Pension asset owners 'take charge' of D&I disclosures with launch of Diversity Charter

The Asset Owner Diversity Working Group, representing £125bn in assets under management (AUM), has announced the launch of a new Diversity Charter, which aims to increase the level of diversity and inclusion information shared by fund managers.

Signatories to the charter will be required to commit to taking account of diversity and inclusion (D&I) records from fund managers when choosing new partners, with diversity questions to form part of the overall assessment scores for each bidder.

This in turn will mean that fund managers wanting to work with these clients will be required to disclose information and demonstrate “real devotion” to tackling diversity and inclusion within their workforce.

Signatories will also be required to commit to including diversity as part of their ongoing manager monitoring, with a questionnaire provided to managers annual for completion.

In addition to considerations around strategic approach, the questionnaire asks managers to look at D&I across five specific key areas: industry perception, recruitment, culture, promotion and leadership.

The charter was developed by the Asset Owner Diversity Working group, which includes representatives from from Brunel, Nest, Lothian Pension Fund, RPMI Railpen and West Midlands Pension Fund, totalling over £125bn AUM.

Alongside support from this initial steering group, the charter has already received backing from the broader industry, with asset owners representing £1.08trn pre-declaring their support.

This includes: Avon Pension Fund, Barnett Waddingham, Church of England Pension Board, Coal Pension Trustees Investment, Cornwall Pension Fund, Environment Agency Pension Fund, LCP, LGPS Central Limited, Local Pensions Partnership Investments Ltd, Redington and Willis Towers Watson.

The charter has also received backing from Pensions Minister, Guy Opperman, who stated: “We need asset managers to be more representative of the savers they represent. 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. I encourage all pension schemes to sign up.”

A number of consultancies, including Aon, Barnet Waddingham, Bfinance, Buck, Hymans Robertson, LCP, Mercer, Redington, and Willis Towers Watson, also provided support in the development of the questionnaire.

Indeed, a statement from the broader group highlighted the inclusion of diversity and inclusion data collection as an "increasingly important" part of manager research for consultants.

“We believe that agreeing a common baseline and getting consistency and agreement of key D&I information required by investment consultants will help create momentum and focus across the asset management community," it stated.

“We recognise that not all firms are going to be able to complete the whole questionnaire at the outset. The idea is for us to outline the direction of travel.

"We are not looking to make judgments based on a single snapshot, nor to benchmark asset managers against each other, but to understand each firm’s strategy, policies and approach to D&I and assess their progress against that as broadly as possible, taking a long term view and holding firms to account for ongoing progress.”

Furthermore, as a multi-year project, the group confirmed that further refinement is expected to be made to the questionnaire in order to integrate findings from initiatives such as the socio-economic taskforce, while a progress report will be produced a year from launch to identify developing best practice.

Commenting on the launch, Lothian Pension Fund portfolio manager and Asset Owner Diversity Working Group co-chair, David Hickey, stated: “It is reasonable for pension scheme members to expect their money to be run by a cross section of investment managers that reflect the diversity in the scheme.

“At the moment this is not the case across pension schemes in the UK. Fund management front offices are currently dominated by white men, and we are not benefitting from the talent pools available in the population – the dominance of a single group suggests a problem with hiring and with culture.

“We are hoping that the diversity charter will allow us to look under the bonnet of firms’ policies and practices and find out what is causing the kinks in the hosepipe, which are particularly extreme with regards to black talent.”

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