Race, ethnicity and investing

Where are we now?

In late 2020, AIQ spoke to Aviva Investors’ senior management about institutional racism and the continued under-representation of black people in finance. They outlined a series of key actions, to improve in-house diversity and inclusion and our engagement with investee companies. A little more than a year on, we explore areas of progress, where more needs to be done, and plans for 2022 and beyond. 

Read this article to understand:

  • What actions Aviva Investors is taking to tackle the under-representation of black people in the company, including at senior management and board level
  • The key areas of progress, and where more needs to be done
  • How this is complemented by an active engagement framework on ethnic diversity

Following the brutal murder of George Floyd in 2020, the global Black Lives Matter movement was a wake-up call for many, including companies in the financial sector. Institutional racism was – and is – still a reality, and companies have the power to help change this for the better. It was a time for self-reflection and action, to embark on the journey towards anti-racism.

Mirza Baig, global head of ESG investments at Aviva Investors, defined an engagement framework to tackle ethnic diversity issues at investee companies (see Race, ethnicity and investing: A time for action).1

It rests on five pillars, on which we now ask all companies to act:

  1. Developing an inclusive culture
  2. Delivering black representation at senior management and board level
  3. Future-proofing the business strategy
  4. Updating recruitment, promotion, and retention practices to make them more inclusive
  5. Collecting relevant data and using it to set targets and ambition for improvement

But we also need to practice what we preach, and show clear progress on those five areas as well.

When interviewed on this topic in 2020, Dawid Konotey-Ahulu, co-founder of the investment consultancy Redington and #TalkAboutBlack initiative in the investment industry, explained this would require asset managers to take their whole firm on a journey, from ensuring the issue remained on leaders’ radar by setting them KPIs, to opening the discussion across the company, training leaders to understand the ‘kinks in the hosepipe’, communicating clear company values and making it clear every employee is required to join in the effort to become more inclusive.

In terms of recruitment and representation, Konotey-Ahulu added companies needed to actively look for black talent where it was instead of sticking to the same small group of elite universities and STEM degrees, and to redefine what good looks like, to broaden the talent pool and diversity of thought.

An Aviva Group action plan

In the wake of this heightened awareness, Aviva committed to a Black Lives Matter action plan,2 to which Aviva Investors subscribed. The plan aims to support black colleagues, educate Aviva employees, and act wider than Aviva, contributing to broader social initiatives.

In the months since making that commitment, Aviva has made diversity and inclusion (D&I) a business-wide priority, resting on improved data, governance and accountability, and linking reward to performance. Local D&I plans will also be developed and reported on.

The group’s 2022 plan also aims to make Aviva a more inclusive workplace. The goal is to achieve this through specific gender, ethnicity, and intersectional community action plans, showcasing role models, delivering inclusive culture training to all staff, and celebrating cultural differences through events and education. The third and final pillar aims to ensure the customer experience is inclusive and accessible, and that inclusion and access are embedded in product design and development.

For Aviva Investors, this has translated into the establishment of an inclusion steering committee focused on three priority areas.

We are setting a long-term ambition to align with fair representation of society

“Our inclusion strategy is based on three pillars – gender, ethnicity and social mobility,” explains Baig. “We are setting a long-term ambition to align with fair representation of society with focused, three-year objectives under each pillar to materially improve underrepresented groups within the business, including senior positions. The targets will be supported by clear action plans with progress overseen by the executive committee (ExCo). We will publish these refreshed targets in the new year.

“Specific initiatives include reverse mentoring for the ExCo by black colleagues, a returning parents programme, and an outreach programme in socially disadvantaged schools to inspire the next generation to pursue a career in asset management,” he adds.

However, it is just the start of a long journey, and more needs to be done to fully achieve these goals.

Charting progress

Developing an inclusive culture

“Creating an inclusive culture requires a mindset shift,” says Mark Versey, chief executive officer at Aviva Investors. “We’ve made good progress, but we're still a long way from success. Some of the good steps we have taken are in raising awareness of the ethnic minority groups we have today in the business. A lot of that has come through the Origins programme Aviva runs, of which I am a sponsor, celebrating ethnically diverse communities within Aviva and Aviva Investors.”

