The Black Lives Matter movement sparked a positive change four years ago and had a huge influence on Financial Services businesses’ commitment to race equality in the workplace.
However, since then there has been no remarkable improvement, with over two thirds of employees saying that their employers current state of ethnic and racial diversity efforts has not changed or has declined compared to two years ago, according to new research from Reboot: Race to Equality: UK Financial Services 2024 report*.
The research, conducted by Reboot – a campaign group of senior financial services professionals working to advance the dialogue and action on race and ethnicity in the workplace – and research house Coleman Parkes, reveals that funding is being reduced and diversity, equity and inclusion (DEI) programmes are being decommissioned as CEOs prioritise cutting costs rather than focusing on improving diversity.
Diversity and business growth go hand-in-hand
Reboot’s report found that employees believe their CEO should be doubling down on diversity, with six in ten (61%) feeling that if top level leaders took significant action to address racism it would have a considerable positive impact on the culture and ultimately, on the bottom line.
Mary O’Connor, former Chief Executive Officer and Board Director, says: “As a former CEO, I have seen how diversity not only protects firms from downside risks such as groupthink, but also fosters growth and unleashes productivity and innovation. Companies that fail to embrace diversity are also failing to achieve their commercial potential and leaving money on the table.”
Nearly half (48%) of employees suggested that one of the main reasons CEOs are not taking sufficient action to address issues is a lack of understanding about the severity and impact of racism. Four in ten (42%) respondents stated that budget cuts are the biggest contributing factor to slowing down or silencing efforts. In addition to this, nearly a quarter (22%) have experienced reduced funding for diversity programmes and over a quarter (26%) have seen an elimination of diversity-focused roles over the last two years.
Rick Lacaille, Former Chief Investment Officer at State Street Global Advisors, says: “Our diverse talent pool offers an enduring, positive differentiator for the UK financial services industry, yet the Reboot report suggests this potential is being squandered by firms’ inability to address the need to build an inclusive culture. Investors in the UK may yet benefit from diversity, but regrettably, more regulation relating to disclosure may be needed.”
Muzzling of diversity advocates
Organisations are trying to create a diverse culture for everyone to speak up, with almost two thirds (58%) saying that their companies actively encourage employees to inform change and build an ethnic and racially inclusive culture.
Yet many respondents feel like they’re being silenced with nearly half (44%) saying they felt pressure not to advocate for ethnic and racial equality in their workplace, and four in ten (42%) saying they have to be cautious when they advocate.
Ethnic minorities felt more pressure to stay silent (45%) compared with their white peers (35%), though both groups expressed concerns about retaliation. Overall, nearly half of respondents (46%) have experienced pressure not to discuss diversity issues and four in ten (39%) experienced muzzling of diversity advocates over the last two years.
Noreen Biddle Shah, Founder, Reboot, says: This year’s report highlights a stagnation in race sentiment since Reboot was launched four years ago. Even more concerning is the growing trend of employees feeling pressured to remain silent on issues of racial and ethnic diversity. Many fear repercussions if they speak up. A real example is that not one of our senior ethnic minority ambassadors was allowed to share a quote in response to this year’s research. This is because DE&I has been institutionalised and less about the individual, but more aligned to the company and its agenda. Four years ago, getting ambassadors to externally speak up was not an issue at all – but that’s because the corporate narrative at that time was more supportive due to the hype around BLM.”
Hannah Grove, FTSE Board Director, says: “If you take one message from this report, it is that actions are needed far more than words in terms of both driving demonstrable progress and ensuring that our financial services industry can flourish with the full benefit of diverse and engaged talent.”
Barriers to career progression
When looking at recruitment, diversity efforts have improved across all levels in organisations with nearly three quarters (74%) stating that their organisation is seeking to be more ethnic and racially diverse when hiring.
Half of the report’s respondents (55%) however, said that their skills and talent are being overlooked and nearly two thirds (59%) feeling that their identity or background has an adverse effect on the opportunities they are given. This has increased drastically from two years ago when just one third (29%) felt the same way. In addition, nearly a quarter (22%) of respondents said that in the current economic environment, ethnic minorities are more likely to face redundancy compared to non-ethnic minorities.
Baroness Helena Morrissey, Chair of The Diversity Project, says: “With so little progress made to date and given heightened racial tensions across the UK, it seems extraordinary that financial firms’ efforts to improve racial equality are diminishing or under threat. But I’m afraid this report corroborates the messages from the Diversity Project’s recent webinar, ‘No Space for Racism’ – there is a clear gap between what needs to happen and what is actually being done at many firms.
“While business leaders can do much more to level opportunity for all talent, encourage openness and deepen community within their own companies, the regulator can also help by providing clear expectations. The Diversity Project, Reboot and #TalkAboutBlack have written to the FCA to urge a renewed focus on tackling racism and improving culture. We look forward to working closely together to change the Reboot report’s findings next year.”
DEI progress in Financial Services
Looking at this year’s Reboot’s Financial Services YoY index*, which is based on data on employees’ perceptions of their company’s DEI progress, the average score for financial services has increased back up to 66.2 out of an optimal 100 (from 64.8 last year) but this is still only at 2022 levels. The driver of this increase is the representation of diverse employees in the pensions sector, which is up from 64.4 to 67.9, but there has been a notable decline in the hedge funds, wealth management and banking sector this year.
Leadership teams providing lip service
Three quarters (70%) of employees described their leadership team as being actively resistant to ethnic and racial diversity initiatives. On top of this, two thirds (62%) described their leadership team as simply giving lip service; talking about ethnic and racial diversity but not taking action. Over half (54%) believe that the CEO’s stance strongly influences managers and its importance as an integral part of the organisation’s culture. Yet only one third (35%) of respondents feel that their CEO and senior leaders are doing enough to address issues of racism, this is a significant drop from last year which recorded two thirds (60%).
Dimple Mistry, Reboot Advisory Board and HR Leader says” The results have shown that there is a sense that CEOs are playing lip service. This is a finding that should be taken seriously, as it can result in the eventual breakdown of the psychological contract and trust. This has a ripple effect into other parts of the employment relationship. If there is pressure for the CEO to focus efforts in other areas of the business, it is important for CEO’s to communicate this to staff with authenticity and ensure action taken matches the messages that have been delivered.”
Bev Shah, co-Chief Executive at City Hive, says: “Leadership in firms should understand that the sentiment expressed by their employees is a reflection of their wider culture, which is central to understanding how an organisation will deliver on its real-world commitments, including to DEI. A failure to consider and include everyone, to the extent that people feel at risk of experiencing racism in the workplace, should be seen as extremely serious. This is particularly the case in firms that present themselves as responsible stewards of assets.”
