Leading domestic asset owners Future Fund, HESTA and VFMC have thrown their weight behind a new voluntary code launched by CFA Institute designed to foster greater diversity, equity and inclusion in investment organisations.
The three asset owners, which collectively manage more than $460 billion, were part of a working group set up to adapt CFA Institute’s Diversity, Equity and Inclusion Code to Australian conditions, following its introduction in the US, Canada and Europe.
Investment organisations in Australia, including members of the working group, will be invited to join more than 190 global signatories to the code, whom CFA Institute says collectively account for an estimated 30 per cent of all global institutional assets under management.
CFA Institute global senior head of diversity, equity and inclusion Sarah Maynard tells Investment Magazine the code, launched in Australia last week, also aligns with the institute’s mission to “accelerate growth in the industry such that it becomes more representative of the societies it serves”.
“It is ambitious,” Maynard says.
“But you know that there’s a mission to CFA Institute, which is very focused on the investment industry and promoting education and ethics, but the last few words [of the mission] are, essentially, ‘for the ultimate benefit of society’.
“And if we believe that, then we have to make sure that that talent distributed across the society can find a home in this industry.”
The investment industry is complex, but it is not as diverse, equitable or inclusive as it could or should be, Maynard says. Making workplaces more appealing and accessible to a wider cross-section of society is great for those people and for the organisations they work for; and for super funds, the benefits that consequently accrue to members is “absolutely the right question to be asking”, Maynard says.
“One of the things is thinking about how you get to the best outcomes in performance terms,” she says.
“There’s a lot of very interesting research, particularly around where people are carrying out complex analytical work and decision-making, that a more diverse team is actually going to essentially produce better results.
“There’s research of the likes of Scott Page [The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy], and there’s also some interesting work that was done looking at best places to work, in terms of innovation.
“What’s very interesting, and where we always need to be careful that we’re not over generalising, is where you look at people with real specialisms, that’s actually where that greater collective intelligence really comes into play.
“In some sectors, there are definitely roles where actually more homogenous teams can be easier to manage and more effective, but that’s not the nature of investment.”
| Definitions | |
| Diversity | The full spectrum of human attributes, perspectives, identities, and backgrounds. |
| Equity
|
Fairness of access, opportunity, and advancement for all within an organisation, which requires eliminating barriers and root causes that have prevented underrepresented groups from full participation within the workplace.
Note that equity is distinct from equality, which requires that each individual be treated without discrimination, including being given equal opportunities for advancement. Essentially, the same support for everyone regardless of the starting point is equality, but that may not provide an equitable solution. Equity offers those who need it targeted support to reach their full potential. |
| Inclusion | A dynamic state of operating in which any employee can be and feel respected, valued, safe, and fully engaged. |
| Source: CFA Institute Diversity, Equity and Inclusion Code (Australia), 2024 | |
The CFA code sets out six DEI principles that are universal, and which signatories to the code are required to adhere to. For that reason, Maynard says organisations need to have a pretty clear implementation roadmap before they start.
But the implementation of the code varies by country, according to the stage of development of the investment industry and applicable laws and regulations, including around employment and anti-discrimination issues.
The Australian version of the code is the result of around a year’s work on tailoring it to local conditions, CFA Society Australia chief executive officer Lisa Carroll tells Investment Magazine.
“The working group that we had set up had probably 12 or 15 people, a really good mix of our membership representatives,” Carroll says.
“Our members are obviously primarily CFA charterholders, so [they have] deep investment expertise. Probably about half the working group are our membership, and then the other half were people more from the HR, DEI expertise space. We really needed both sides to collaborate on that.
“We had organisations like HESTA, Future Fund, Future IM/Pact, University of Sydney and VFMC all involved in the in that work. It was quite a good representation of the local industry who really nutted through what is the context and what are the implementation challenges or opportunities that would sit under each of those six [principles].”
| Six principles of the CFA diversity, equity and inclusion code | |
| Principal | Explanation |
| Pipeline | Expanding the diverse talent pipeline. |
| Talent Acquisition | Designing, implementing, and maintaining inclusive and equitable hiring and onboarding practices |
| Promotion and Retention | Designing, implementing, and maintaining inclusive and equitable promotion and retention practices to reduce barriers to progress. |
| Leadership | Using our position and voice to promote DEI and improve DEI outcomes in the investment industry. We will hold ourselves responsible for our firm’s progress. |
| Influence | Using our role, position, and voice to promote and increase measurable DEI results in the investment industry. |
| Measurement | Measuring and reporting on our progress in driving better DEI results within our firm. We will provide regular reporting on our firm’s DEI metrics to our senior management, our board, and CFA Institute. |
| Source: CFA Institute Diversity, Equity and Inclusion Code (Australia) 2024 | |
Maynard says that when organisations have diverse teams that are more inclusively managed, “you start to see an ability to challenge”.
“Again, there’s really interesting research around, if I’m sitting with somebody I recognise to have a very different identity from my own, before I frame my argument I’m going to work harder, I’m going to think more deeply about how can I express this in such a way [that] am I going to convince [them]?
“I know she’s not going to agree with me about this, and she’s going to give me a hard time making this case. So what do I need to do before I start? Whereas if instead I’m going, you over here, Jane or Martin or whoever you are, I don’t really need to try. Because I know you think the same way as me, heuristics come in, and that doesn’t improve performance.”
Maynard says a more DEI-focused investment team will overcome some of the biases that can lead to poor decisions.
“If you work in investment, you know you have to manage your cognitive biases,” she says.
“And interestingly, a lot of those – like the endowment effect, or recency bias – that clearly have an impact on investment outcomes will also have an impact on how you manage a team in the workplace. They will also be relevant.
“And so, if you can bring those pieces together, so that people are really developing the parts of their brains that can pick up when a bias is impeding their decision making, put in, if you like, their own checks and balances, and then also in the group, then that is likely to result in better business decisions too.”
Maynard says that the investment industry must also excel at client service, and to meet the changing and diversifying needs of its clients as societies change.
Diverse, equitable and inclusive investment organisations will do better at “designing products which meet the needs of the kind of lives people have, rather than something theoretical, kind of [they] will have this, whether it fits or not”, she says.
