires. The fields are there, they haven't all completed it, which by itself is not great.
But clients are interested. Managers know they can't get highly rated without completing the field, so the data is improving quickly and we're collaborating with others in the industry to try and improve the data.
"So we're looking to have the average gender diversity in the strategies we highly rate or use in our investment management portfolios above 30 by 2030."
That's our internal goal. That's our moon shot. And to get there we need help from our client base and help from the investment management community. The investment management community will have to change and become more diverse.
Aleks: I think measuring progress ultimately is all about having the right underlying numbers as well. OK, I think there are some obstacles clearly but let's put numbers and data aside.
What are the other challenges and obstacles that are out there that stand in the way for all of us to collectively make an effort on DEI?
Luba: I am really happy that the obstacle of changing mindsets and also having the conviction of wanting to do it for the right reasons is no longer such a big obstacle as it was maybe 10 years ago. So, the many senior leaders in our industry that we interact with, be it clients be it asset managers they do want to make this change for the right reason.
The problem is if we allow things to just evolve naturally and allow this generational change in attitude towards diversity to settle.
It would take us 100 years, not 10 years, so the progress would be very slow. As a result, we really need to take meaningful action that is much more than the natural progression of talent and hiring women or ethnic minorities at the junior level.
And this is where the hurdle arises that there is just not enough diverse talent in our industry at the moment. And this means that when we look at bringing in new talent when new opportunities arises at mid-level or senior level, we as senior leaders need to be much more recruiting diverse talent from different backgrounds rather than always search for a long track record in investments and asset management.
Aleks: I think the whole notion on the recruitment side is absolutely critical and trying to hire also with different perspectives.
Any further thoughts from your end on what the potential obstacles to DEI are?
Rich: I think there are some really big ones in there. As we continue to push to get the gains of diversity and the real impact on results and the better acceptance, the better social license to operate, more consistency with stakeholder capitalism and community expectations.
Doing this to get better investment results and doing this because it's right thing to do as we try to navigate towards our goals, technology, the scale of the challenge and I guess a couple of things that haven't come out yet - you can have diverse people in the room, but are you really including them in a way that allows them to bring their whole selves to work?
And it's Pride month globally. So, I'll give you an LGBTQ+ example. Our stats and research say that in the UK where there are very strong protections for LGBTQ+, only half of colleagues are out at work and comfortable being out at work. If you're trying to conform and look like everybody else, act like everybody else. How can employees possibly give the full benefit of their creativity and diverse perspective?
Aleks: I could not agree with you more and I think every one of us has to challenge our thinking. But switching gears, how do you view rainbow dressing and what is genuine progress?
Rich: Well, I'll steal from my colleagues in the career business, not my area of expertise, but the work they're doing with corporations, so this probably gets into the type of work UBS does looking at companies to invest in.
One piece of work we did is that more than 80% of companies have set DEI goals. OK, that's good. How many of them have a multiyear strategy that's understood by their middle managers and their line managers and the numbers dropped to the 40s and a percent in 30s?
So that's a say-do gap. Now that may just be a matter of time, they announced the goal and now they're figuring out the detail. But the action, those hiring decisions Luba mentioned and development and engagement, and who's in the room for decisions? Who's consulted with and who gets to go to the meeting?
The other thing I'd comment on is the importance of allyship!
Luba: Maybe just to add another angle on the same theme of, essentially "diversity washing". Because the societal expectations have changed and because clients and investment consultants are asking investment managers to improve, what I see more often than I would like is that in their honest desire to change, some senior leaders bring diverse talent in, but they don't work hard enough, and fast enough to change their culture and create the right environment for this diverse talent to thrive. The only way to achieve your diversity objectives is through creating an inclusive culture.
Please note, all views expressed are panelists own and should not be relied upon as investment advice.