Keesa Schreane [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 ESG and sustainable finance. I'm Keesa Schreane
Keesa Schreane [00:00:20] Today we're going to talk about a topic that is central to ESG and to investors interested in firms who are adding actions, not just words, and working toward equality and a stakeholder driven approach to business. Diversity, equity and inclusion, or DI&E, 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 Steer's is partner and Head of the European Primary Investment Team at Pantheon Ventures and manager at Pantheon International P.L.C.. Elena Philipova is Head of ESG 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 percent 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 percent of board members are culturally diverse. Elena, how do these findings impact corporate leaders and institutional investors specifically?
Elena Philipova [00:01:48] Thanks, Keesa and good morning, good afternoon, everyone. In today's highly volatile business reality, diversity and inclusion is more important than ever. And it's, as you mentioned, measurable progress in increasing workplace diversity and inclusion remains mixed. The reasons why 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 corporates and investors to strive for.
Elena Philipova [00:02:24] However, most can agree that diversity is good for business. The diversity is the fuel for innovation, and growth is 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. It is our attempts to look into data and extract insights to raise awareness and illustrate why it's so important to measure and manage those topics. Firstly, I guess I'll start with a good news. We see certainly an increase in 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, gets also managed, or at least what doesn't get measured cannot be managed. So it's very important to start to the data, to start to acknowledge and encourage transparency. We see that trend certainly true when we talk about gender diversity. But one concerning trend from gender diversity perspective, which we've highlighted in previous reports as well, and we continue to see that is somewhat of a difference, a gap between increased diversity at the top of corporations and we would expect to see a comparable increase at middle management, but we don't. Middle management seems to be lagging behind and that presents then the question of, well, how do you nurture the future pool of leaders for the corporations to be diverse if you're not nurturing that from within the organizations? So it's a concern to think about and reflect for both companies and investors.
Keesa Schreane [00:04:49] So 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?
Elena Philipova [00:05:08] I mean, from a consequences standpoint of view, surely there is more research done that indicates that more diverse organizations are also better financially in terms of delivering better financial results. Our annual diversity report also quite clearly showed that correlation. So companies that do not embrace this topic at the heart of their business strategy and the structures they create, to create diverse and inclusive workplaces, to nurture diversity is a core driver of innovation. They ultimately will deliver and suffer from a fundamental perspective as well. That's quite damaging. It's damaging from the perspective of workers and employees, and retaining and recruiting the best talent. It's also damaging in terms of customer brand and reputation. And customers are certainly becoming more conscious of sustainability issues and are starting to translate those into their purchasing decisions and choices. So, yes, there are certainly consequences.
Keesa Schreane [00:06:32] And I'm wondering, too, about data disclosure. You mentioned that it looks like more data is making its way to the public domain, but what do the disclosure challenges do you see, if any, globally in 2021 that might limit transparency around race, ethnicity or gender?
Elena Philipova [00:06:50] Yeah, definitely, I mean, although discussions, initiatives in this area have been progressive, most tend to focus on gender and we cannot help but ask the question, what's happening to the other equally important facets of diversity, inclusiveness, such as race and ethnicity? There are clearly different challenges related to that, in every one of us has a critical role to play in overcoming them. We as a data provider that powers the financial industry through data and technology, clearly our role to play is to raise awareness on the data gaps and support the industry in having a better understanding of what data investors require. That's why we're quite excited to team up with Fortune to launch 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 this is an effort to change that.
Keesa Schreane [00:08:11] Absolutely, what gets measured, gets managed. That's clearly something that we're hearing from the top down and even bottom. Helen, I want to bring you into this to talk, specifically about the private equity space. Could you talk about trends that you're seeing with diversity, equity, inclusion and trends around measurement and really taking that measurement to a different level? What do you think in the PE space?
Helen Steers [00:08:35] Well, first of all, thank you very much for inviting me to this discussion, which I find really, really fascinating. And your report is very, very impressive. I mean, first of all, why would we be interested in what's happening 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 eight percent per annum, whereas the number of quoted companies has been shrinking sort of two percent per annum. So the private equity market is becoming more important and I think it's really important for investors to pay more attention to this asset class. In terms of the private equity industry's record with diversity and inclusion, I think it's fair to say that five or 10 years ago, we were coming from a position where diversity in the industry was not great. I mean, I've been working in private equity for 30 years now, and often I would be the only woman in the room, whether it was at a conference or whether it was in a smaller group in a due dilligence session. So it's been a problem in the industry over the years.
