Europe

New Framework to Assess Managers’ Corporate Culture

Managers worth £6.5 trillion back standard aimed at creating more diverse, equitable and inclusive industry.

Some of Europe’s biggest investment firms have backed a new framework aimed at helping investors assess the diversity credentials of the asset managers they appoint.

Schroders, Legal & General Investment Management (LGIM), Aviva Investors and others representing £6.5 trillion in assets under management are supporting the ACT standard – ‘Action, Challenge, and Transparency’ – set up by think tank and advocacy group City Hive.

The standard is designed to assess the corporate culture of asset management firms and to help clients to understand and compare their efforts to become more diverse, equitable and inclusive. Participants hope it will become a “core element” of the due diligence process for manager selection by “measuring culture and diversity as standalone pillars of the ESG universe”.

City Hive and ACT founder Bev Shah said the framework “sheds light on actions being taken” by asset managers and would help “create the wholesale shift needed to build an inclusive investment management industry”.

“In order to create real impact as an industry, investment companies need to allow emerging and diverging ways of thinking to thrive and create meaningful change,” Shah said.

“To move towards an equitable and sustainable world, access to investing and investments must be democratised. [Managers] need to ensure that their actions and behaviours are reflective of their values and mission statements.”

Diversity under the microscope

The announcement comes as asset managers and other financial services companies are under increasing scrutiny from regulators and clients over workplace culture and diversity and inclusion issues.

In a discussion paper published last summer, the Financial Conduct Authority said the finance sector had “taken steps forward” but had to do much more in order to truly support diversity.

Investment consultants have embedded diversity criteria into their manager research functions, based on academic evidence that shows the benefits of a diverse management group and workforce on culture and investment performance.

In August 2021, a group of UK asset owners, including Brunel Pension Partnership, RPMI Railpen, Nest and Lothian Pension Fund, created the Asset Owner Diversity Charter to tackle a lack of diversity across the fund management industry. The charter includes an Asset Manager Diversity and Inclusion Questionnaire, aimed at standardising diversity metrics and informing engagement on improving diversity and inclusion.

ACT’s framework is based on three “pillars”, which the organisation said were designed to give insight to clients and asset managers regarding corporate culture.

The three pillars are: investing in and valuing people; purpose, values and vison; and accountability and disclosures. The combination is intended to combine companies’ stated values with practical and data-driven evidence.

Firms that complete ACT’s assessment can publish their scores in annual reports and other documents to “publicly demonstrate measurable developments in corporate culture”, it said.

“Commercial imperative”

Apiramy Jeyarajah, Head of UK Wholesale at Aviva Investors, said ACT was “an important step” for the sector to become more equitable and sustainable.

“Boosting diversity in a full and holistic manner is not simply a moral imperative – it is a commercial one,” Jeyarajah added. “Institutional investors and consultants are looking for asset managers who consistently provide alpha generation and manage risk – with diversity of thought and idea generation among the criteria they consider.”

Matthew Rawlings, Head of Financial Institutions for the UK and Ireland at BlueBay Asset Management, said the framework would “remove some of the default excuses and barriers” encountered when attempting to address diversity issues.

ACT’s focus on corporate culture “rather than tokenistic or performative behaviours” was important for creating real change, according to Stonehage Fleming’s Head of Sustainable Investments, Mona Shah. She added that the collaborative nature of the project would help “galvanise such change”.

Selina Tyler, Head of UK Wholesale at Lombard Odier Investment Managers, highlighted that ACT would mean asset managers were held to account in the same way as the companies in which they invest.

Other ACT signatories include M&G, Mirabaud Asset Management, AssetCo, Federated Hermes, Capital Group, WHEB, Radiant ESG, TT International Asset Management, Invesco, and Snowball Impact Management.

ACT is overseen by a council of asset manager stakeholders chaired by Shah and City Hive’s Chief Strategist Mandy Kirby.

 

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