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Race, ethnicity and investing

Practice what you preach

In the second article in our series on racism, we explain why asset managers need to get their own house in order to be a credible agent for change at the companies they invest in.

“The colour of my skin has already put up a mental barrier to what my aspirations are. I manage my expectations and my aspirations, telling myself this probably won’t happen,” says Elizabeth Atoyebi, associate for infrastructure equity at Aviva Investors. “Things are achievable in this industry. There are ways to network and to move up. But it’s hard to justify having such aspirations when I see nobody who looks like me in certain positions. I’m not even thirty, but I already know that.”

The colour of my skin has already put up a mental barrier to what my aspirations are

The enduring presence of institutional racism and discrimination, particularly against black people, means all companies need to set themselves clear pathways toward proportionate inclusion of ethnic minorities. For asset managers, engaging with companies, as well as governments, industry bodies and NGOs to effect change represents part of their stewardship responsibility. But for the demands to have teeth, the changes cannot be one-sided.  

Dawid Konotey-Ahulu, co-founder of investment consultancy Redington, says progress in financial services has been painfully slow, with little change in his 30 years in the industry. However, he now sees a real intention to change from financial organisations – something he has been advocating through the #TalkAboutBlack initiative that he co-founded1 – particularly through initiatives on intentional hiring and culture change.

“As often with progress, nothing happens for a long time and then things suddenly take off, similar to what we saw on climate change. I think this is what we are seeing on black minorities now,” he says.

If you don’t lead by example, you have no authority

Asset managers need to seize the opportunity and ensure the momentum is not lost. “If you don’t lead by example, you have no authority. We have to make sure people get an equal chance, and that people who don’t have that equal chance receive more support,” says David Cumming, chief investment officer for equities at Aviva Investors.

Industry specific kinks in the hosepipe

The financial services industry is prone to all the “kinks in the hosepipe” Konotey-Ahulu described in his 2018 essay, So, can we talk?.

The kinks run the length of the hosepipe: from very early childhood, through to adolescence, through to late teens, through to the employment years

“[The kinks] run the length of the hosepipe: from very early childhood when, often, there is no-one telling black kids they can achieve something special in life […]; through to adolescence, when the dearth of high-achieving black role models means young black kids cannot look to the top of the judiciary or the medical profession, or the world of finance, or the arts, and think “That could be me one day!”; through to late teens when, if you do find yourself in higher education, no-one comes looking to hire you into their prestigious blue-chip organisations; through to the employment years, when the working corporate assumption often seems to be that you might, maybe, make it into middle management, but Partnership, Senior Management, the C-Suite, the Bench, the Board, the Chairman? – that’s just not going to happen.”2

Yet the industry also presents two specific kinks that make it even harder for black people to join and thrive in the sector. First is the complexity of the business, which requires strong technical skills that are often only gained through a university degree in STEM subjects or economics. Black students are underrepresented in such degrees, and not encouraged often enough to pursue them.

According to research by the UK’s Social Mobility Commission, despite starting school with performance largely in line with national averages, black children are the ethnic group most likely to fail their Maths GCSE and among the least likely groups to achieve a good degree at university. The report attributes the relative underachievement to conscious and unconscious bias in the treatment of black pupils.3

The lack of black representation at the top of financial firms must be fixed

These skills are also required further along the career path, meaning the pool of black candidates shrinks even further. The lack of black representation at the top of financial firms must be fixed, but it could be a slow process as the industry will have to do more around entry-level and junior recruitment, and then encourage career progression.4

This ties into the second issue, which is the barrier created by the prevalent – and perceived – corporate culture, of which class is a key element. Compared with white people, fewer black people in the UK have privileged upbringings and, to a large degree, people who succeed in financial services either come from upper-middle class backgrounds or have to give up part of their identity to fit in. In the UK, for instance, black children are the ethnic group most likely to grow up in poverty, with a quarter of students eligible for free school meals.5

This creates barriers in terms of recruitment, but also perception. Mirza Baig, global head of governance at Aviva Investors, says there is a misunderstanding across society of what asset management is and what its values are.

