Why Is Diversity, Equity, and Inclusion Important in Finance?

A rapidly evolving finance industry demands new capabilities and a more diverse workforce and inclusive workplace cultures. According to CFA Institute's own definition of DEI, diversity is the spectrum of human attributes, perspectives, identities, and backgrounds while inclusion is a dynamic state of operating in which any individual or group can be and feel respected, valued, safe, and fully engaged. Each of these factors must be deliberately encouraged and leveraged to develop a successful, diverse, and inclusive environment. According to a recent PwC Global survey, 85 percent of financial services CEOs polled said promoting inclusion and diversity helps enhance business performance. Other research also supports the business case for inclusive cultures that lead to increased profitability, creativity, and innovation. Indeed, a 2019 McKinsey & Co. study revealed top-quartile companies for racial and ethnic inclusion outperformed those in the fourth quartile by 36% in profitability.

Diversity in Asset Management

The discussion around motivations for pursuing diversity in investment management often revolves around two main areas: "the business case for diversity" (i.e., with more diverse perspectives, business outcomes will improve) and "because it is the right thing to do.” Overall, asset management firms tend to be in a reactive phase of diversity and inclusion, meaning that actions are taken primarily to comply with local laws and social pressure.

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  Accelerating Change: Diversity, Equity, and Inclusion in Investment Management

  This CFA Institute 2021 report captures the vast array of data collected throughout the Experimental Partners Program. It records the seismic shift from diversity, equity, and inclusion (DEI) leadership being centered in HR to ownership by business heads, supported by increasingly expert DEI leads.

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  Driving Change: Diversity & Inclusion in Investment Management

  This CFA Institute 2018 report on the state of inclusion & diversity in the investment management industry, including survey data and conclusions on where the industry needs to get and how to get there.

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  Twenty Actions to Promote Inclusion in the Investment Industry

  Stemming from the inception of the Experimental Partners Program, collaborators identified 20 key concepts of inclusion & diversity and made recommendations for actions that asset management firms can take to improve in each area.

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  Why Diversity Is More Critical Than Ever

  Machel Allen, CFA, discusses the ever-growing importance of inclusion & diversity in the midst of the COVID-19 crisis.

Millennial Trust

More than one in three Americans (35%) in the labor force are millennials, making this group the largest generation of the US workforce. To attract millennials and members of Gen-Z, firms should set out to achieve a broad balance of objectives, including an emphasis on inclusion and diversity.

Regulators and Policymakers

Diversity is part of the larger conduct and culture focus of regulators. Amid increased regulatory focus, industry standard setters are stepping in to fill the void, including CFA Institute which is developing Environmental, Social, and Governance (ESG) Disclosure Standards for Investment Products.

Investor Demand

Demand from large investment consultants for DEI data and progress is on the rise, including metrics on asset managers’ investment team diversity in requests for proposals. According to the recent CFA Institute Earning Investors’ Trust study 76% of institutional investors and 69% of retail investors have interest in investment design and products that incorporate environmental, social, and governance (ESG) factors, with a growing number of investors prioritizing racial diversity and justice to create a more inclusive society.

I can’t think of a problem that more urgently requires a better outcome than racism. I believe we need to begin to answer the “what must we do” question by focusing on our firm and how we make it better — for our people, our clients, and our communities.

Teams Dominate

Many firms are recognizing that the diversity of their employees can be a key part of their success. For example, firms are shifting from the “star portfolio manager” model to diverse investment teams, which leads to better outcomes in complex decision making.

Awareness of Biases

The investment management industry must continue to think more deeply about how behavioral biases affect decision making more broadly and the benefits of diversity in overcoming groupthink. We all have something to learn when it comes to behavioral biases.

Benefits of Diversity, Equity, and Inclusion in the Workplace

• Innovation

  Finance firms that foster inclusive cultures are more open and innovative.

• Representation

  Firms that promote diversity, equity, and inclusion also recognize the importance of responding to changing client demographics with a more diverse professional team.

• Competition

  Diversity, equity, and inclusion enables firms to better serve prospective and current clients and to better compete for top talent.