AIQ - The Now Normal

A time for action

Race, ethnicity and investing

In a two-part feature, we look at what asset managers need to focus their engagement efforts on to make a difference on anti-black racism, and why the industry needs to get its own house in order.

Worldwide demonstrations following the brutal death of George Floyd in May 2020 have been a wake-up call for many companies, opening the eyes of white employees – and senior management – to the fact racism is still present in most businesses.

Although investor engagement has helped drive change on many fronts, from climate change to gender diversity, it has had far less impact on racial inequality. But why is this, and what needs to change?


Ignorance is no excuse

Diversity has been on the corporate agenda for years, with companies keen to talk up their equal opportunity hiring and diversity and inclusion (D&I) initiatives. Yet while overt racism is perhaps less prevalent in the workplace than it once was, racial discrimination has not been eradicated, although many white employees will be unaware of the problem.

Four main factors are at play in maintaining this state of ignorance. First, it can be extremely hard for black employees to speak out. Because they can be few and far between in some companies, and tend to occupy junior or middle management positions, they may struggle to make themselves heard.

Many white people remain unaware of their white privilege

Second, many white people remain unaware of their white privilege – the ability to live their lives without having to think about how their skin colour affects the way they are treated. They may become uncomfortable and defensive when talking about racism and discrimination – US academic Robin DiAngelo sees this response as evidence of “white fragility” – preventing open dialogue on the issues.

Third, ethnic diversity has often been left behind as D&I projects have focused on gender, and black people have been categorised alongside Asian minorities in inclusion initiatives under the BAME acronym. This has hidden the ongoing underrepresentation of black employees, particularly at senior levels.

“We need to ensure that when we say black, we mean black, not BAME,” explains Elizabeth Atoyebi, associate for infrastructure equity at Aviva Investors. “There are a lot more ‘palatable’ demographics in BAME, and some people say they want to see more BAME representation because they don’t want to say ‘black’.”

Figure 1: Ethnic minority representation in FTSE 100 companies in 2019
Ethnic minority representation in FTSE 100 companies in 2019
Source: ‘Leadership 10,000 2019,’ Green Park, December 4, 2019. Note: White: white; Ethnic: black African, Caribbean, black British, Pakistani, Bangladeshi, Arab, Indian, Chinese, any other Asian. Black: black African, Caribbean, black British; Top 3: Chair, CEO and CFO; Top 20: Board, including Chair, CEO and CFO plus the Executive Committee; Top 100: senior leaders who report into the Top 20

Fourth, the issue is compounded by class discrimination in many blue-chip companies. Class is another critical barrier to being hired and promoted, and black minorities in Europe and the US are, on average, from less privileged backgrounds.1

Helping remove the “kinks in the hosepipe”

Dawid Konotey-Ahulu, co-founder of the investment consultancy Redington and the #TalkAboutBlack initiative in the investment industry, likens the difficulties faced by young and talented black professionals to “kinks in the hosepipe” that stop their careers from flowing. These range from socioeconomic differences to entry-level barriers, discrimination in career progression and the fact the problem has traditionally been low on company boards’ agendas.2

Konotey-Ahulu advocates two key actions to change company culture. First, companies should open the discussion on race internally. Second, and perhaps most importantly, senior managers should take it upon themselves to understand the problem and what they can do to address it.

Senior management has to go on a learning process, understanding what it is like to be black

“Senior management has to go on a learning process, understanding what it is like to be black, and what the kinks in the hosepipe are. It’s like anything; to be an expert on climate or a strategic initiative, you’ve got to go and learn about it,” explains Konotey-Ahulu.

While the investment industry itself has considerable room for improvement, as we highlight in part 2, asset managers also face increasing pressure from clients to demonstrate effective engagement with companies in other sectors, as well as governments, non-government organisations and industry bodies.

According to Mirza Baig, global head of governance at Aviva Investors, many companies simply don’t recognise their power to be an agent for change through relations with suppliers, staff, consumers and society.

“We need to help them – and us – recognise their role, understand where they are on the journey, set targets and ambitions and translate those into policies and initiatives,” he says.

