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The ESG Interview: Blazing a Trail

Lindsay Hudson, Head of Inclusion and Diversity at Aegon Asset Management, says managers must understand the business benefits of diversifying human capital.

The British government is heaping praise on the UK financial services sector for its “trailblazing efforts” towards achieving gender parity.

Last month, Economic Secretary to the Treasury John Glen MP declared there was “much to celebrate” as women now make up 32% of boards and 23% of executive committees across financial organisations. This compares to 23% and 14% respectively in 2016.

These findings come as part of HM Treasury’s annual review of the progress made by its Women In Finance Charter, which aims to improve female representation across the sector, particularly in senior roles.

Aegon Asset Management (Aegon AM) is one of 330 signatories to the charter and has exceeded the average improvement in female-to-male ratio achieved by the wider industry.

At the time of signing in 2018, the asset manager had 22% female representation in senior roles and committed to a target of 30% by the end of 2021. As of end-August 2021, it had increased that figure to 35.7%.

“Female representation and role models count,” says Lindsay Hudson, Head of Inclusion and Diversity, Aegon AM.

“People need to see a woman in a senior role to be able to appreciate that they have a chance to climb the ladder. We need less homogeneous leadership teams, and we are not going to get that if we keep choosing people who are the same gender, from the same background and from the same country clubs.”

From the top

Hudson’s role was created by Aegon AM UK CEO Stephen Jones. It is this level of buy-in from the very top that Hudson attributes to much of the company’s success in bolstering female representation.

“Our CEO is enormously supportive of inclusion and diversity; this is not a side desk passion project,” Hudson says.

But diversity and inclusion are not just important to Aegon AM’s top brass. Investors too expect to see asset managers pay more attention to the make-up of their workforces. This August, the UK-based Asset Owner Diversity Working Group, which represents more than £125 billion in assets under management, created the Asset Owner Diversity Charter designed to encourage investment managers to take inclusion more seriously.

Speaking at the time of the Charter’s launch, Diandra Soobiah, Head of Responsible Investment at National Employment Saving Trust, said: “Any fund manager unwilling to disclose [diversity and inclusion policies] should be a serious red flag for investors.”

Hudson agrees and says if asset managers understand that diversification makes good investment sense, they should also understand the business benefits of diversifying human capital.

“Rule 101 in asset management is to diversify investment capital and maximise returns and we want to do the same with human capital. It is applying that same rule used when investing money to investing in our talent,” she says.

That investors have more than cottoned on to the importance of a varied board is played out in new business requests with potential customers asking more questions about diversity within asset management firms.

“I have seen quite a ramp up in terms of the questions we are being asked on inclusion and diversity particularly through requests for proposals; the questions have become a lot more granular,” she says.

Recent research by Cerulli has confirmed that asset owners are increasingly issuing business-related requests for proposal (RFPs) that include diversity inquiries, thus incentivising asset management partners to self-evaluate.

Regulators, too, have their eye on the extent to which the financial services sector represents women and minority groups.

Speaking at the launch of the Women in Finance Annual Charter Review, FCA CEO Nikhi Rathi said: “As a regulator, we want [diversity in the] firms we oversee and in the markets we regulate. Not because it is a social good – although, frankly, that should be enough. We care because diversity reduces conduct risk and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.”

Making an impact

It is important then that asset managers can demonstrate they are paying more than lip service to gender parity. Hudson says this is why she has introduced a diversity scorecard against which departments across the organisation are measured.

“For too long inclusion and diversity has not been driven by data and metrics. Instead, it tended to be seen as an HR issue. We have to treat this as we do any other business imperative across the firm,” Hudson says.

Hudson says the diversity scorecard gives every business leader their own metrics against which their progress, or possible lack of it, can be measured.

The firm has also created seven new internal ‘inclusion and diversity communities’, including one with a ‘dedicated focus on advancing gender equality’ with board-level executive sponsorship.

Hudson says Aegon AM is focusing on getting more women from middle management roles into senior positions, conceding that this is an area where the company has “struggled”.

Based on a series of interviews conducted over the summer, Cerulli discovered that both asset owners and managers are experiencing “particularly acute” retention challenges in the middle of their organisational structures.  Setting goals and dedicating resources to recruiting, hiring, and retaining diverse talent are helping institutional asset owners and managers achieve desired organisational change, the research consultancy said.

“It is always wise to look at your data,” Hudson says. “The McKinsey research cites ‘the broken first rung on the ladder for women’ as a sticking point, but our data indicates Aegon AM gets women to the mid-level and then we struggle to promote them further.”

To counter this, Hudson says the asset manager wants to broaden its talent pool and is targeting schools and universities as a means of spreading the word to potential female applicants that investment management is a worthwhile career choice.

She says: “We are giving talks to female students about the wealth and breadth of opportunities available in our industry.”

Collegiate rather than competitive

When asked about whether Aegon AM’s improved gender diversity statistics will galvanise its rivals to up their game, Hudson, who is on the steering committee of the UK Diversity Project, argues that the industry is collegiate rather than competitive in its efforts to level the playing field.

“The good thing about this topic is that most of industry are involved with the UK Diversity Project; we are all trying to work together. We have all got the same challenges and most people in inclusion and diversity want to do the right thing for the future.”

She adds: “We have a forum to share best practice and to call out things that haven’t worked. We are trying to make things work both for the company internally and for the industry externally.”

To build on the positive momentum already achieved, Hudson hopes the advent of more flexible working will encourage more women into asset management.

However, she notes that the Covid-19 pandemic, while a catalyst for workplace flexibility, has also unduly negatively affected women. A 2021 survey from McKinsey found that one in four women are considering leaving the workforce or downshifting their careers as a result of Covid-19, versus one in five men.

“The last 18 months have been challenging for everyone, but women have been disproportionately affected and not just in this industry. That is a real shame because in the long term, the world of work will become a more flexible place, which means it is more accessible for everyone including women,” Hudson says.

Despite the recent pandemic-related setbacks, Hudson remains positive about the future for women in asset management. However, she concludes that seismic shifts in behaviour do not happen overnight.

She says: “Don’t let perfection get in the way of progress. We must continue to make small nudges in right direction because that will all add up to making a big difference for diversity overall.”

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