The diversity and inclusion gap: The time for talk is over

Progress has been made but the sector is still far from achieving equality 

When the FCA published Discussion Paper 21/2 at the beginning of July, it sent a clear message to the industry: efforts to improve diversity and inclusion aren’t progressing quickly enough.  

Despite some high-profile initiatives over the years, such as the Women in Finance Charter and gender pay gap reporting, recent research by the Bank of England showed these hadn’t bridged the gap.  

Between 2001 and 2020, the proportion of authorised positions in the UK banking sector held by women rose from 9 per cent to 20 per cent. Meanwhile, the working paper also showed that the proportion of female CEOs rose from just 1.7 per cent to 9.7 per cent in the same time period. An improvement, but it’s fair to say the sector is still far from achieving equality.  

It also needs to be acknowledged that the majority of initiatives to date have focused on gender disparity, but there are many inequalities that exist beyond just gender, which have been highlighted by the Black Lives Matter protests following the murder of George Floyd. What’s more, research by McKinsey found that different groups have been, and continue to be, impacted by the pandemic in different ways. Diverse groups such as women, along with the LGBTQ+ community, people of colour and working parents, have been comparatively more adversely affected – both in the workplace and in the home. 

It’s no surprise, then that for the FCA diversity and inclusion was highlighted as a priority across all markets in this year’s business plan. The regulator want to see more diverse representation at all levels and inclusive cultures in which staff can share their diverse experiences and backgrounds. As such, how can firms achieve greater diversity and inclusion progress?  

Collect the right data 

While the FCA will be using the responses to the Discussion Paper to refine its supervisory approach, the truth is supervisors already consider how effective a firm’s diversity and inclusion arrangements are at reducing potential harm as part of their Firm Assessment Model. This focus is set to increase, with FCA CEO Nikhil Rathi already publicly proposing a new conduct question focused on diversity and inclusion.

However, regulators don’t have access to the data they need to understand the current state of play, monitor progress and develop effective policy interventions.  

The first step towards data-led regulation of diversity and inclusion is the FCA’s one-off voluntary pilot data survey later this year, but firms should be preparing more generally for future reporting requirements in this space. These will likely centre around the nine protected characteristics from the Equality Act 2010, plus information on socio-economic background, although the exact perimeters of the pilot survey are yet to be confirmed.  

The challenge here is encouraging employees to share their data, and many clients have told us that the voluntary nature of disclosure makes it difficult to get an accurate picture of their business.  

Firms should be aiming to get employee buy-in from the start: explaining why the data is being collected, addressing data protection concerns, and sharing updates on progress. The language used here can be impactful – for example, employees might be far more willing to ‘share’ their data, rather than ‘disclose’ it, particularly if they understand it is with the aim of improving diversity and inclusion.  

Recognise the importance of intersectionality 

The FCA’s interest in socio-economic background alongside the nine protected characteristics isn’t surprising. There are many demographics, characteristics and factors that make us diverse – from visible differences such as gender, age and ethnicity, to the less visible such as sexual orientation, disability and socio-economic background.  

This is why it’s so important to understand intersectionality, recognise that different factors will interact to create different experiences which have the potential to exacerbate disadvantaged situations for some. This needs to be factored into your diversity reporting. It’s no longer enough for firms to focus on driving improvements in just one, isolated area.  

Inevitably, there will be challenges ahead as the regulator tries to do more to drive progress and the sector adapts to changing expectations. Over the course of the next year, it’s likely we’ll get a clearer view of what those expectations will be. But for now, all firms should be considering how they can collect the right data to measure diversity and inclusion in their firms. The recent discussion paper offers a helpful starting point.  

By Olivia Fahy, head of culture, TCC Group 

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  1. What on earth has this to do with investing or client protection?

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