A group of UK asset owners are inviting their peers to join them in committing to take account of fund managers’ diversity and inclusion efforts when selecting and monitoring managers.
The “Asset Owner Diversity Charter” was devised by representatives of pension investors including Brunel Pension Partnership, London CIV, Lothian Pension Fund, NEST, RPMI Railpen and West Midlands Pension Fund.
It was developed with the aim of formalising a set of actions that asset owners could commit to to improve diversity across the investment industry, such as including diversity disclosure within new investment management agreements, and where possible into existing agreements.
A key component of the charter is a questionnaire that aims to standardise complex diversity metrics – beyond just gender – to improve disclosure.
To be provided to managers annually for completion, it was developed to be progressive and enable signatories to hold fund managers to account for ongoing progress.
The second key component of the Diversity Charter is a “toolkit” to support asset owners with manager selection and monitoring, including suggested questions they can use in scored fund manager assessments.
Raising the bar
Helen Price, stewardship manager at Brunel and co-chair of the charter steering group, said information on race, age, ethnicity, sexuality and socio-economic backgrounds was not being consistently collected in a way that equipped the industry to identify barriers and make meaningful progress.
By “raising the bar on diversity disclosure” the asset owners would be forcing fund managers to confront poor performance and begin taking action, she said.
She added: “The world’s top 10 fund managers are responsible for an estimated $40trn. If they change behaviour and promote the importance of diversity, they could have a serious impact across countries and economies.”
Diandra Soobiah, head of responsible investment at NEST, said any fund manager unwilling to disclose “should be a serious red flag for investors”.
Avon Pension Fund, Coal Pension Trustees Investment and Church of England Pension Board are among pension funds that have signed the Charter, which has the backing of the government.
“It is good to see pension schemes taking a lead in developing this charter and committing to work with the wider investment industry to improve diversity,” said Guy Opperman, minister for pensions and financial inclusion.
The initiative also has the support of investment consultants, with the asset owners and consultants collectively shaping and agreeing adoption of a core set of questions to reduce duplicate requests and improve standardisation.
In a statement, the group of consultants said they believed getting consistency and agreement of key diversity and inclusion information would “help create momentum and focus across the asset management community”.
The questionnaire will be refined over time to incorporate findings from initiatives such as the Socio-Economic Taskforce. In the toolkit, the asset owners flagged that new research – commissioned by the City of London Corporation and authored by the Bridge Group – found that almost nine in 10 senior roles in financial services are held by people from higher socio-economic backgrounds (as defined by parental occupation at 14).
The launch of the Charter comes shortly after the UK financial regulator, the Financial Conduct Authority (FCA), last month launched a consultation about how to “accelerate the pace of meaningful change on diversity and inclusion” in the financial sector.
Last week the FCA released proposals to boost disclosure of diversity on listed company boards and executive management teams.
The Charter can be found here.