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U.K. Asset Owners Pledge to Push Managers on Diversity

A group of pensions and consultants, totaling $1.5 trillion in assets under management, will require asset managers to disclose information about the gender and racial makeup of their firms.

In the U.K, major public pension funds and consulting firms have joined together in a coalition for greater diversity and inclusion in manager selection.  

The Asset Owner Diversity Charter, spearheaded by Brunel Pension Partnership, is backed by 17 organizations representing £1.08 trillion ($1.5 trillion) in assets under management. The charter mandates that participants incorporate diversity questions into their manager selection processes, monitor selected managers for diversity and inclusion on an ongoing basis, and lead and collaborate in this area to encourage broader industry change.

Institutions who signed the charter — including £30 billion pension manager RPMI Railpen, the £15 billion West Midlands Pension Fund, and the £3 billion Church of England Pension Board — are expected to implement its proposed commitments within 12 months of signing. 

This includes asking current and prospective managers to complete annual questionnaires to gauge their progress and measure how managers look at diversity in terms of industry perception, recruitment, culture, promotion, and leadership. In the questionnaire, managers will document the racial and gender breakdown of employees at each level — board, executive, senior management, front office — and levels of recruitment and retention by race and gender. Managers will also have to answer specific questions about maternity, paternity, and shared parental leave and adoption policies. The questionnaire will end with an overall assessment score of the manager.

“The standardization delivered through the charter questionnaire will provide a better understanding of each firm’s approach and strategy to progressing diversity and inclusion and equip signatories to hold firms to account for ongoing progress,” Helen Price, Brunel Pension Partnership’s stewardship manager, said in a statement. 

Similar questionnaires have sprung up across U.S. pension plans, like the Los Angeles County Employees Retirement Association, Illinois State Universities Retirement System, and the Ohio Public Employees Retirement System. These efforts come at time of heightened demand for better diversity and inclusion in the asset management industry globally.

In the U.S., for example, the percentage of female portfolio managers has fallen from 14 percent in 2000 to 11 percent in the in 2020, according to Morningstar data reported by Bloomberg in May.

In the U.K., less than 1 percent of asset managers are Black, according to Bloomberg Intelligence. In a 2017 joint survey from FundFire and Money Management Institute, less than 5 percent of surveyed executive-committee level employees were Black or Hispanic in the U.S. market. 

The Bloomberg Intelligence report, which looked at diversity and inclusion in asset management, also documented a need for more LGBTQ+ inclusion efforts in the U.K. In the survey, 62 percent of LGBTQ+ respondents said they felt they had no visible ally in the office. There are still few statistics on the percentages of trans- and nonbinary managers. 

According to the Brunel Pension statement, the asset owner diversity charter has strong support from the U.K. government. 

“The world’s top ten fund managers are responsible for an estimated £40 trillion,” Price wrote. “If they change their approach, the impact globally could be enormous.”

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