What firms are telling us about values and commitments

Most investment firms want to demonstrate to staff and stakeholders they take topics relating to culture and inclusion seriously.

However, this is also something they find challenging with honest, open conversations few and far between. 

The benefits of a diverse, open culture that is strong, transparent and flexible, have been well-versed over the recent decade, and City Hive research shows firms are responding to stimuli from both employees and clients.

There has been increasing consensus that diversity of thought and representation can enable better investment analysis, better decision making and improve client outcomes. 

Understandably, the search for better data on practice and progress is now being sought, not least as material change in diversity in leadership and certain team roles and equity of compensation is happening at a glacial pace.

This means there are still disappointing outcomes for individuals and a sense the industry is failing to attract and retain the talents that will keep it innovative and future-proof in a changing world and changing markets. 

Do we need to revisit the basics?

How can firms ensure diversity, equity and inclusion (DEI) and sustainability – factors they will need to ensure the longevity of their business – are truly embedded? 

Firstly, because change must come from the very top of an organisation, it is worth looking at the company values and how a firm is committed.

It is easy to dismiss values exercises because we often see the same words espoused – but integrity, client focus and quality are reasonable things to aim for.

We wanted to understand how a firm is set up to deliver on their stated values, be it through the calibre of their teams and how they ensure they can create the right products and services. 

Of the 50 firms whose data we examined, almost 90% said their firm has a specific commitment to DEI embedded in its values. 

Baillie Gifford challenged on lack of diversity at London conference

Firm data, provided as responses to the City Hive ACT standard, indicates they design and implement programmes around culture and inclusion with strong and positive intentions, and are also striving to recruit and retain employees from different backgrounds.

Crucially, they clearly acknowledge in the narrative data that they believe this will lead to the best client outcomes.

And clients, of course, are changing as much as the world is. 

What are firms currently saying about their values? 

Our research shows the most cited values for firms focused on client delivery, with a variety of other values put forward to deliver – ranging from the traditional focus, through to reliability, trust, respect and product excellence.

The ACT framework asks firms to articulate how values were developed and why particular values were important. This can be an evolving area in relation to culture and inclusion topics, but several firms can talk about how values were brought to life in practical terms.

This includes setting out how they ensure (or intend to ensure) a diverse and inclusive business and/or incorporating a discussion on efficiency in business practice and ensuring returns. 

Firms that lack these details are generally (not always) smaller and less likely to have internal committee structures; or firms that are earlier in their journey due, for example, younger firms that still need to create concrete elements to support initial policies or gain more employee involvement.

The good news is, creating those elements at an early stage really helps embed the process and develop employee ownership of those concepts. 

So where does the industry need to improve and how? 

The conversation on culture has become a permanent fixture, even if this means more challenge to how it matters to client outcomes.

This means it will be increasingly necessary for all firms to differentiate their approach and articulate how reliability and tradition marries up with how they are best navigating emerging risks and opportunities in a changing investment, economic and social landscape. 

This can come to life via firm processes and execution – such as employee engagement and committees – and through leadership focus and goals – more examples are in the City Hive ACT Trends report.

Fund selectors that are increasingly focused on internal values and culture tell us they want to see clearer links between inclusive practice and what this means for client delivery and outcomes. 

This should also demonstrate how the treatment of employees is designed to align with firm values, and can still article where the most important of these values is client satisfaction – something which aligns with Consumer Duty. 

 But our research shows, despite the strongly expressed commitments, diversity data remains lagging across many indicators.

It is all well and good for firms to identify DEI as a core value, but investors want to see the actions taking place, the intentionality and resources behind these.

This will show true commitment, something that is imperative for the right direction of travel. 

Article first appeared on Investment Week.

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