13 June 2022
Diversity has become a leading consideration for the way in which firms across the financial capitals of the world structure their teams. ESG has now paved the way as the flagship for positive change within the industry, shining a spotlight on the positive impact of diversity and inclusion both in terms of investment team make up as well as at board level in investee companies.
The City of London has come a long way over the last ten years (whether this was in the form of race, gender, or beliefs, to name a few). It has been shown throughout recent decades that diversifying a firm not only has positive social impacts for the wider population and economy, but also for the productivity of the industry which has been undeniably late to the party. Although late, it cannot be denied that the financial services industry is now a strong pioneer for diversification in the workplace with a range of initiatives designed to correct previous failings – although with more work to be done.
An example of how this might go wrong is in Sustainability Investment and the curse of “greenwashing”. This has been seen in cases of sustainable investments, governance of firms, and the extent to which ESG is actually driving firm’s decisions. Greenwashing comes in the form of consciously concealing a firm’s motivations, or unconsciously fulfilling a requirement. The latter of these is an issue which is less often addressed.
In order to approach this matter for firm, industry, and world-wide change, there must be a level of awareness and care from the highest level of leadership down. Driving diversity and inclusion with the motivation to reach a regulatory requirement, or due to superficial representation of a firm’s beliefs is a concerning form of greenwashing which is challenging to detect but requires addressing to truly achieve meaningful change. Therefore, it is essential to determine the incentives for each case of diversity and inclusion to avoid the rabbit hole of complying to regulation in an attempt to promote change from a surface-level perspective.
To achieve authentic and effective change within the workplace, the City needs to align regulation with principle and passion. Therefore, motivations may need to be fundamentally challenged in this context as representation of diverse individuals is not a quota to be met, but rather a goal which the industry can encourage and integrate across every level. This will lead to not only the equal opportunity and fair representation, but it also to a strength of both firm and industry culture which is yet to be seen.