Episode Transcript
Speaker 0 00:00:00 Welcome to the Refinitiv Sustainability Perspectives Podcast, where our goal is to engage and inform our audience from investors to asset managers and portfolio managers, to sustainability leaders and those involved in E S G and sustainable finance. I'm Keitha Shreen. Today we're going to talk about a topic that is central to E s G and to investors interested in firms who are adding actions, not just words in working toward equality and a stakeholder driven approach to business. Diversity, equity and inclusion are d e i is increasingly important to ensure a high performance as it brings diverse knowledge, experiences, and encourages innovation. Today's guests will help us explore this topic. Helen Steers is partner and head of the European Primary Investment Team at Pantheon Ventures and manager at Pantheon International P L c. And Elena Filippova is head of e s g proposition at Refinitiv. Now, Refinitiv has recently released the 2020 list of top 100 most diverse and inclusive organizations globally, as well as the 2020 report focused on diversity and inclusion in the workplace. To download those, please use the link in the episode description. This report shows important achievements. For example, we saw a 43% increase in the number of females on corporate boards in the last five years, but at the same time, the report states that on average only 30% of board members are culturally diverse. Elena, how do these findings impact corporate leaders and institutional investors specifically? Thanks,
Speaker 1 00:01:49 Kisan. Good morning. Good afternoon, everyone. In today's highly volatile business, reality, diversity and inclusion is more important than ever. Um, and it, as you mentioned, measurable progress in increasing workplace diversity and inclusion remains mixed <laugh>. The reasons why, um, that's the case are arguably as varied as the potential solutions. It's not an easy question, and it's not an easy challenge for, uh, corporates and investors to, to solve for. However, most can agree the diversity is good for business. Um, diversity is the fuel for innovation and growth. It's the engine behind resilience and sustainability, and it's the foundational block on which businesses adapt to the changing needs of their stakeholders. But let me highlight some of the key findings from our annual diversity report, which was released in September. Um, and it is our attempt to look into data and extract insights to raise awareness and illustrate why it's so important to measure and manage, um, those topics. Firstly, I I, I guess I'll start with, um, a good news. We see certainly an increase in, uh, data and transparency. There is more data around diversity and inclusiveness that companies are making available in the public domain, and that, in our opinion, is a critical first step of the journey. What gets measured can get also managed, or at least what doesn't get measured cannot be managed. So it's very important to start with the data to start with knowledge and encourage transparency.
Speaker 1 00:03:52 Um, we see that trans certainly true when we talk about gender diversity, but one concerning trend, uh, from a gender diversity perspective, which we've highlighted in previous reports as well, and we continue to, to see that is the somewhat of a, a, a difference, a gap between increased diversity at the top of corporations and, um, we would expect to see comparable increase at, uh, middle management. But we don't, uh, middle management seems to be lagging behind. And that presents then a question of, well, how, how do you nurture the future pool of leaders for the corporations to be diverse? Um, if, if you're not nurturing that, uh, from within the organizations. So it's a, it's a concern to, to think about and reflect on for both companies and investors.
Speaker 0 00:04:49 So in Elena, are there certain expectations of shareholders or even of employees, and are there consequences when those expectations aren't being met? You talk about middle managers and how those jobs, those roles aren't as diverse. Are there consequences around things like that?
Speaker 1 00:05:07 Um, I mean, I mean, from a consequences standpoint of view, uh, surely there is, um, more, um, research done that indicates that more diverse organizations are also better, uh, financially in terms of, uh, delivering better financial results. Um, our, um, annual diversity report, um, also quite clearly show that correlation. So companies that do not embrace, um, this topic at the heart of their business, the, the strategy and, and the structures that they create to, to create, um, diversity inclusive workplaces, to, to nurture diversity as a support driver of innovation, um, they ultimately will deliver. And from a financial perspective as well, that's quite damaging. Um, it's, it's damaging from the perspective of workers and employees and retaining, recruiting and retaining best talent. Uh, it's, it's also damaging in terms of, um, customer brand and reputation. And customers are certainly becoming more conscious of, um, sustainability issues and are starting to translate those into their purchasing decisions and choices. Um, so yes, there are certainly consequences.
Speaker 0 00:06:31 And I'm wondering too about data disclosure. You mentioned that it looks like that more data is making its way to the public domain, but what data disclosure challenges do you see, if any, globally in 2021 that might limit transparency around race, ethnicity, or gender?
