Monday, 6 February 2023

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Why asset managers could be the unlikely heroes who drive social, cultural, and economic impact at scale

Why asset managers could be the unlikely heroes who drive social, cultural, and economic impact at scale

The global asset management industry has a total asset base of $126 trillion–five times the gross domestic product of the U.S., the largest economy in the world.

Only 1.4% of that astounding sum is allocated to diverse asset managers. Asset allocators, therefore, have enormous room to build more inclusive societies by increasing investments in diverse managers.

Even when Black and Latin workers make up more than 20% of a particular workforce (take railroad workers, for example), less than 1% of their savings are invested by their pension in Black or Latin managers. In fact, often their savings are invested in companies that are under-serving their own communities. Addressing this issue isn’t charity, it’s equity. ​​Pensions belong to pensioners.

As I shared with industry leaders at the World Economic Forum in Davos, asset managers’ economic impact can also have an extraordinary social and cultural impact. Managers who embrace this unique responsibility can take several specific steps to drive change within their organizations and the companies they own.

First, we can turn unconscious bias on its head, in a way that is action-oriented and concrete, by establishing Conscious Inclusion programs. These programs must include rigorous, ongoing learning that employees are mandated to take part in. Programs should be paired with formal assessments of the environment and culture that each employee is fostering. And processes should be tied to compensation, forcing employees to constantly improve inclusion in measurable ways that cut across the entire organization.

Second, we can do better on board diversity. Much of the discourse on board diversity is around public boards. That’s important–but private boards are sometimes overlooked.

Private equity generated more than $500 billion in buyout deal value in the first half of 2022 alone, compared with $179.5 billion in capital raised from IPO listings in all of 2022. And while there are about 2,800 public companies with revenues greater than $100 million, there are 18,000 private companies of that size.

We’ve expanded the pipeline of diverse board members at Vista through a program we launched with the National Association of Corporate Directors (NACD), called the Pipeline Program Together. We’re producing 150 board-ready candidates each year–and making them available to any company in the world.

Third, we need to measure our work. Changing the culture of an…

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