Five areas for engagement

To incorporate black representation more explicitly into Aviva Investors’ own engagement strategy, Baig and Marte Borhaug, global head of sustainable outcomes at Aviva Investors, have identified a framework around five key areas.

“First, we expect companies to create an inclusive culture for black employees. Firms should commit publicly to a D&I agenda that includes a focus on ethnic minorities, with policies in place to promote inclusion and tackle discrimination of all kinds, including on race,” says Borhaug.

We expect companies to create an inclusive culture for black employees

This may not seem like much, but research shows not all leaders are ready to take even this minimal step. The UK 2018 Race at Work Report found only one in three employees surveyed said there was at least one senior leader or champion in their organisation who actively promoted equality, diversity and fairness, showing no change since 2015.3

In addition to public commitment and policies, research and stakeholder interviews frequently highlight the need for financial support for initiatives to tackle racism at work, including dedicated roles, programmes, events and other activities. Although employee networks play a crucial role, companies should ensure they are properly resourced. To that end, Aviva Investors is encouraging investee companies to dedicate time and money to such initiatives.

The second point focuses on senior representation. “We will ask companies to commit to ethnic minority representation, including black representation, on boards and in senior management teams,” says Borhaug.

Aviva recently became a founding member of Change the Race Ratio, a campaign led by the Confederation of British Industry to encourage companies to improve the representation of black and ethnic minorities in their organisations. By signing up, companies commit to setting targets for boards and senior management.

The third area involves diversity proofing business strategies. Across the globe, but even in majority-white countries, black consumers form a large part of the customer base, and firms should be thinking about how to satisfy their needs with products and services.

Research by PwC demonstrates the benefits of this. In 2018, it analysed the D&I strategy of 50 businesses, including leadership tone, HR policies and D&I initiatives. The research found the most successful firms had a D&I strategy that was closely aligned to the corporate strategy.4

It is good practice for firms to assess risks associated with racial discrimination

Mitigating the risks stemming from racial discrimination must also be embedded into the enterprise risk management framework. Companies manage a variety of business-related risks, including climate change and staff retention. It is good practice to include risks associated with racial discrimination, enabling companies to recognise, measure, understand and tackle them.

The fourth engagement area involves putting pressure on companies to review HR policies and practices, from identifying and recruiting talent to creating a level playing field for promotion and improving retention. In a 2018 update to the McGregor-Smith Review, over half of BAME employees felt they would have to leave their organisation to progress their careers, compared with 38 per cent of white employees.5

Finally, companies will be asked to collect relevant data, set targets and measure progress. “You need data to be able to hold companies accountable: when engaging with them, we are somewhat hamstrung by the lack of it,” says Baig.

Figure 2: Percentage of European and American firms disclosing
Percentage of European and American firms disclosing…
Source: JP Morgan, Bloomberg. Europe: Bloomberg Europe 500 firms; USA: S&P 500 firms

Holding companies accountable

While there is an ethical imperative to act, companies that fail to address the issues in their own organisations could suffer financial consequences. David Cumming, chief investment officer for equities, and Colin Purdie, chief investment officer for credit at Aviva Investors, believe companies that don’t change will be shunned by consumers and investors.

At least some businesses are waking up to the issue. Baig notes some retailers have started to proactively allocate 15 to 20 per cent of their shelf space to products supplied by black-run businesses.6 Purdie says this will benefit the retailers, particularly if consumers get behind the move.

“These are the trends investors need to understand, support and position for. Companies that don’t support them or change will suffer,” he explains.

Culture shift

Borhaug believes asset managers also need to engage with governments and regulators to create and implement legislation.

We need to push governments to recognise institutional racism

“We need to push governments to face up to their own challenges and recognise institutional racism. It may seem like a non-business issue, but we can tell governments we don’t want to live in a country where racial discrimination and police violence happen, and help support the organisations trying to tackle it,” says Borhaug.

The best-run firms will not wait for direction from governments, however. Konotey-Ahulu notes companies with strong leadership will be proactively making the profound changes needed.