“Even before we get to issues about promotion and development, people of different backgrounds won’t even apply because of the idea they won’t fit in. It is monocultural versus multicultural,” he says.

As an industry, we don’t talk enough about where we come from and our backgrounds

Marte Borhaug, global head of sustainable outcomes at Aviva Investors, agrees. “As an industry, we don’t talk enough about where we come from and our backgrounds and thinking about how we position role models from all walks of life. It sounds like a soft approach, but it has to be part of the solution. Of course, the focus has to be on improving diversity throughout the corporate ladder, including at board and management level, but there’s also power in giving people in the talent pipeline visibility and a platform to speak up and share their views,” she says.

Atoyebi also believes there needs to be more honest discussion within organisations about their commitment to ethnic diversity.

“What do they want to achieve? Are they just reacting to what is going on in the world or do they want to see change, do they want to see that diversity of thought, do they want to see different types of people? Because it’s all well and good saying things like ‘we have to think about unconscious bias’, but it’s all the same types of people coming in, it’s all the same types of faces,” she says.

Kinks in the hosepipe


No one telling black children they can achieve something special.

Parents cannot always invest time to supplement school education and set their children up for long-term success.


Dearth of high-achieving black role models to inspire young black children.

University / early adulthood

Blue-chip companies aren’t proactive in looking to hire black students.

Recruitment centres on STEM degrees from top universities.

A lack of connections in the corporate world during university and early adulthood.


Pervasive corporate assumption that black employees are unlikely to progress beyond middle management.

Corporate monoculture hinders recruitment and discourages applications.

Kinks in the hosepipe

What asset managers can do to help unkink the hosepipe

Dedicate permanent resources, both financial and human, to tackle racism at work, change practices, reach out to black communities outside the company, and maintain momentum.

Integrate diversity into the company’s business strategy in terms of product development, target audiences, suppliers, investment decisions and engagement with companies.

Childhood / adolescence

Go speak in schools. Tell black children about asset management, and that your company wants to attract people like them.

Work with dedicated NGOs to reach out to the right people, in the right way.

University / early adulthood

Redefine what good looks like in terms of diplomas and background.

Promote opportunities to the black community, e.g. through #100BlackInterns.

Review recruitment processes.


Set up ongoing firm-wide dialogue, training and awareness-raising. This should not be a one-off.

Ensure senior managers actively learn about the issues and take the whole firm on the journey.

Review promotion and retention processes, not just for BAME but for black employees specifically.

Collect data and set timelines and measurable targets. Measure and report on progress.

Use mentoring and sponsorship to help black employees build networks and open doors.

Courtesy of Dawid Konotey-Ahulu.

Soft skills, hard targets

While talking isn’t as tangible as changing policy wording or setting diversity targets, ‘soft’ areas like role modelling, raising awareness and mentoring are crucial to showcase there is a place for people from diverse backgrounds.

Black representation on boards and in senior management needs to be improved

However, timelines and measurable targets also need to be set: black representation on boards and in senior management needs to be improved, business strategies must address the full array of customer types, recruitment and retention practices need updating and accurate data must be collected to measure progress.

As a starting point, for example, Aviva has pledged to review its recruitment and promotion processes, have at least one board member from an ethnic minority by the end of 2021, and promote opportunities to the black community.6 Aviva Investors is also taking part in the #100 Black Interns7 initiative, set up to help black students across the UK kickstart their career in investment management.

However, asset managers also need to address the specific kinks of the industry in terms of educational and class biases. Training will be required, and awareness can be raised by encouraging people in the organisation to share their experiences.

Aviva Investors employees can raise race issues through a confidential channel, for example, while Aviva has committed to running quarterly Safe Space sessions for black colleagues with the help of external experts, while organising anti-racism training for all staff, as well as reverse mentoring and inclusion training for senior leaders.

“We need to communicate the fact diverse people should not be worried but proud to be black, or gay, or female, and that it will stand them in good stead in our company,” says Colin Purdie, chief investment officer for credit at Aviva Investors.

