Diversity In Asset Management: From Words to Actions

In a recent ESG Leaders interview, co-founder of Responsible Investor Tony Hay interviews Marie Dzanis, Head of EMEA at Northern Trust Asset Management on the firm’s approach to diversity, equity and inclusion (DE&I).

Sponsored by Northern Trust Asset Management

 

In a recent ESG Leaders interview, co-founder of Responsible Investor Tony Hay interviews Marie Dzanis, Head of EMEA at Northern Trust Asset Management on the firm’s approach to diversity, equity and inclusion (DE&I).


TH: DE&I is increasingly becoming a focus for asset owners and managers. What are the drivers behind this?

MD: I think the industry is starting to understand that diversity is a systemic inequality issue.  Social unrest was brought to the fore during the pandemic, lending a sense of urgency to achieving better representation in the business world. There’s also a very strong business case for diversity: firms in the top quartile for racial and ethnic diversity are 35% more likely to have above-average financial returns, and in the UK, findings suggest that for every 10% increase in gender diversity at the senior executive level, operating profit rises by 3.5-4%[1].

The financial sector is lagging on diversity, however. Research shows that women make up just 20% of executive committees and 23% of boards across almost 500 financial institutions[2]. Furthermore, fewer than one in 10 management roles in the financial services industry are held by black, Asian or minority ethnic (BAME) people[3] – but the industry is waking up to this.

 

TH: To what extent is DE&I becoming a win-lose manager selection component?

MD: Asset owners and consultants appreciate the business case for diversity and there’s an ongoing expectation for leadership. We’re seeing more and more questions on diversity in due diligence questionnaires and on RFPs. In the UK, the Asset Owner Diversity Working Group is requesting standardised disclosures from managers on a range of complex diversity metrics, and its toolkit demonstrates how members can consider diversity in manager selection and monitoring.

 

TH: The asset management industry is still behind the curve on DE&I. How does Northern Trust Asset Management compare to the rest of the sector?

MD: We’re proud to prioritise DE&I in our business globally, and we continue to push ourselves – and our peers – to make meaningful progress.. We’ve achieved 61% gender, racial and ethnic diversity in our Asset Management Executive Group and 39% representation from people of colour (POC) on our board[4]. Our investment teams have 25% BAME representation in the UK, while in the US we’ve reached 29% POC representation – that’s compared to 28.3% POC representation in the US population and 15.3% BAME in the UK[5].

 

TH: How have you achieved this?

MD: We undertook a global DE&I strategic assessment in 2019, resulting in a DE&I strategy aiming to drive accountability, enhance and develop programmes and placements, and advance culture. To improve accountability, we created a DE&I dashboard to track progress on hiring, retention and promotion. We also have a strong governance model – our Global DE&I Executive Council has strategic oversight on diversity, and from there, it cascades down to regional business units and country-level DE&I councils chaired by senior leaders. It’s important that leaders at every level are committed to our diversity agenda.

Our second priority means we’re developing diverse talent at all levels. In EMEA, our efforts include a diverse leaders programme, circles for junior female talent, and cross-company talent accelerator programmes. To further diversify culture – our third priority – our dedicated Business Resource Councils provide networking and mentoring for employees of various backgrounds, including women, LGBTQ, black, Asian and Latin heritage groups. We have mandatory training for employees on unconscious bias and inclusive leadership, and encourage open conversations about mental health between teams and managers. All these steps feed into a holistic approach to diversity.

 

TH: How have you implemented a strategy for boosting the inclusivity of your recruitment process?

MD: In 2018, we introduced a gender focus when hiring for senior-level roles, resulting in an increase of women hired at our most senior level from 33% to 55%. In 2019, we focused on removing biases from our hiring process by developing more inclusive job descriptions and implementing mandatory training for those responsible for hiring. We aim to have a diverse slate of candidates for every role across all regions, and it makes a big difference that our interviewers are diverse too – it communicates how we think about talent and ensure the right people enter and succeed in our organisation.

 

TH: Do you see DE&I as being a positive driver of company performance?

MD: Absolutely. Companies that have diverse leadership and fair workplace environments make great decisions – and that could be an investment opportunity.

 

TH: How do you engage on DE&I with the companies you invest in?

MD: We push for DE&I reporting to include both qualitative and quantitative metrics across different levels of employment. We take this into account when voting on diversity-related shareholder resolutions, which surged to more than 60 this year after relatively few in 2020.

Our proxy committee set a standard this year that all boards must be 20% female, and US boards have at least one ethnically or racially diverse director, and last year we withheld support from 780 director nominees at companies lacking board diversity, including a number of votes against directors in the S&P 500 for lack of diversity and poor disclosure.

 

TH: What can the financial industry do to accelerate the diversity agenda?

MD: We need better data and better measurements – both qualitative and quantitative. Another very important theme is local regulations. Certain countries do not allow measurement or producing metrics around ethnic minorities, and we would urge local regulators to change that.

 

TH: Finally, if you could wave a magic wand, which aspects of DE&I would you change today?

MD: In my opinion, firms need to ask themselves, does our culture allow for people to challenge our process and values, and bring completely different insights to the executive table? Only when we allow change can we evolve for the better.

To watch the full interview, click here

[1] McKinsey & Company – Why diversity matters

[2] Oliver Wyman – Women In Financial Services 2020 Report

[3] FCA – Diversity and inclusion in the financial sector – working together to drive change

[4] Northern Trust Asset Management – as of December, 31 2021

[5] Northern Trust Asset Management – as of December, 31 2020

 

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