“You need to take your whole firm on a journey. That is where real leadership comes in, where you stand up and say: ‘This is the mountain we’re going to climb. I want you to come with us on this journey, and if you don’t want to come with us, you need to find another firm.’”

Why asset managers must get their own house in order

“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 Aviva Investors’ Atoyebi. “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.”

All companies need to set themselves clear pathways toward proportionate inclusion of ethnic minorities

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, engagement to effect change represents part of their stewardship responsibility. But for the demands to have teeth, the changes cannot be one-sided. 

Redington’s Konotey-Ahulu says progress 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-founded7 – 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.

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 Cumming.

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?’ (see Part 1 and below).8


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.

The industry 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.9

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

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.10

That ties into the second issue, which is the barrier created by the prevalent – and perceived – corporate culture, of which class is a key element, as mentioned earlier. This creates barriers in terms of recruitment, but also perception. Baig believes 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.

Soft skills, hard targets

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

However, timelines and measurable targets also need to be set: black representation on boards and in senior management needs to improve, 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.

Role modelling, awareness-raising and mentoring are crucial to showcase there is a place for people from diverse backgrounds

But asset managers must also 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 within firms to share their experiences.

Atoyebi thinks quotas can be helpful, if they are specific and measurable. “We need to be comfortable saying ‘black’ and 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 different viewpoints and more diversity to the way the business is run and the way it thinks.”

Broaden the search

At an entry level, asset managers need to engage with less-privileged communities and challenge the preconception not everyone can fit in.

Konotey-Ahulu says there are black students who can offer cognitive diversity, determination and resilience. “They may not come in a nice, gift-wrapped box that says: ‘11 A-stars and a first-class degree in engineering from Oxford’, but they may turn out to be the most successful employee you have ever hired,” he says.

“The thing I keep going on about is the pipeline,” adds Atoyebi. “Where are you recruiting from? What does the stream look like for people already in the business? Which universities and schools are you looking at? Are you looking at school leavers? Are you looking at people who aren’t too sure about taking on a lot of student debt? Of course, people say it will just come out of your salary, but it’s still quite daunting for a lot of people from certain backgrounds.”

These are qualified people that don’t get a chance because they don’t relate that well to senior management

Borhaug points out one danger to this, which is the temptation to cut costs on outreach programmes and internships in a crisis. “These programmes should be a permanent part of companies delivering the change we want, not a cost that gets cut when times get tough,” she says.

Although targets must be set and progress measured, other programmes such as mentoring and sponsorship will be vital. In part, this is because having privilege tends to come hand-in-hand with having a network – or at least being able to build one by dint of having a similar background – of senior people who can open doors.11 As these doors don’t typically exist for black or less-privileged employees, firms need to set up programmes to level the playing field.

“These are qualified people that don’t get a chance because they don’t relate that well to senior management. They don’t have their rugby banter, or they don’t talk about cricket, maybe, or something random like that. It’s the same as with gender,” says Atoyebi.

Investor influence

Beyond their own recruitment policies and culture, asset managers need to look at how they manage their investments, especially in the context of their fiduciary duty. In real asset sectors such as real estate and infrastructure, shareholder engagement is not applicable, but there are opportunities to influence the supply chain.

“We deal with many suppliers, from construction companies to property service providers and power station operators. One of the areas we need to look at in more depth is diversity within those organisations. We can make a difference there,” says Mark Versey, chief executive officer at Aviva Investors.

We need to look in more depth at the diversity of the suppliers we deal with

Improving diversity – of which better black representation must be a central part – is not just a question of doing the right thing; having diverse investment teams can improve decisions and outcomes.12 Making better investment decisions will also mean analysing companies’ black representation and commitment to diversity as part of research.

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.

“In 12 to 18 months’ time it is going to be a question. When that happens, it starts to turn the dial, because asset managers want to have good answers. If you are a smart asset manager you will figure that out,” says Konotey-Ahulu.

Consultants will begin to take asset managers’ diversity practices and black representation into account

He acknowledges we can’t ‘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 now.

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