The company is encouraging more role models to speak about inclusive behaviours

Lydia Emanuel, former learning and development consultant at Aviva Investors (before taking up a new role with Aviva in Canada), adds the company is encouraging more role models to speak about inclusive behaviours, including Versey, and that D&I has become a key part of the strategy, further supported by clients’ growing demand for ESG integration.

“A lot of communication around race and inclusion has come out this year, ramping up conversations across the company,” she says. “Added to the anti-racism training and leadership inclusion training that has started in 2021 within Aviva Investors, these things raise awareness around the inclusion agenda and the aim is that helps the culture too.”

Versey concurs, highlighting mandatory anti-racism training as Aviva Investors’ most important initiative on the issue in 2021. “This is the culture we need to get to – moving from being ‘not-racist’ to being ‘anti-racist’,” he says. “That's the journey we're trying to take people on. It will take time, but that's ultimately what we need to be to have a fully inclusive culture.”

It is really important for the executive team to learn and listen, and to explore ideas

Versey also mentions the reverse mentoring programme, whereby every member of the ExCo has been paired with a black mentor. “It is really important for the executive team to learn and listen, and to explore ideas. In doing so, we can develop new solutions for future working and gain awareness, especially of the issues we have today,” he says.

Nonetheless, both Versey and Emanuel acknowledge there is work to be done. “One of the things we do is to give all the ExCo an inclusion goal and, from next year on, this will be extended to all people leaders,” says Emanuel. “For far too long, people generally have tended to think inclusion is either for HR or for very senior leaders to own. The reality is the business has many more people than that, and if we leave inclusion to just a handful of people, things are never going to change.”

Delivering black representation

In terms of delivering representation at board and senior management level, this is intended to create diversity of thought and influence decision-making throughout the organisation, and also create role models in the company.

“It is an area of weakness for us and the whole industry,” says Versey. “On ethnic minority representation, BAME statistics can hide the detail of the representation issue – we need to break down statistics by each ethnic minority to get real understanding on where our diversity issues lie.”

It will take time for roles to become available and for the company to create a large enough pool of candidates

He says it will take time for roles to become available and for the company to create a large enough pool of candidates, both of which are needed to make significant changes at senior management level. As a result, Versey is focusing on building future leaders. One way he has begun doing is by changing the structure of the different committees that report into the ExCo, so they are more representative of a diverse community.

“Secondly, we have a very limited number of role models across the business and have to be mindful our ethnic diversity champions are not being asked to do too much on top of their day job,” he adds. “That's an increasing concern I have, and I am considering making ‘diversity champion’ a core part of some people’s roles, so we give them the time to do this properly and they can be rewarded for it appropriately.”

We either struggle to retain diverse talent, or we struggle to progress them through the organisation

Emanuel adds one of the things Aviva Investors has struggled with is the progression of talent. “We get decent diversity at the junior level, but we either struggle to retain diverse talent, or we struggle to progress them through the organisation. We have a bit of work to do in understanding what is causing this,” she says.

At board level, she adds that, although Aviva plc has committed to meet the recommendations of the Parker Review and has named an ethnic minority board member, the focus has not been on Aviva Investors’ board historically, and that board members’ data has not yet been requested.

“That's a big thing and has been acknowledged,” she says. “The other thing is board positions don't open up very frequently, so it will take even more time to change than senior management representation. It's on the agenda, particularly when it comes to ethnicity and social mobility. There is more work to do at the board level, but first we need to figure out what our starting point is.”

Diversity-proofing the business strategy

The establishment of the inclusion steering committee, and its client pillar in particular, are helping to integrate accessibility and inclusion into strategic product and client decisions. Ethnicity has also been built into the ESG process, which forms part of every investment decision, as well as into the engagement framework and voting policy (see below).

I have put diversity and inclusion on the ExCo agenda as a standing item

“I have put diversity and inclusion on the ExCo agenda as a standing item, so it is something we talk about every month,” adds Versey. “We don't have targets yet for ethnic diversity, but now that we have the data, it will be a next step for us to set medium-term targets. It's also important that all the executive team get involved across the different projects we have, whether our own ones or those coordinated externally by the Diversity Project.”

One area where the company hasn’t yet made significant inroads is in looking at diversity across its contractors and suppliers, particularly in real assets, where the supply chain is a key part of asset management.

