Events of the last few months, from the pandemic to protests ignited by the killing of George Floyd in the US, have thrust racial, ethnic and gender inequality into the spotlight.
Financial institutions are rethinking their approach to diversity and inclusion: indeed, over 70% of respondents to a survey during a recent Euromoney webinar said that their institution is doing just this.
In addition to pledging funding to minority communities, banks and other financial firms are assessing how they may be supporting the status quo through their business operations, and therefore what they need to change.
We’ve been looking at how our performance metrics may have meant we have been selecting without considering up-and-coming leaders who may not have the same networks as others
– Brandee McHale, Citi
Adebola Osakwe, global head of inclusion and diversity at global investor KKR, says: “Within finance, those bulge-bracket institutions that have had policies in place for years are fine-tuning their actions – and for those in the US that means a more intentional focus on black and African-American employees. For lack of a better term, we’re seeing a ‘reboot’, a doubling down now around D&I.”
Osakwe, who joined KKR five years ago to spearhead a global inclusion strategy, adds that the private equity sector broadly lags large investment banks, but points out that her firm has made particular efforts over the last few years to address diversity and inclusion among employees, supply-chain and portfolio companies.
In recruitment, for example, KKR has reintroduced analyst roles so that it can hire diverse talent at an earlier stage to be trained and developed.
“Some communities lack access and networks and therefore may not be putting themselves in your applicant pool,” says Osakwe. “You have to do more to find them and bring them on board and prepare them, so we reintroduced an analyst programme.”
She adds that the firm is making sure the new recruits are competitive and supported.
Brandee McHale, head of community investing and development at Citi, says there is a tendency in the financial sector – often unconscious – to favour recruits from certain universities instead of considering those who may not have had access to networks or support to attend such institutions, but may well have just the skills for the job.
“We’re subconsciously taught that people are special if they go to certain schools,” says McHale.
Citi has been running its Pathways to Progress programme that works with those who don’t have access to networks to prepare for careers.
McHale also points out that the firm is redesigning its screening process for selecting non-profit organizations to work with: “We’ve been looking at how our performance metrics may have meant we have been selecting without considering up-and-coming leaders who may not have the same networks as others.”
It may seem that monitoring for diversity is fairly simple, but Osakwe points out that it is much more difficult to make sure boxes are being more than ticked.
“You can look at hiring and attrition rates and seniority of employees, for example,” she says, “but it is more challenging to measure for inclusiveness. We run an engagement survey to see if individuals feel a sense of belonging, whether their managers are helping them progress etc, and then seeing if the answers are different for minorities and seek to understand what’s at play.”
While hiring and retention tends to be the main point of focus when it comes to enacting a D&I strategy, increased awareness of systemic racism and inequality has led financial institutions to look further.
Nandita Bakhshi is president and chief executive of Bank of the West, owned by BNP Paribas. She points out that there are many ways a financial institution can be impactful through its businesses – including influencing clients.
“We have to work with clients because we cannot do this alone,” she says.
BNP Paribas Asset Management seeks to influence greater board diversity through its shareholder engagement
– Nandita Bakhshi, Bank of the West
She points to a sustainability linked loan that BNP Paribas made to professional services firm WSP where the interest rate decreases as gender-targets are hit (among other environmental, social and governance key performance indicators).
Shareholder engagement is another means for financial institutions to influence clients.
“BNP Paribas Asset Management seeks to influence greater board diversity through its shareholder engagement,” Bakhshi says.
Also, if financial institutions are truly embracing ESG, she adds, inclusion naturally becomes embedded.
Micro-finance and inclusive finance offer financial institutions another opportunity to bring equity to bear through their business lines.
Bank of the West has been working with Grameen America, for example, opening a branch to help women in Fresno, California.
“Some 76,000 women are living below t