Despite challenges, many trustees will factor DEI in provider selection
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Last year, the Pensions Regulator took another important step in its push for more diversity and inclusion, with an action plan to help schemes start this journey. Our DEI report, produced in partnership with Cardano, reveals the key reasons why many schemes are struggling to improve board diversity – but also their plans to factor DEI into provider selection.
Small and large schemes face distinctive challenges when adopting DEI
In addition to being a low priority on the trustee agenda, there are additional barriers to DEI adoption.
For smaller schemes, another key concern is that DEI implementation may turn into tick-boxing or virtue signalling.
In comparison, larger schemes are more likely to struggle with the logistical challenges of DEI. For example, 38% of schemes over £10bn cite data difficulties among the top barriers, while 23% struggle with outdated recruitment processes.
Angela Winchester of 20-20 Trustees points out that there are additional factors making DEI implementation difficult:
One of the main challenges with DEI is that you will never get a trustee board that fully represents every aspect of your membership because there are so many different characteristics to consider. Compounding this further is the fact that there are only so many people on a trustee board in the first place.
Despite challenges, DEI considerations will play a growing role in provider selection
While starting this journey may prove difficult, many schemes are not dissuaded from enforcing high standards on DEI – especially with providers. In fact, 50% of trustees say DEI is an important factor when considering providers.Engaging with providers presents an important opportunity for both sides to expand their knowledgebase. The added scrutiny over providers’ DEI credentials is especially important given the benefits that come from increasing team diversity. Jennifer Adams, of Independent Trustee Services, highlights that improving DEI is a net positive for decision-making, saying:
It has been proven that diversity of thought can result in better decision making, and that exploring all of the different aspects of an issue from multiple perspectives can help trustees arrive at a well-rounded and reasoned conclusion.
According to Ally Georgieva, Head of Insights at mallowstreet, managers should not overlook the benefits that diversity can bring to their team:
Asset managers can see improvements in decision-making as much as any company. Without the varied experiences of people from different races, genders and upbringings, companies risk blind spots in their decision-making, which can lead to talent drain and a poor client experience.
While our DEI Report does not cover diversity outside the pensions industry, this point is supported in research by the Harvard Business Review on diversity reducing the risks of groupthink, as well as a study from McKinsey showing a strong relationship between financial outperformance and higher diversity on executive teams.
As DEI implementation takes off, trustees have new resources at their disposal
Trustees should note that there are already numerous sources they can turn to for best practice. For example, both TPR and the PLSA provide comprehensive DEI guidance tailored for trustees.
Another useful resource for DEI education is the PMI, which now offers a certified training course on diversity and inclusion.
Harus Rai, of Capital Cranfield highlights that the APPT is also proactive about knowledge sharing, stating:
The APPT has a DEI work stream going on at the moment, which our trustees can access. We have also produced a useful ‘hints and tips’ guide on how to create more diversity.
Commenting on the report’s findings, Gillie Tomlinson, Head of Trustee Engagement at Cardano, said:
It is clear that the pensions industry is very much on a journey in improving DE&I. Helpful guidance, which benchmarks to follow, and how to set targets are all areas that need addressing. Therefore, it is crucial that as an industry we work together, discuss best practices and challenge ourselves on different approaches to ensure we can improve the attractiveness for people from diverse backgrounds to become both professional and lay pension trustees.