Speaker 1 00:06:50 Yeah, um, definitely. I mean, although, uh, discussions initiatives in this area have been progressive, most tend to focus on, um, gender. And we cannot help but ask the question, what's happening to the other equally important facets of diversity and inclusiveness such as race and ethnicity? Um, and, um, there are clearly different challenges related to that. Um, and every one of us has a critical role to play in in overcoming them. We as, uh, a data provider that, um, uh, powers the financial industry through, through data and, uh, technology. Clearly our role to play is to raise awareness on the data gaps and support the industry in having better understanding of what data investors require. Um, that's why we're quite excited to team up with, uh, fortune to launch, uh, a new project called Measure Up, which is designed to urge companies to measure and report on their diversity and inclusion in the workplace efforts. Because as mentioned, what gets measured, gets managed, and absolutely measure up is exactly an effort to change that problem.
Speaker 0 00:08:11 Absolutely. What gets measured gets managed. That's clearly, um, something that we're hearing from the top down and even bottom up. And Helen, and I wanna bring you into this to talk specifically about the private equity space. Could you talk about trends that you are seeing with diversity, equity, inclusion, and trends around measurement and really taking that measurement to a different level. What are you seeing in the PE space?
Speaker 2 00:08:35 Well, first of all, thank you very much for, for inviting me on, uh, to this discussion, which I find, um, really, really fascinating. And your, and your report is very, very impressive. I mean, first of all, why, why would we be interested in what's happening in, in the private equity world? Well, the growth of the number of companies, which are private equity backed, has been increasing markedly over the last few years, so increasing about 8% per annum. Um, whereas the number of quoted companies has been shrinking sort of 2% per annum. So the private equity market is becoming more important, and there are, therefore, I think it's really important for investors to pay more attention to this asset class in terms of the private equity industry's, um, record with diversity and inclusion. I think it's fair to say that, um, five or 10 years, five or 10 years ago, we were coming from, um, a position where diversity in the industry was not, was not great.
Speaker 2 00:09:30 Um, I mean, I've been working in private equity for 30 years now, and, um, often I would be the only woman in the room, um, whether it was at a conference or whether it was in a, in a smaller group, in a due due diligence session. Um, so it's, it's been, it's been a problem in the industry over the years. About five years ago, in fact, exactly five years ago, um, a group of senior women in the industry decided to get together, um, 2015 to form a nonprofit organization called Level 20, um, which was founded in order to attract, retain, and support women in private equity and to get to the magic number of, uh, at least 20% of senior positions in the industry being held by women. Um, to your point about measurement, um, there have been almost no studies done about the number of the, a absolute number of women in the private equity industry, um, which was, was fairly surprising.
Speaker 2 00:10:25 So in fact, one of our first tasks actually was to look at the percentage of women in private equity. And what we came up with was, um, with the, with the help of some of the industry, uh, associations, was that in terms of senior positions, um, women held only 6%, 6% of senior positions in private equity. So, so, so pretty, pretty poor. So this volunteer led organization has now grown over the last five years. Uh, we've grown from zero members to 2,500 members, um, from founder funding to having now 65 sponsors. Um, and amongst those sponsors are some of the best well-known private equity firms in the world, um, firms that, that everybody would've, would've heard of. We now have a c e o executive team board and advisory council, and we've pushed, um, much further ahead on some of our initiatives such as sort of mentoring initiatives, advocacy research, which was there right from the beginning, and of course, networking.
Speaker 2 00:11:24 Um, and from being a UK only organization now expanded to 12 different European countries. Um, and we're talking about expanding further. So a a lot of progress in the last five years. And, and, you know, back to your original question, we're starting to see the effects now in the private equity industry. So whereas before diversity and inclusion was not really on the agenda, so I would go to an advisory board meeting or, or a, um, a company board meeting and, um, diversity and inclusion just, just wasn't on the agenda. Um, now it is in terms of recruitment of women, you know, some firms are now at the point where, um, they have almost 50%, uh, female recruits, women are being supported and making, making it to senior levels, um, making it to partnership levels. So I, I, I think there's been a big change in the last five years, um, and I'm hoping that change will be ongoing,
Speaker 0 00:12:18 And those are great numbers, the 50% that many firms are seeing. But unfortunately, as we all know, when we talk about women in these, um, roles, generally in a lot of cases, women of color are not being considered, especially at those high numbers. In 2020, though many corporations spoke about diversity, specifically, including women of color, and we all know that promises have been made before. Um, but what can corporations do to achieve this sort of equity as well as diversity? Do you have some tips for that or something that you've seen work in terms of best practices?
