Progress by the financial services industry towards achieving diversity, equity and inclusion in the workforce is "at best uneven, and at worst, stagnant". Those were the words of Sheldon Mills, Executive Director of the Financial Conduct Authority (FCA) in his speech, delivered on 22 November 2022. He has recommended that firms start taking steps to address diversity and inclusion issues now, if not already doing so.

As a reminder, in July 2021 the FCA published its discussion paper – 'Working Together to Drive Change', inviting comments from across the sector on proposals for implementing meaningful change. 180 responses were received and the regulators are currently finalising their position on these issues, which they are due to publish next year. (See our previous article here Financial regulators consultation on equality and diversity – Birketts). In the meantime, Mills makes it clear that firms must continue to take steps forward and have provided some examples of DE&I practices observed in a number of firms through a recent supervisory exercise and pilot data survey, which we have summarised below.

Start collecting data

The regulators have once again expressed the need for firms to collect and appropriately use diversity data, emphasising that good data allows firms to identify where intervention might be needed.

The regulators note that many firms are focusing primarily on the gender and ethnicity of their staff, rather than other less visible characteristics such as disability or LBGTQ status. For example, less than a fifth of large firms are collecting data on the socio-economic background of their staff. Firms are therefore being encouraged to broaden the types of data they collect.

In addition to this, employee participation in data collection exercises is hampering some firm's efforts to improve data collection. The FCA found firms with the best declaration rates have worked hard to achieve this, many creating senior, sponsor led initiatives.

In Birketts' experience, companies with the best data collection rates have:

  • Appointed a senior sponsor to explain why data collection is so important and how the firm intends to use the data it collects to improve things.
  • HR teams running dedicated sessions to explain how the data is used.
  • HR teams holding sessions explaining what insights they have already gleaned from the data collected.
  • Run sessions showing staff how easy completing the data form can be by taking them through an example.
  • Held Employee Q&A sessions.

Strategise your approach

The regulators also noted that although 80% of the firms the FCA surveyed had a DE&I strategy in place, most strategies are too narrowly focusing on gender and ethnicity, particularly in leadership roles. The regulators recommend firms adopt a broader focus and then use the data collected to identify and tackle particular problem areas. They also recommend not only focusing on representation at senior level but making sure an effective pipeline of diverse talent is created, nurtured and supported. Data and DE&I strategy should therefore be viewed in tandem to ensure progress. Importantly, a DE&I strategy should cover all aspects of the career lifecycle, from recruitment through to leadership, if it is to lead to a truly diverse workforce.

Culture and inclusivity

The regulators believe the benefits of diversity can only be realised within a healthy firm culture that actively promotes inclusivity. Whilst most firms want to develop inclusive cultures, this is not systematically approached alongside diversity. Mills believes that measuring inclusivity through surveys should be part of a firm's overall approach to diversity. Firms are therefore encouraged to start thinking about how they measure inclusivity and what steps they can take to make sure different perspectives are welcomed.

Report by the Association for British Insurers – a blueprint for Diversity Equity and Inclusion

Mills' speech comes with other DE&I developments in the insurance industry following the publication of the Association for British Insurers' (ABI) Diversity, Equity and Inclusion Blueprint. The Blueprint identifies key themes and sets out suggestions for firms to adopt as good practice to improve DE&I across the whole of the employment lifecycle.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.