“Influencing the supply chain will come with time and we are looking to address this during 2022,” says Versey. “The concept here is to set up a supply-chain charter, which can cover developers, property managers and the underlying services and constructors. The charter would then need to be accompanied by engagement and reporting to evidence impact. We haven’t yet actioned this because fixing diversity inside the company is a higher priority, but it is part of our longer-term D&I strategy.”

Updating recruitment, promotion, and retention practices

In the current context of limited hiring opportunities, using recruitment as an avenue to improve diversity is a challenge. When no new positions are created and only backfills can be hired, it puts a strain on managers. “People want someone to fill that space as soon as possible, and they usually think they need someone who's just like the person who just left,” says Emanuel.

Structural changes are being made to the recruitment process, moving to a strengths-based hiring approach

Over the longer term, however, structural changes are being made to the recruitment process. Working with Aviva’s recruitment team, which has extensive experience in the area, Aviva Investors is moving to a strengths-based hiring approach.

“That helps redefine what good looks like,” adds Emanuel. “We'll see whether it makes a significant difference in terms of the types of people who get through the assessment centres.”

Aviva has also set up a pilot on blind hiring, removing certain data from CVs in the early stages of the process and, going further, it is creating an inclusive hiring programme.

Aviva Investors has also developed or joined several successful programmes to help attract and recruit more diverse candidates, such as 10,000 Black interns – converting two out of three summer interns into full-time hires – Career Ready, UpReach and Investment 20/20, which work with candidates from lower socioeconomic backgrounds, helping with diversity of all forms.

“This was the first year we did a Spring Insight Week in collaboration with Aviva,” says Emanuel. “Think of it as a conveyor belt: if someone takes part in Spring Insights, they may become interested in applying to the intern programmes, and then hopefully they get a place in the graduate programmes. That conveyor belt, combined with the strengths-based recruitment approach, should help with increased diversity.”

We're keeping the conversation on race going, from education to ‘brave race conversations’ within teams

In terms of nurturing and including black colleagues to a greater extent, Emanuel adds initiatives like having colleagues take part in the Encircle mentoring programme through #TalkAboutBlack, creating the ethnicity workstream and other safe spaces for colleagues to speak up, and keeping the conversation on race going, from education to ‘brave race conversations’ within teams, Versey regularly talking about racial inclusion and updates on Aviva’s Black Action Plan are all steps in the right direction.

“We've created these safe spaces, these areas of community. People often underestimate the impact these networks and workstreams can have, just in terms of acting as a support forum for people who might have challenges, race or non-race related. They work, so that has greatly helped,” she says.

Nevertheless, promotion and retention remain areas where there is considerable room for improvement.

“Things are moving so quickly that anyone can turn around and say they're going to get their progression somewhere else if they don’t get it in time here,” she says. “We have to figure out how to identify those people, their flight risk, and if there is anything we can do to retain them. Is there a way to be creative by moving people around internally, to different businesses, for example? And that might help with diversity of thought as well.”

She believes part of the issue is a lack of confidence keeping people from applying for roles. “We need confidence building and role modelling to show a lot of people move to different businesses, and that it is possible,” she says.

Unfortunately, another reason is that some colleagues continue to feel pushed out, or not listened to when trying to make changes. This ties back into the need for deep cultural change, which has begun but will take time.

Collecting and using relevant data to set targets and monitor progress

After a year-long drive, 83 per cent of Aviva Investors employees had filled in their data on ethnicity as of January 4, 2022. This allows Aviva to publish its ethnicity pay gap for 2021, which will include Aviva Investors.3

Now that we’ve got the data, we will be thinking about what targets to set ourselves for ethnic diversity

“Now that we’ve got the data, we will be thinking about what targets to set ourselves for ethnic diversity,” says Versey. “It's not obvious what a benchmark should be. Taking a London-based or UK-based benchmark will yield very different results. What we don't have yet is a financial services benchmark and, again, the data, when it comes out, will be helpful.”

As in many companies, the data has not yet been refined by ethnicity, which can skew the results. “It's still in review, but the view is to have ethnic minority targets, potentially mapped to the London population, and then separate black population targets,” says Emanuel.

These internal efforts have been accompanied by the implementation of the engagement framework on ethnic diversity.

