CFA Institute unveils DEI code for investment firms

Only a small proportion of the financial services industry includes women and minorities, something the organization would like to change.

The CFA Institute today published a code for investment companies to promote diversity, equity and inclusion, or DEI, within their practices, part of a strategy to measure DEI in the industry and improve it over time.

The organization, however, is not forcing anyone to comply, and the DEI code, can be voluntarily adopted by investment professionals in the U.S. and Canada.

Firms that sign it must commit to furthering DEI across six principles that “drive cultural change.” These are: pipeline; talent acquisition; promotion and retention; leadership; influence; and measurement.

“In addition, signatories commit to accelerating and amplifying the impact of their commitment by making the economic, business and moral case for diversity, equity and inclusion,” the organization stated. “Further, in Canada, signatories commit to implementing the Truth and Reconciliation of Canada Call to Action #92 and to embracing Indigenous reconciliation.”

Today’s unveiling of the final version of the code comes after two years of development. The CFA Institute chose the U.S. and Canada as the first countries for the initiative in part because of demand for action on racial justice that exploded following the murder of George Floyd in 2020 and growing attention on rights for Indigenous people in Canada, the organization said.

“Over successive generations, the investment industry has lacked the knowledge, experience and, frankly, motivation to build DEI into the framework and culture of organizations. That is now changing,” Sarah Maynard, the institute’s head of external DEI, said in a statement. “Increasingly, responsibility for DEI is moving to business owners with DEI goals embedded in long-term business strategy. There is no finish line, and effective change will require iterative, continuous improvement with commitment from every individual.”

Those that opt to sign the organization’s new code will be asked to provide annual progress reports, confidentially, data from which the group will use to compile industry-level statistics, it stated. Within two years of signing, firms must show that they have a DEI policy and statement; senior leadership ownership and oversight governance process; and a plan to integrate DEI.

The code “aims to foster commitment from institutions to DEI action that will lead to greater inclusion of wider viewpoints from the best talent, which will lead to better investment outcomes, help create better working environments and generate a cycle of positive change for future generations,” the group stated.

FEEDBACK

Last year, the institute published a draft of the proposed code and began collecting comments from members and industry groups. Of those who responded, 49 supposed the measure and 32 opposed it. Some of the comments that railed against a DEI code “may be considered objectionable” but were published in the interest of transparency, excluding “a select few that contravened civil discourse and decorum,” the organization said.

One of the strongest proponents of the code was the CFP Board, which itself began a DEI initiative through its Center for Financial Planning in 2015. Highlighting the need for action is the small proportion of CFP professionals who are Black or Latinx, although that segment of members has been growing rapidly, the board wrote. As of the end of 2020, there were 3,688 such professionals, up from 3,274 a year prior, a growth rate of more than 12%, which is five times the growth rate of the wider population of CFP members. Further, about 23% of CFPs are women.

The proportion CFA Institute members who are women also shows the need for a DEI code, that group noted in a presentation to the press ahead of today’s announcement. About 30% of financial industry workers are women, compared with less than 20% of CFA members.