In light of recent tragic events in the United States where we witnessed the death of George Floyd, Breonna Taylor and Ahmaud Arbery which drew public attention to the Black Lives Matter (BLM) movement across the world, large organisations have been vocal about how they plan to shape the agenda to promote diversity and inclusion (D&I) further. In a time where people are calling out for their rights, global business heads in the financial sector have publicly shared their concerns, their condolences and their commitments on effecting change. As mass employers, large organisations need to re-evaluate their D&I strategies by looking at what has worked, and what has not.

While the media may have decreased its daily reporting of the BLM protests, it is clear that the issues have not gone away, nor should they. Jörg Ambrosius who heads State Street’s Europe, Middle East, and Africa (Emea) business, comments: “Given the tragic events in the United States, I hope that this is a permanent discussion that does not cool-off, as this is a long-term challenge which needs collective effort, focus and concrete action in order to win. I would also say that the financial industry has a clear responsibility here to do things differently in the future.”

Given that many financial organisations have a large number of employees, the industry plays a crucial role in tackling global cultural issues. When asked about the industry's role, Teresa Parker who leads Northern Trust’s Emea hub says, “I think the first one is to be aware in order to understand what the issues are, what’s causing inequality, and what’s causing majorities to stay in leadership roles. Secondly, we are part of the economy and so how we interact with the economy matters. I think about financial institutions and how they support the economy overall to make sure that there is easy access for all citizens to financial services.”

While D&I initiatives are not new, these top custodian banks have been refreshing and adapting their strategies to ensure that they promote D&I on an ongoing basis, while also ensuring that they hold people within their organisations accountable. A common theme that reoccurs is that accountability sits within the senior management level and not within human resource (HR) departments. Dr Grace Lordan, an associate professor and economist at the London School of Economics and Political Science (LSE) says that placing D&I in the hands of HR is the reason why it is not resonating throughout organisations. Dr Lordan and Karina Robinson are launching the Inclusion Initiative at LSE in November, which sets out to leverage behavioural science insights with data science to advance our understanding of the factors that advance inclusion within the financial sector. Alongside this insight, the initiative also seeks to offer proof of a causal link between inclusion to outcomes that are important to those firms such as profit and loss, creativity, the assessment of risk and innovation. “The first stage within companies is to make people realise that inclusion within teams is actually better for the team, with respect to thinking creatively, innovatively and assessing risk better. If you showed any manager that by being more inclusive and changing their managerial tactics it would be better for them with respect to their team performance, they would then put focus on it. Believing that HR are the ones responsible for D&I is why D&I is not working,” says Dr Lordan.

Parker reiterated the same views, highlighting that D&I stems further than just with HR. “We’ve just done a strategy refresh in terms of diversity and inclusion, a couple of things have come out and some lessons have been learnt. The first thing is making sure there is clear accountability, which is not with HR, but with senior management. The second is making sure that you measure your results. We now call our strategy ‘diversity, equity and inclusion’ as a result of this refresh. It is important that all senior executives have responsibilities and it’s part of how we are assessed,” adds Parker. In terms of the hiring process and ensuring that underrepresented groups are given equal opportunities, Ambrosius adds, “An area where senior executives obviously play a key role is when it comes to the hiring processes. When there is a senior position up for bid, we ensure that we have interview panels as well as candidate panels, which are diverse. This is not purely HR related; this is the managers’ responsibilities.” This hiring strategy is mirrored at Northern Trust, “we mandated that for all senior hires, we would need at least one woman or one ethnic minority, and the hiring panel would include the same,” comments Parker. In terms of Northern Trust's statistics, Parker adds that within its board of 13 members, 38% are from Black, Asian and Minority Ethnic (BAME) backgrounds and 23% are women. At the bank's management group of 11 people, 2 (18%) are from BAME backgrounds and 3 (27%) are women. At its executive vice president level, which is compromised of 53 people, 10% are from BAME backgrounds and 33% are women. State Street did not disclose its statistics.

While the hiring process is crucial, equally important aspects are promoting, mentoring and tracking career progressions. Parker adds that the same mandate applied to the hiring process is also used at the promotion stage. “We did the same thing in terms of promotions to ensure that you are applying the same standard across the genders and now we are starting to focus on those biases. I don’t think that previous to those discussions senior management team felt that they were biased against women, but they were doing what society does, which is to say women have to prove themselves before getting promoted, but with men, you can see the potential coming,” says Parker.