Speaker 2 00:12:50 Yeah, so it's an excellent question and, and, and in fact, this is getting, um, a lot more attention. And it's not just, it's not just a, a a at sort of the middle level. We're seeing it really from sort of senior levels in, in organizations. So I, I talk about the Four Ease. Um, so engagement, um, you know, talk, talking to our private equity managers for the private equity managers to get it on, on agendas, not just in their own organizations, but in their portfolio companies. Um, really important, um, embedding diversity, um, equity and inclusion in their organizations. A little bit like E S G. It has to be embedded in the culture of an organization integrated into processes, whether it's due diligence or portfolio management, and then empowerment, um, driven from the top with senior managers who really believe in it and drive it through the organization and then end results performance. Why are we doing it? We're not just doing it because it's the right thing to do. We're doing it because it produces results. We all know that diversity of thought, um, avoids group think, and it produces better end results and performance. And we're all in very competitive industries where in fact, we want to get the best performance outta our teams.
Speaker 0 00:14:01 Hmm. And, and I will add that the reason that we should listen to you, Helen, about this is because we know that Pantheon investment heads are about 45% female and 40% people of color. So, you know, of what you speak here, how did you arrive at this number? Was it simply just implementing those four E's? Was there another way that you really managed to bring this, um, bring this to life in your firm?
Speaker 2 00:14:25 Well, I think it, I think it goes to the culture actually of, of Pantheon. Um, so Pantheon was, was founded with three senior partners, um, two men and one woman. Um, so it was, was one third, um, female right from the very beginning. Um, and then I, I think maybe because of that, that that beginning and because of the fact that the organization was global right from the very beginning and had, um, had offices, uh, in the US Europe, but also out in Asia, um, has, has always had a very big appreciation for the fact that people from different cultures, different backgrounds, um, can really, uh, uh, produce a lot of diversity of thought, which is essential in investment decision making. Um, and it was right that it was like that right from the very beginning. Um, we were founded in 1982. Um, in fact, PIP the, um, quoted investment trust, which I, which I manage, um, actually had, its, uh, had its, um, I p O in 1987.
Speaker 2 00:15:21 Um, so a long, long history and really has, has, has, has been this way from the start. So it, we haven't done this overnight. We haven't suddenly, suddenly promoted a lot of sort of se senior females to become investment heads. We haven't suddenly gone out and recruited a lot of, um, you know, a lot of people with, with non-white backgrounds. Um, it's, it's, it's happened over a very long period of time. Um, when I look back and reflect and I talk about those four E's in know, engagement, embedding empowerment and end results, um, you know, we talk about it now, it's almost as a sort of an assessment and, and a, and a conclusion. Um, but I think it's just been a very gradual process. So I think what I would encourage people to do is to really focus on, on the culture, because that's what's really going to make a difference. Um, and I suppose I should mention as well that pip, our quoted investment trust, um, is, is really a shiny example of, of, you know, of, of the corporate world because three outta seven board directors are female, which is ahead of the, the UK's Hampton Alexander recommendations.
Speaker 0 00:16:21 Wow. And a way to summarize that, it all goes back to culture. I think many people would agree with you there. Um, it's great to hear all of this wrapped up some of the key points. It's important to measure and manage data, to gain transparency. Also, um, we heard from Elena that increase increasing amounts of data is being found in the public domain, which clearly bodes well, um, for those in our businesses. Also, mid-level managers are tending to lag behind in terms of numbers of diverse candidates, in terms of numbers of those who, um, are of diverse backgrounds and inclusion of those particular roles. Also, more diverse organizations deliver better results. Financial results. If we're looking at the question why D n I is important and why d e I is so important to companies, diversity is a core driver of innovation. I think that clearly has been laid out in terms of the report as well as in terms of the points that you talked about today, the consequences of lack of diversity, equity, inclusion could be damaged to a company's reputation, which is clearly a major risk.
Speaker 0 00:17:25 Helen, you mentioned that pe the market is becoming more important, thus investors should really pay attention to this specific asset class. Um, unfortunately few studies have been done around the percentage of women, um, in the private equity space. But one of the things that you advocate for in terms of increasing the number of women as well as people of color, mentoring, advocacy, research, and networking, you gave us tremendous information with the four E's engagement, embedding d n i into organizations as a part of due diligence, as a part of portfolio management, as well as empowerment and end results, always looking at the performance keys to increase the number of people of color, women of color, um, in these organizations. Elena, Helen, thank you so much and thank you to our audience for joining us. Again, check out definitives 2020 list of top 100 most diverse and inclusive organizations globally, as well as the 2020 report focused on diversity and inclusion in the workplace. It's in the episode description. This is Kesa Shrine. Thank you for joining us.
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