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Every Chief Risk Officer should be having sleepless nights over the lack of diversity in the investment industry

Investors are taught to diversify portfolios to mitigate risk. They need to diversify their decision-makers for the same reason, says Bev Shah

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Recent global events have propelled the topic of race up the agenda, and for many of us has resulted in questioning of our own behaviour both personally and professionally. We’ve seen many even pledging publicly to do more to effect change.  

The investment management industry has an improving track record of being able to use our power to challenge the behaviour of the companies we invest with. We’ve embraced a broader definition of stewardship. We put out statements about our voting policies and join initiatives to push others to do better. And there have been important, collaborative successes such as shareholder resolutions on climate and increased scrutiny of remuneration – often driven by engaged asset owners.  

But what about our own teams and firms? Hold a mirror up to the investment management industry and the picture is one of senior leadership with attitudes and policies that look in need of an update. It’s no longer sufficient to preach to the companies that you invest in. Your clients have already woken up to this, with questions that have arrived in RfPs about not just the product and fund manager, but about the company and brand. They are looking for evidence of authentic words backed with real action.  It’s time for the industry to embrace the principles it espouses so easily to others and fully back cultural change – that ultimately supports responsible and sustainable investment objectives.

In my opinion every Chief Risk Officer should be having sleepless nights over the lack of diversity. We are taught to mitigate our risk by diversification and a multi asset portfolio will be a mix of asset classes, currencies, sectors, cap size, geographies and yet the majority of the people actually making the decisions are very similar, whether it is a common gender, ethnicity, socio-economic profile or schooling. Although sustainability roles show more representative diversity, we have yet to see much of this filter upwards to key decision-making roles. The risk is a limit to the cognitive diversity in teams and group think at senior levels.  It means we fail to telegraph or correctly assess risks, because we have got used to being cushioned from impacts. It has taken the scale of the climate emergency to bring it into sharper focus for leaders. What else are we missing?

Hold a mirror up to the investment management industry and the picture is one of senior leadership with attitudes and policies that look in need of an update

As an ethnic minority woman who has spent more than two decades in the City, I am troubled by the statistics. An audit of public-sector pay in London carried out for the mayor, Sadiq Khan, found that Black Asian and Minority Ethnic (BAME) staff were paid up to 37% less on average. In December 2018, the BBC reported that academics from ethnic minorities experience a 26% pay gap in the UK. Black female academics were paid 39% less than white men at Russell Group universities.

The UK Parker Review in 2017 found that over 50% of FTSE 100 companies had no ethnic representation on their boards and set a target for the FTSE 100 to appoint at least one board-level director from a BAME background by 2021. Some progress has been made but not enough to hit this target. Earlier this year, only 37% of FTSE 100 companies did not have any ethnic minority representation on their boards. From this we can extrapolate that boards are not serious about addressing the representative shortfall and therefore, they are missing the opportunity of people with different backgrounds, biases and beliefs supporting more robust decision making. More than 70% of revenue generated by the FTSE 100 is outside the UK, yet they are not even close to representing their customer base. 

Should we be challenging our own organisations?

There is of course a lot of talk about the importance of having a diverse workforce and due to the requirements for gender pay gap reporting, a perception has developed that companies are focusing all efforts on improving diversity and conditions for minority groups in the workplace. The gender pay gap numbers tell a different story, and highlight that this is a structural issue that will take time to fix. Fixing, of course, will only happen with commitment to actions, backed by hard resources, soft leadership that focuses on the value of people and the development of role models across job functions.

Boards empowered with budget to invest properly in people is required if we want to build a strong diverse pipeline to leadership, but this is not seen as a business priority. Perhaps because the people at the top have no real-world experience of a glass ceiling. After all, they made to the top! For others from diverse backgrounds, getting to the top is comparable to climbing the North Face of the Eiger.

Just like responsible investment, changing culture to create an inclusive and dynamic industry means we have to collaborate with shared goals for change, to address our individual and collective shortcomings and lost opportunities.

Improving Diversity, Inclusion and Equality is a part of your sustainable responsibilities and, while pushing others, we need to look at ourselves and ask our own organisations what are we doing and why do we not take it seriously but expect others to?  Otherwise you are diluting the impact you are having in the world.


Bhavini ‘Bev’ Shah is the Founder and CEO of City Hive, a network dedicated to championing inclusive culture in the investment industry. Prior to setting up City Hive, she spent eight years as an analyst for Aviva Investors.  



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