Financial services firms failing on diversity research warns

The financial services sector has been told its time to truly engage with its diversity, equity and inclusion (DEI) strategies after new research found the average DEI score for financial services firms has declined from 67 to 65 (out of an optimal 100) in the past 12 months.

Reboot a working group of senior financial services industry professionals commissioned the research which found created the score, which is based on the views and experiences of 800 employees across financial services with a minimum of ten years’ experience in the industry. It suggests that almost no progress has been made over the past three years. , given the Reboot index score in 2021 was 65.

The research found that the decline was primarily driven by lower levels of perceived commitment to tackling racism from senior leadership.

Reboot’s report, titled Race to Equality: UK Financial Services, includes insights from respondents working in financial services roles on their views towards equality and diversity in the workplace. It is the third edition of Reboot’s annual report, tracking corporate progress on DEI following commitments and increased scrutiny in the wake of the George Floyd murder in May 2020.

Four in ten respondents (40%) said they did not believe that their CEOs or top-level leaders were sufficiently committed to addressing racial discrimination in the workplace. Asked why respondents believed this, almost half (48%) suggested senior leaders didn’t fully understand the impact of racism, and 43% suggested leadership feared backlash from either inside or outside of the workplace. The research showed that if CEOs and top-level leaders took significant measures to address racism, four fifths (81%) of employees believe it would lead to positive change across the organisation.

Jörg Ambrosius, executive vice president, chief commercial officer, State Street said: “The research makes it clear that the need for proactive and intentional measures with well-defined outcomes and expectations is what is needed from leadership. While each of our organizations can individually try to address these issues, it will take the collective effort and influence of our industry overall to create lasting and visible change. We must do better.”

As such Reboot has devised a six point plan to drive DEI.

  1. CEO influence on organisational culture: The CEO’s stance and actions on racism significantly shape organisational culture. Their approach, whether proactive or lacking, impacts manager behaviour and the overall perception of the organisation’s commitment to addressing racism. CEOs must set the tone from the top.
  2. Leadership communication and training: Both line managers and CEOs should lead with open communication about diversity and its importance. Continuous training to understand and combat racism is highlighted for effective leadership.
  3. Advance ethnicity pay gap reporting to boost transparency: employees still lack confidence in data disclosure to their employer, so more needs to be done to create a culture of trust, to enable more transparent reporting disclosures to be published.
  4. Action and accountability: A zero-tolerance stance on racism, clear goal-setting, and fostering accountability at all levels are vital. Employees believe that holding leaders accountable for their actions and decisions is crucial in promoting an anti-racist workplace.
  5. Collaboration and external expertise: Collaboration with employee diversity groups and seeking external expertise in anti-racism initiatives can provide varied perspectives and more holistic solutions.
  6. Transparency, equity, and representation: Transparent communication about diversity initiatives, ensuring equal opportunities for all, and championing leadership teams that reflect organisational diversity are paramount for fostering trust and inclusivity.

On a positive note, this year’s survey did point to positive commitment to driving inclusive cultures in the City. It found that three quarters (75%) of employees surveyed said their company leadership teams were committed to promoting diversity and inclusion related initiatives in the workplace, and 78% said their organisation actively promotes an ethnic and racially inclusive culture. However, to drive further progress, employees identified several other areas as needing to be addressed to progress DEI.

More than half of respondents believe that issues remain around improving representation and mentorship. In fact, when asked about barriers to ethnic minority career progression, 56% noted a lack of networks that can assist with career progression, and 59% a lack of role models with a similar identity or background.

While Reboot’s surveys show year-on-year improvements of ethnic minority representation at senior levels, rising from 29% in 2021, to 30% in 2022 and 32% in 2023, progress is very slow and must advance further to create diversity of role models that junior and mid-level employees need.

Noreen Biddle Shah, founder of Reboot said: “This year’s results show a lot more still needs to be done and structural change is key to moving the needle. In its recent consultation, the FCA demonstrated a sophisticated understanding of the nuances surrounding progressing DEI. It pinpointed the need for better data and acknowledged that for ethnicity, it should be broken down with sufficient granularity. They have also highlighted the importance of having the right tone coming from the top – very much mirroring the findings of this year’s report. We hope the conclusion of the consultation will include a mandatory reporting process involving the publishing of data, a narrative around that data and an action plan to show how this will progressively improve – tracked year on year to ensure accountability.

“Some firms are already publishing their ethnicity pay gap data on a voluntary basis. While the numbers are far from perfect, this willingness to be transparent is a positive sign. For instance, Schroders recently published its data, demonstrating how it intends to build a strong pipeline of diverse professionals across different levels. This show of commitment is enough for now and we hope other firms will follow suit.

We need to remember – this is not a fluffy exercise. Diversity of thought will reduce business risk, it will support innovation and robust outcomes, as well as lead to a fairer society.”

Reboot’s report, titled Race to Equality: UK Financial Services, includes insights from respondents working in financial services roles on their views towards equality and diversity in the workplace. It is the third edition of Reboot’s annual report, tracking corporate progress on DEI following commitments and increased scrutiny in the wake of the George Floyd murder in May 2020.

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