Helen Steers [00:09:47] About five years ago, in fact, exactly five years ago, a group of senior women in the industry decided to get together, 2015, to form a nonprofit organization called Level 20, which was founded in order to attract, retain and support women in private equity and to get to the magic number of at least 20 percent of senior positions in the industry being held by women. To your point about measurement, there hadhave been almost no studies done about the number of women in the private equity industry, which was fairly surprising. 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 with the help of some of the industry associations, was that in terms of senior positions, women held only six percent. Six percent of senior positions in private equity. So, pretty pretty poor. This volunteer led organization has now grown over the last five years. We've grown from zero members to 2,500 members. From founder funding to having now 65 sponsors, and amongst the sponsors, some of the best, well-known private equity firms in the world, funds that everybody would have heard of. We now have a CEO, executive team board, and an advisory council, and we've pushed much further ahead on some initiatives, such as the mentoring initiatives, advocacy, research, which was there right from the beginning, and of course, networking. And from being a UK only organization to now expanding to 12 different European countries and we're talking about expanding further. So, a lot of progress in the last five years. And 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 a company board meeting, and diversity and inclusion just wasn't on the agenda. Now it is. In terms of recruitment of women, some firms are now at the point where they have almost 50 percent of female recruits. Women are being supported and making it to senior levels, making it to partnership level. So I think that's been a big change in the last five years and I'm hoping that change will be ongoing.
Keesa Schreane [00:12:18] And those are great numbers, the 50 percent that many firms are seeing. But unfortunately, as we all know, as we talk about women in these 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, 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?
Helen Steers [00:12:50] Yes, that's an excellent question. And in fact, this is getting a lot more attention. And it's not just at sort of the mid-level, we're seeing it really from sort of senior levels in organizations. So I talk about the four E's, so Engagement, talking to our private equity managers for the private equity managers to get us on agendas, not just in their own organizations but in their portfolio companies, really important. Embedding diversity, equity and inclusion in their organizations, a little bit like ESG. 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, driven from the top with senior managers who really believe in it and drive it through the organization, and then End results, performance while we're 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 avoids groupthink 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 out of our teams.
[00:14:02] 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 forty five percent female, and 40 percent of employees are people of color. So you know of what you speak here. How did you arrive at this number? Was it simply just implementing those for E's or was there another way that you really managed to bring this to life in your firm?
Helen Steers [00:14:25] Well, I think it goes to the culture, actually, of Pantheon. So Pantheon was founded with three senior partners, two men and one woman. So it was one third female right from the very beginning. I think maybe because of that, that beginning, and because of the fact that the organization was global right from the very beginning and had offices in the US, Europe, and Asia, and has always had a very big appreciation for the fact that people from different cultures, different backgrounds, can really produce a lot of diversity of thought, which is essentially an investment decision making. And it was like that right from the very beginning. We were founded in 1982. I, in fact PIP, [00:15:13]the quoted Iinvestment Trust transformation [1.5s] , which I managed, actually had its IPO in 1987. So, so long history and really has been this way from the start.
Helen Steers [00:15:26] So we haven't done this overnight. We haven't suddenly promoted a lot of senior females to become investment heads. We haven't suddenly gone out and recruited a lot of people with nonwhite backgrounds. It's happened over a very long period of time. When I look back and reflect and I talk about those four E's; engagement, embedding, empowerment and end results, we talk about it now as a sort of assessment and a conclusion, but I think it's just been a very gradual process. I think what I would encourage people to do is to really focus on the culture, because that's what's really going to make a difference. And I suppose I should mention as well, PIP our quoted investment trust, is really a shining example in of the corporate world because three out of seven board directors are female, which is ahead of the UK's Haempton Alexander recommendations.
Keesa Schreane [00:16:21] Wow, and a way to summarize that it all goes back to the culture. I think many people would agree with you there. 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, we heard from Elena that an increasing amounts of data is being found in the public domain, which clearly bodes well 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 are of diverse backgrounds and inclusion in those particular roles. Also, more diverse organizations deliver better results, financial results. We're looking at the question why D&I is important and why DEI is so important to companies. Diversity is a core driver of innovation, and 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 damage to a company's reputation, which is clearly a major risk. Helen, you mentioned that the PE market is becoming more important, thus investors should really pay attention to this specific asset class. Unfortunately, few studies have been done around the percentage of women 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&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 in these organizations.
Keesa Schreane [00:18:10] Elena, Helen, thank you so much. And thank you to our audience for joining us. Again, check out Refinitiv's 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 Keesa Schreane, thank you for joining us.
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