New DEI code aims to encourage investment firms to make progress on diversity

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The CFA Institute is introducing a new diversity, equity and inclusion (DEI) code for the investment industry on Thursday as part of a move to increase gender and racial diversity. The initiative is launching in Canada and the U.S. and will eventually roll out globally.

“We’ve come to the realization that globally diverse perspectives lead to better investment outcomes and better investment choices, which serve society better,” said Paul Andrews, managing director for research, advocacy, and standards at the CFA Institute, in an online presentation on Tuesday from Washington.

The organization aims to encourage companies that sign on to the code voluntarily to commit to the following six principles: expanding the diverse talent pipeline, implementing inclusive talent acquisition, reducing barriers to equitable promotion and retention, encouraging diverse leadership and influence, and measuring and reporting progress results.

“We want to be able to tap into the talent that we know is distributed across all populations that has not yet been represented in our industry,” said Sarah Maynard, global head, external inclusion and diversity strategies and programs, at the CFA Institute in London.

Companies that sign on to the code will agree to develop and adopt an internal DEI policy and statement, plan on how they will integrate it within their organization, and have oversight and governance from senior leadership within two years of signing.

The code is flexible and companies can choose which initiatives will have the most impact on their businesses.

Measuring success and recognizing progress

Once the signatories have signed on to the code, they’re required to provide data annually and confidentially based on a reporting framework the CFA Institute has developed.

That framework includes questions about diversity numbers among employees broken out by job levels such as executives, board members, administrative and professional. These numbers are further broken out by gender and ethnicity such as Black, Caucasian, Indigenous, Japanese, Chinese, and South Asians.

If signatories are unable to meet the basic reporting requirements within two years of signing on, they can work with the CFA Institute to receive coaching. But if they fail to implement the changes quickly after that, their membership in the code will be considered over.

Still, there’s no expectation every company will get a gold star on their first try, said Kim Lew, president and chief executive officer at Columbia Investment Management Co. in New York, and a member of the CFA Institute’s DEI working group.

“It’s really about progress and people recognizing the importance of progress,” she said.

Ms. Maynard said the CFA Institute will report the data collected from the companies annually.

Member demand drives development

A grassroots movement from the organization’s members in Canada and the U.S. led to the development of the code, Ms. Maynard says. (The ongoing focus on Indigenous rights in Canada and the Black Lives Matters protests in both countries during the past few years had an influence.)

A working group was formed in March 2020 and is made up of volunteers from various companies and industry bodies, including Nicsa, the California Public Employees’ Retirement System, Franklin Templeton Investments and Columbia Investment Management. An initial draft of the code was released in July 2021 for public, industry and regulatory comment.

When asked why it took the association until 2020 to start working on the code, Ms. Maynard said it was a combination of not having someone in a DEI role to spearhead the initiative, and the time and research needed to create the code. Changes in the industry made it the right time to launch the project.

While members of the working group did not say how many companies apart from the CFA Institute have already signed on to the code, they were optimistic.

“A lot of work has gone into this and hopefully people will become signatories,” Ms. Lew said. “I am hopeful that the industry, in general, will appreciate the importance of tapping into all the talent that is available.”

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