We need to put the mindset out there that it’s not simply a quota for the sake of it

Atoyebi also thinks quotas can be helpful, if they are specific and measurable. “When we look at these quotas, we need to ensure we are comfortable saying ‘black’, and that we put the mindset out there that it’s not simply a quota for the sake of it,” she says. “It is a quota to access qualified people who might bring a different viewpoint and more diversity to the way the business is run and the way the business thinks.

“And it would encourage potential, because I look up and I don’t see any black faces. Why would I stay in a business I believe doesn’t value people like me?” she adds.

Fixing the supply kink

Beyond their own recruitment policies and company culture, asset managers also need to look at how they manage their investments, especially in the context of their fiduciary duty to clients. In real asset sectors such as real estate and infrastructure, the investment and management teams are one and the same. While it means shareholder engagement is not applicable, it creates opportunities to influence the supply chain.

We need to start looking at diversity within our suppliers

“We deal with many suppliers, from construction companies to property service providers and power station operators. One of the big areas we need to start looking at in more depth is diversity within those organisations. This is one area where we might help make a difference,” says Mark Versey, chief investment officer for real assets at Aviva Investors.

The lack of existing data and the fact the issue is rarely raised with providers mean the first step is to gauge the current situation and the potential impact of changes to procurement policies. “We need a period of analysis, to understand how diverse the companies already are and what policies they have, so that if we wanted to upgrade our own policies, we could appreciate the impact,” says Versey.

Second is reviewing procurement processes, asking suppliers to change their diversity policies where relevant, choosing those with good diversity credentials and supporting black businesses.

Harnessing diversity of thought

Improving diversity – of which better black representation must be a central part – is not just a question of doing the right thing; as we argued in a recent article, having more diverse investment teams can improve investment decisions and outcomes.

Improving diversity is not just a question of doing the right thing; having more diverse investment teams can improve investment decisions and outcomes.

This is borne out by research, which has found significant differences in people’s attitudes to risk and investing, meaning a more diverse group would likely make different decisions than a uniform team.10 Similarly, a 2014 article on price bubbles in financial markets by Sheen Levine et al found that ethnically diverse markets were significantly more efficient than homogeneous ones.11

Making better investment decisions will also mean analysing companies’ black representation and commitment to diversity as part of investment research.

“It should be part and parcel of any investment discussion, in the same way as regulation, litigation, consumer demographics and climate change. It is not going to change the process, but it will change the outcome,” explains Purdie.

The current momentum puts the onus on asset managers to change the composition of their teams and the way they make investment decisions. They need to start now, but they will also have to stay the course to improve investment outcomes over the long term.

“We have short memories, especially investors. We have to lead by example and not be swayed by short-term issues. This change is long overdue, and we want to be on the right side of it, from a moral and an investment perspective. We have got to build it in, and we have a lot to learn so we can do that,” says Purdie.

Clients will demand change

Just as investors are likely to shun companies that do not adapt, clients and investment consultants will begin to take asset managers’ diversity practices and black representation into account when assessing them. Now that it is something that can be talked about, it is becoming a powerful lens to look at the social dimension of ESG.

Clients and investment consultants will begin to take asset managers’ diversity practices and black representation into account when assessing them

“I think 12 to 18 months from now it is going to be a question. The manager research team will start asking asset managers about their ethnic mix, not only on BAME as a very broad category, but more specifically asking how many black senior employees they have. And when that happens, it starts to turn the dial, because asset managers want to have a good answer to those questions. I am not going to predict it is next week, but the time is coming. If you are a smart asset manager you will figure that out,” says Konotey-Ahulu.

He notes that we cannot ‘unkink the hosepipe’ in a day, however, which is precisely why asset managers need to stay the course. It took a tragedy to shake the industry out of its complacency; it is crucial the momentum is not lost.

Part 1: A time for action

In the first of a two-part series on anti-black racism, we look at five areas asset managers need to focus on if their engagement efforts are to make a positive difference.

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