Diversity and inclusion success starts with a focus on inclusion

With the financial services industry behind many other industries when it comes to diversity and the inclusion of women and minorities, the first step toward progress might be separating diversity from inclusion.

“There’s a difference between diversity and inclusion, because diversity is a representation of the organization and inclusion is agreeing to ensure an individual’s authentic self is welcome,” said Tali Shlomo, former global people engagement director at the Chartered Insurance Institute.

Shlomo was part of a panel of industry representatives speaking this week at the Women in Asset Management virtual conference.

Discussing ways to bring more diversity into an industry that historically has been represented mostly by white men, the panelists advised moving past stale efforts that have barely moved the needle.

“It has to be a business initiative, not an HR mandate, and you have to recognize that it’s an ongoing effort,” said Heidi Ridley, co-founder and chief executive of Radiant ESG.

“Diversity and inclusion are lumped together as one thing, but inclusion is the important part, and you get there first by understanding why diversity matters and what the benefits are,” Ridley said. “It will require some structure and formalizing programs to keep it going, and it does require a true commitment.”

Kathryn McDonald, co-founder and head of investments and sustainability at Radiant ESG, said too often even the best intentions fail to move beyond a “box-ticking exercise” that is largely focused on diversity on corporate boards.

“Quota systems at the country level have given us increased diversification on boards, but have not narrowed pay gaps, increased the number of [minority] CEOs, and have not given rise to economic benefits we typically associate with diverse groups,” she said. “What might it be about the boards that has not given way to the benefits we’d like to see? It could be an issue of inclusion at the board levels.”

McDonald cited the National Football League’s Rooney Rule as “a great example of a mandated initiative” that helps increase diversity but falls short in many ways.

Named after the former owner of the Pittsburgh Steelers, Dan Rooney, the rule established in 2003 requires NFL teams to interview ethnic-minority candidates for head coaching jobs.

“In its beginning there were great improvements, and we saw a number of head coaches from minority ranks attributable to the Rooney Rule, but more recently we’ve seen that fall off because it’s too narrow; it’s only focused on head coaches in the pro league,” McDonald said. “Top-down initiatives can be effective, but they should be broad in scope and must be backed up by a culture of inclusion in order to give rise to the economic benefits that we know are possible.”

If there is a silver lining to the new world of social distancing and remote work, it might be that company cultures have been forced to become more flexible, which is opening doors for some employees, said Justin Onuekwusi, head of retail multi-asset funds at Legal & General Investment Management.

“Most investment teams recognize that this is going to be the normal, and you will have more people working from home,” he said. “Before, companies would say, ‘If you can’t adapt to our culture you won’t be part of the culture.’ Now companies are more willing to adapt to different cultures.”