The Race at Work Charter - how can intermediaries be involved?

2016 saw a turning point for equality in financial services, with the introduction of the Women in Finance Charter. A spotlight was - finally - turned squarely on the issue of inequality between men and women, and there followed a swathe of businesses engaging meaningfully with the process of change.

But there was another, mostly unintended, effect. The 2018 review of the WIF Charter undertaken by New Financial Group showed that firms who were following the Charter’s guidance on performance-linked bonuses and ratio tracking were using the same metrics for another purpose: to track their racial diversity, too.

It seems an obvious consequence: inequality is intersectional, and it follows that the remedy to unequal hiring and promotion practices for women would also be useful in tackling racial inequality. But it was unofficial, often entirely internal, and largely reported as an interesting sidenote in the WIF Charter report.

But what was clear was that businesses in financial services are thinking about diversity and equality more clearly (and with a greater sense of responsibility) than ever. Firms were feeling the pressure to improve, not only for the sake of their image, but for their performance. Statistics from a McKinsey report showed that firms with greater racial diversity at management level showed a corresponding boost to their EBIT (earnings before income and taxes).

Enter the Race at Work Charter. Not designed specifically for financial services, but with similar methods of personal and collective responsibility, the charter was launched in 2018 with the aim of culture change across the UK.

Here it’s important to look at race and racial inequality in financial services in comparison with the broader business community. Financial services is not historically known for its diversity, although certain sectors - notably fintech - perform ahead of the curve. In the UK as a whole in 2015, 1 in 8 of the working age population were from a non-white background, yet held only 6% of top management positions - and the Race at Work Survey revealed that 25% of ethnic minority employees reported that they had witnessed or experienced racial harassment or bullying from managers. 

In July 2020, the Financial Conduct Authority's new chief executive Nikhil Rathi said it was very important that organisations, including the watchdog itself, made progress on diversity as quickly as possible. 

It is true that progress has been made - or at least, targets for progress have been set: Lloyds Banking Group was the first FTSE 100 firm in the industry to set an ethnic diversity target with a target of 8% of its top 7,000 staff to identify as BAME by 2020. Alongside this, the FCA has also set ethnicity targets of 8% senior roles to identify as BAME by 2020 and 13% by 2025. However, as of 31 March 2017, the FCA’s senior leadership team was at 2% BAME which was down from 3% in 2016. 

The Race at Work Charter, while not specifically aimed at the financial services industry, provides clear guidance and accountability for its members, and so have been a helpful ‘jumping off’ point for firms wishing to improve their racial diversity. A number of financial services firms are signatories of the Charter: Aegon UK, Association of British Insurers, Aviva, BoE, HSBC, Royal London Group, Santander, Investec, Shawbrook, Skipton BS, LBG, Leeds BS, Natwest, Nationwide. Predominantly large businesses, who have both the numbers required for robust data and the HR capacity to embed new reporting practices into the workplace, they may seem a thousand miles away from the average advice business.

But what are the five goals of the Race in Work Charter? And how could they translate to much smaller businesses - and advisers specifically? At first glance, they may seem like a huge commitment for smaller firms: but, much as HR departments can be fifty people or one, the goals of the charter are all scalable to the size of your business.

The first is to appoint an executive sponsor for race, who provide visible leadership on the matter and can drive actions such as setting targets, briefing recruitment agencies and supporting mentoring. This seems eminently achievable for even a small firm - as does the second aim, which is to capture (and publish) ethnicity data and the progress being made. In smaller firms, data will be limited and easy to capture - and leadership on the topic can be informal and discussion-led.

Committing at board level to zero tolerance for harassment or bullying - the third goal of the Charter - can be as simple as affirming a commitment and keeping the issue on the agenda at board meetings, as well as making sure relevant policies are in place to support employees who face harassment or bullying. A feature of small workplaces is often that management teams are reactive, rather than proactive, not realising that policies or processes are needed until concerns crop up. Implementing these ahead of time not only ensures commitment to the aims of the Charter overall, but helps towards the fourth aim: making clear that supporting equality in the workplace is the responsibility of all leaders and managers. This could include introducing performance objectives covering their responsibility to support fairness for staff.

The last aim - and one that may be more difficult for smaller businesses - is to take action that supports ethnic minority career progression. On the face of it, very small businesses with limited room for progression at all may find it difficult to actively develop career progression for any employees, regardless of race. However, thinking about the issue more broadly can help: mentoring, sponsorship and providing development opportunities may not be easy to arrange internally, but joining larger mentoring or networking groups as a business will help employees thrive and boost their chances of career progression long-term, even if not within your own business.

As with all aspects of running a business, there is no one size fits all when it comes to promoting racial equality in the workplace. Each business will have its own challenges - hiring in areas with vastly different demographics, for example, will change how easy or difficult it could be to ensure diverse shortlists, and firms with only a handful of employees may find internal mentoring hard to organise. But all goals of the Race at Work Charter are achievable with commitment, open discussion, and utilising outside resources to supplement your own where needed.

Financial services - and the UK’s professional approach to racial equality as a whole - can change, and will do so to the benefit of all businesses and employees. While equality and eliminating harassment or discrimination are the overall goal, it is also true that the potential benefit to the UK economy from full representation of BME individuals across the labour market is enormous. Through improved participation and progression, is estimated to be £24 billion a year, which represents 1.3% of GDP.

Put simply: to achieve true racial equality in financial services requires the same kind of commitment and broad support that has been so rightly been shown toward the Women in Finance movement, and will benefit the industry and its consumers as a whole.