At State Street, its mentoring process is adjacent to what the bank calls ‘sponsoring’. Ambrosius adds that in the gender space, the bank implemented sponsoring programmes and is talking about doing the same for people of colour. The sponsorship means seeking out a manager with an individual where they would want to sponsor their career in order to increase the number of diversity groups at management level. “With sponsoring, there’s a very concrete outcome we are striving for and that is to actively push careers of certain individuals to give them a fair chance. That is something which we have done and which we will continue to do more broadly when it comes to diversity aspects,” adds Ambroisus. In terms of tracking career progressions, over the last five years, Northern Trust has run a similar programme called the ‘diverse leaders programme’ in Emea. It focuses specifically on BAME talent to help improve their ability to get ahead with their careers and engage with management. “We track people to see how they are doing and that actually has been a differentiator for people of an ethnic background that are underrepresented in order to progress,” adds Parker.

Both banks have also implemented mandatory unconscious bias training across all management levels. Ambrosius notes that this training is on an ongoing basis, while Parker adds that having this training allows individuals to recognise biases they may have. In turn, Parker notes that this opens up dialogues which then need senior people around the table representing those groups that can, in a positive and constructive way, call biases out to start making a difference. “Being silent is not an option anymore and that is the key point here. This is where managers have the responsibility to work with their team in order to create an environment where we can openly speak about these issues,” adds Ambrosius.

Both business heads for Emea recognise the efforts that have been made at their respective banks but openly stated that more could be done, as well as in the broader financial sector. Parker says, “I do think that there are pockets of the industry where people are so far back in terms of their views that maybe it’ll take until the next generation comes in…. you need to figure out what is the intervention that works as there are maybe pockets of people who either don’t see it or don’t want to see it.” Ambrosius acknowledges that some unrepresented groups received less attention than others, but notes that all diversity elements need to be looked at in an equal way. “There was a period over the last decade where there was a lot of focus on gender and I firmly believe that was the right thing to do at that time. However, we have to recognise that there are other diversity aspects, which are equally important and that have to be equally taken into account and actively managed. That’s where I would say our diversity agenda has changed and will change.” Dr Lordan shares her insight on why D&I strategies may not be working as well, or as quickly as they should.

“The reality is, millions of pounds are spent every single year in the City on things that we believe may enhance diversity and inclusion but we rarely check to see if they do. Many interventions that firms roll out are quite time consuming and when colleagues do not see change, they can become fatigued with D&I intervention. Seriously understanding whether what you’re doing is working would help block that fatigue,” says Dr Lordan.

Some argue that quotas, or setting D&I targets in terms of representation, could be the way forward but Dr Lordan adds that quotas can have a backfiring effect. “When we have quotas we might not necessarily be increasing diversity in the way we think we are. If you put focus on quotas for certain groups then it could have negatives effects for other groups. I think quotas can work but they need to work with auditing to ensure that there is no crowded out. I haven’t seen any company do this, taking backfiring seriously. This is important because there is emerging evidence to suggest that gender quotas may disadvantage non white colleagues and also those from lower socio-economic backgrounds.” It is therefore evident that in order to change norms, address biases and tackle inequality within firms, the strategies stem from open dialogue. In order to incorporate D&I on a daily basis, Parker adds, “I think it’s around attitude, inclusion, respect and culture. That means leaders need to understand what is happening, calling out issues, reinforcing good behaviour, and calling our bad behaviours, so that people feel comfortable bringing themselves to the office. I think the more diverse you are, the better you are at that and the more open minded you are, the better you are at having open conversations.”

The consensus is that having a diverse and inclusive workforce is beneficial to firms. It leads to better outcomes, a better working environment, and a better economy. To clearly distinguish how attitudes might be changing, Dr Lordan says that actions need to be witnessed. If this cannot be done through statistics to show representation as they are not always publicly available, noticing the amount of resources firms are pouring into their D&I strategies is a good starting point. “The real acid test as to whether attitudes are changed is whether actions change. It’s not what companies say, but what they do. I am encouraged to see a large number of financial and professional firms moving beyond words, to pledging additional monies, talent and time and disrupting how they are approaching D&I,” concludes Dr Lordan.

On that note, Nasdaq’s chief Adena Friedman announced in June that the firm was donating cash to organisations fighting racial injustice and increasing its investments into its internal programmes. “We know we need to do more, and through our continued efforts, we strive to support those who need it most and to take the necessary steps to create positive change, both within Nasdaq and in the communities where we live,” says Friedman.