Why impact investors must join the diversity battle

Diandra Soobiah, the new co-Chair of the 30% Club, calls for our support as she expands the gender equality group’s mission: “This is still a fight for some. We still have a long way to go.”

George Floyd's murder last year by a police officer in the US galvanised a lot of action around racial bias within companies, and led to the 30% Club setting new targets around gender and race representation. SIPA USA

CV

∙ Co-Chair 30% Group 2021-present
∙ Head of Responsible Investment, NEST (National Employment Savings Trust) 2010-present
∙ Investment Analyst, Russell Investments, 2006-9
∙ Research Analyst, Nedgroup Investments, 2002-06
∙ Queen Mary University of London, 1998-2002

Since its foundation in the UK in 2010 the 30% Club has been hammering on the proverbial glass ceiling.

The 'Club' gets its name from the core mission to seek “at least 30% representation of all women on all boards and C-suites globally,” arguing this is “the point at which minority voices achieve critical mass and can be heard.”

Diandra Soobiah, the new co-Chair, tells Impact Investor that she is broadening that mission now to include race, something that is highly personal for her.

“When I joined the investment industry 20 years ago, I felt the need to conform to a white male-dominated industry and was highly conscious of the fact that I would be the only female of colour in investment seminars,” she says.

She feels passionately “it shouldn’t be necessary to conform, and sadly this is still a fight for some. We still have a long way to go.”

George Floyd

Soobiah feels George Floyd's murder last year galvanised a lot of action around racial bias within companies. Earlier this year the global campaign group, led by chairs and CEOs, “set some new targets around gender and race representation, raising the stakes,” Soobiah says.

"When I joined the investment industry 20 years ago, I felt the need to conform to a white male-dominated industry, and was highly conscious of the fact that I would be the only female of colour in investment seminars," says Diandra Soobiah, the new co-Chair of the 30% Club, a campaign group for gender equality. 30% Club

The Club sent out letters to companies that it deemed ‘falling short of what they should do.’ After all, “we've had seven years since the UK’s Parker Review suggested the appointment of at least one director of colour on boards, and yet still so many companies are falling short.”

Some companies apparently push back, saying that the pool of talent is insufficient. Soobiah is having none of this. “Companies should stop letting perfection get in the way of the good.”

She adds: “While we're not yet at the stage where we recommend investors to vote against boards that say it's too difficult, we want more evidence that they are engaging and evidence of action at the grass roots.”

Business case

Asked what that might be, the campaigner argues: “Companies should look at how they are promoting people, developing them, and retaining them. They should be talking to their recruitment consultants pushing them to look further afield.”

“There is a large body of research that supports this re-pivoting,” according to the 30% Group Chair. Certainly, McKinsey’s work suggests the gender battle is largely won in the US. “Between January 2015 and January 2020, representation of women in senior-vice-president positions grew from 23 to 28%, and representation in the C-suite grew from 17 to 21%.”

By contrast, in their report One Million Black Women US investment bank Goldman Sachs paints a picture of racial disparity across the workforce. Leadership from the top may be needed to change this.

Black women’s ‘wage gap’ now stands at 15% relative to white women and 35% relative to white men. Strikingly, only a tiny proportion (0.5%) of single black women own their own business, a rate that is 24 times lower compared to single white men.

However, consultancy firm McKinsey also calls for a broader definition of diversity, beyond gender and race. This is something Soobiah concurs with. “Further out I hope that diversity will be treated in an even broader sense where we look at companies seeking skill sets from diverse backgrounds, in terms of age and socio-economics as well as race and gender.”

Fortunately, according to Soobiah, “the right thing to do is increasingly interlinked with the business case. Why wouldn't companies eliminate systematic bias and seek to get access to a broader group of people at leadership level?”

Call for support from impact investors

As well as broadening the 30% Club’s mission, Soobiah is seeking to broaden its support, and this is where she feels impact investors can play a role. “We want impact investors to be more involved and would welcome more impact funds in our group.”

Soobiah admits “all our members tend to be big global institutions based in London.” That list currently includes giants like Fidelity, JP Morgan, Blackrock, Aviva and Standard Life.

She certainly wants more European involvement. “We want investors to seek impact across their portfolios and that means looking beyond the UK. We have spoken to regulators and data providers to establish where the difficult, often smaller, companies are across Europe.”

When it comes to this global expansion, she adds, “whilst I do hope ethnicity will be a focus in the future, our short-term priority will be to improve gender representation.”

Focus on smaller companies

European impact investors might help with a particular challenge: smaller companies. “One of my main observations is that consultations around possible disclosure on diversity, and a setting of targets, often do not include small companies. The focus is always on big, listed companies. The smaller companies are not getting the attention they should on this issue.”

Why could this be? “I think some of the issues are around data protection rules which make some companies feel uncomfortable about disclosing data,” she offers. In addition, smaller companies are sometimes “just too small to be able to afford to appoint consultants or a diversity officer.”

Things have to change. “If we look at the UK, 50% of the workforce is employed by smaller companies and indeed 80 to 90% of employers are SMEs. We need to address systematic bias across the whole economy.”

The 30% club would like regulators to apply regulations to all size companies. “I also think there could be an opportunity here. If larger companies are seeking to broaden diversity on their boards, they should look at their smaller suppliers,” says Soobiah.

“Often there will be talent there which is not getting represented at board level in large companies. There is a danger of the same director making the rounds on boards.”

Personal Commitment

For the last twelve years Soobiah has been working at the UK company NEST (National Employment Savings Trust) “focusing on diversity and highlighting the business case.”

As Head of Responsible Investment there she says she has “essentially been overseeing the application of ESG factors across our investment approach, and how we apply stewardship to our range of investments. Tackling a range of issues - human capital, climate change, diversity.”

Membership of the 30% group was a natural extension of this, and Soobiah was very pleased to take up the co-Chair position earlier this year. As she explains, “people behind me might not be as lucky as I have been.”