Asset owners have said diversity, equity and inclusion (DE&I) correlate directly with business performance, and they are integrating it into their business models. However, many still fail to engage on DE&I with their underlying portfolio companies, according to the latest Pensions for Purpose report.
Navigating diversity, equity and inclusion – an asset owner perspective shows that, in the past two years, pension funds have significantly advanced their DE&I strategies, integrating these principles deeply into their operations and establishing specific DE&I action plans.
Beyond headline policies or statements, however, the paper highlighted a mismatch in understanding how these policies translate into practice on the ground and challenges investors to deepen their DE&I engagement beyond surface-level commitments to ensure meaningful implementation across all investment tiers.
Karen Shackleton, chair and founder of Pensions for Purpose, commented: “The common belief in the potential of DE&I to boost business performance is a great starting point to raise awareness of the importance of the topic.
“Our research shows commendable progress and significant areas for deeper engagement with DE&I. Surprisingly, it is not yet impacting underlying investments significantly. However, we found commitment to DE&I is growing among asset owners, who realise there is more to be done and the overall trajectory for DE&I, especially looking beyond gender, is positive. We would expect future research on this topic to show progression.”
Best practice
According to the paper, asset owners expect to enhance DE&I strategies by focusing on high-quality data and broader disclosure, such as the gender pay gap, while expanding their DE&I efforts beyond the board level to include the entire workforce, mindful of regional and cultural variances.
It also suggested, as the industry evolves, so will DE&I strategies, with ambitions to set clear key performance indicators for progress and extend diversity efforts beyond gender to address broader issues such as disability and socio-economic disparities. DE&I initiatives could be applied more broadly across markets and to increase diversity in senior positions, positioning DE&I as a parallel priority to challenges like climate change.
Given this analysis, the paper outlines universal DE&I best practices – considered applicable across asset owner organisations – offering a roadmap for institutions to enhance their DE&I initiatives internally and in their external partnerships.
Among the suggestions, the paper says asset owners should initiate mandatory internal DE&I training to establish a common understanding; incorporate DE&I considerations in the manager selection process; reflect DE&I values in voting and stewardship; and ensure DE&I is a standalone item in meetings with asset managers.
The paper was sponsored by Jupiter Asset Management. The firm’s lead investment manager, Abbie Llewellyn-Waters said the firm is “encouraged” by the report’s findings.
“We recognise the challenges stemming from data availability and consistency; however, we are encouraged by the ambition this report highlights to align interests and provide clarity for asset owners on the real-world social outcomes of their investments, which is also why we spend a considerable amount of time in reporting on these outcomes in our Sustainability Reports, so that the individual members can understand how their long term savings support social equality outcomes.”
