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Diversity & inclusion is important for all organisations. Why is it particularly important for pension providers?
Pension providers responsibility is to work with their clients with the aim to achieve positive long-term outcomes for all. Pension providers invest in many of the world’s largest companies and can therefore positively influence these companies to ensure they are better suited investments for pension savers. A part of this, is ensuring companies represent diversity across all levels. Pension investments are a means to an end, to fulfil the goals and later life ambitions of investors, so managing potential risk factors such as lack of diversity is crucial.
LGIM are tackling some of society’s biggest problems – climate change, lack of diversity, ageing populations, city regeneration and the housing crisis, to name just a few. We use today’s capital to help benefit tomorrow’s society – that’s what inclusive capitalism is all about. Addressing society’s biggest challenges whilst delivering our business for future generations will take new ideas, innovation, phenomenal teamwork and relentless focus. That can only be achieved if we’re collaborating, respectfully, inclusively and whilst embracing diversity of thought and experience.
How can an effective diversity & inclusion strategy support good member outcomes?
LGIM believe that diversity is directly linked to value creation and in our view, improving diversity at a company level is financially material. In our view, diverse organisations make better strategic decisions, are more forward thinking, showcase a higher resilience and can exhibit lower risk potential. These are all significant factors which will have an impact on how well a company is run and whether they make a good investment for a member’s pension.
What is the link between diversity & inclusion and Environmental, Social & Governance investing?
Responsible asset managers that take into account ESG considerations can instigate genuine change at the companies in which they invest. The progress made towards greater representation of women on corporate boards demonstrates that improvement is possible – if investors act forcefully. We can use our influence to insist upon higher standards on everything from diversity to climate change across capital markets – first through demanding corporate transparency and disclosure, and then through informed and targeted action.
We are a responsible investor, rising to the challenges of a rapidly changing world. At LGIM, this means active ownership and engagement, through stewardship with impact and cross-asset research. In our view, ESG factors are financially material.
Responsible investing is essential to mitigate risks, realise investment opportunities and strengthen long-term returns for our clients. We have a responsibility to many stakeholders. When we allocate capital, we conduct extensive research into potential environmental and societal outcomes.
What new factors are emerging in the diversity & inclusion debate?
We have been longstanding advocates for cognitive diversity in the companies in which we invest and within the workplace and have spent a lot of time improving the gender balance of companies, through both engagement and voting, with great success in the UK and in the US.
Gender will continue to be a focus for us at LGIM and something we have started to look at more carefully is how we can better support women during the menopause. We see this as being an important topic that will continue to emerge and that needs more focus in all workplaces.
Our focus on ethnicity to date has been to push for more consistent and reliable disclosure, as set out in our corporate governance and responsible investment principles. However, recent societal tragedies have made clear that we must now expedite our work and that to wait for perfect data is not an option, so we will be engaging more forcefully on companies’ commitments to ethnic diversity and demanding transparent reporting. Our expectation is that companies set ambitions related to the ethnic composition of their organisation, throughout the workforce, with a particular emphasis at the board level, which generally sets the tone from the top. For companies that fail to meet our transparent and rules-based minimum expectations, there will be voting and investment consequences.