Stepping up engagement

Diversity was one of the topics in the annual letter sent by Aviva Investors to company chairpersons for 20214 and, also from 2021, Aviva Investors was among the first investors to extend its voting policy to ethnic diversity, asking firms to ensure their boards are ethnically diverse.5

In the first half of 2021, Aviva Investors voted against 81 nomination committee chairs at 76 companies in the UK, North America, and Australia where there was no ethnic diversity on the board or there was weak disclosure in respect of plans to address this. Those three markets were chosen to begin with as these are where ethnicity data is regularly disclosed, while the team is encouraging companies in other markets to improve disclosures on diversity.

Disclosure differs hugely, with some companies including only boilerplate information on diversity where ethnicity is simply listed as something that is considered, to other companies setting out plans to meet targets and discussing initiatives within their organisation.

However, this is not only a board-level issue. Companies also need to do more at senior management levels and throughout the company, something Aviva Investors actively engages on.

“We've also been flexible,” says Nathan Leclercq, senior corporate governance analyst at Aviva Investors. “We have sometimes exceptionally supported nomination committee chairs’ re-election, because either the company had made strong progress on diversity, or the disclosures gave us a feeling they were getting there.”

He adds engagement efforts have focused on asking companies to provide more disclosure on their approach to ethnic diversity, including how they plan to tackle the issue, meet targets set by the Parker Review in the UK, increase diversity at a board and senior management level, and explain initiatives undertaken across the organisation.

Leclercq cites the example of FTSE 350 financial company Brewin Dolphin, whose chair and nomination committee chair the team exceptionally supported due to its positive disclosures and initiatives such as reverse mentoring programmes focused on ethnicity.

It was pleasing to see Brewin addressing some of our concerns around gender diversity

“But we also emphasised our expectation for Brewin to address the lack of diversity on the board,” he says. “Board nominations could have been in motion anyway, but we engaged in February, and it was pleasing to see Brewin appoint a director from an ethnic minority background in May, and a woman in June, addressing some of our concerns around gender diversity.”

In terms of black representation specifically, Leclercq says there is more work to do, as most companies are not yet disclosing by different ethnic minority group.

“In chairs’ opening remarks on company reports and accounts, there have been lots of references to Black Lives Matter, but it doesn't seem like the companies are setting targets to hire and promote more black people,” he says. “I think that will become a bigger issue next year. Certainly, with some of the laggards we've seen this year, there will be a lot more progress expected in 2022. The more investors are collectively looking at them, the more we will see progress, although we will have to see how that translates from the board level to senior management representation.”

The start of a long journey

Investor interest in ethnic diversity is also supported by the increasing frequency with which consultants and other client groups raise the topic with asset managers. In fact, several have joined the Diversity Project’s industry-wide Asset Owner Diversity Charter, whereby they commit to monitor and engage with asset managers on their diversity policies, including ethnic diversity.6

It’s becoming a hygiene factor, which is good; you've got to be able to tick the boxes

Versey says it is very much part of the conversation consultants have with him, and a topic increasingly raised in requests for proposals and requests for information. “It’s becoming a hygiene factor, which is good; you've got to be able to tick the boxes,” he says. “But the more advanced consultants are trying to assess our culture, to determine how well embedded things are.”

Emanuel gives the example of Netflix as a goal to aspire to. “The company is even higher than the US population in terms of black representation, so it is doing quite well. It has a lot of resources and been focusing on diversity for a long time, so I can understand why,” she says. It shows that, in time, and with the proper resources, other companies can achieve real change and become more representative of the societies they serve.

“If there was one thing I could change, it would be the consistency of inclusive behaviour because it just takes one person to act a certain way for culture at a company to break,” she adds. “But it will take time: behaviour takes time to nurture and nudge.”

The good news is the issue has full support from the top. “It’s high on my agenda as a leader; I am intent on making Aviva Investors a really inclusive company,” says Versey.

Related views

Important information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK,  this is issued by Aviva Investors Global Services Limited. Registered in England No. 1151805.  Registered Office: St Helens, 1 Undershaft, London EC3P 3DQ.  Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

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The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom. Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is registered with the Ontario Securities Commission (“OSC”) as a Portfolio Manager, an Exempt Market Dealer, and a Commodity Trading Manager. Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas LLC ("AIA") is a federally registered investment advisor with the US Securities and Exchange Commission. AIA is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.

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