When the Financial Conduct Authority released its Business Plan 2021-22 in July, many were quick to note the shift in regulatory priorities.
While company culture has been a primary focus for the past few years, the FCA will now be turning its attention to the issue of diversity and inclusion in financial services.
The plan was prefaced by the publication of its recent discussion paper, written in collaboration with the Prudential Regulation Authority and Bank of England.
In it, the regulators expressed concerns over the rate of progress being made towards meaningful representation and equality in the industry, citing such issues as ethnicity and gender pay gaps as evidence of significant work still needing to be done.
These recent releases have all been remarkably unified in their message: businesses will be expected to do more, and more quickly, to improve diversity within their workforces going forward.
So, what is the thinking behind this shift in priorities?
Why D&I and why now?
While moving towards more diverse representation has been on the corporate agenda for years now, critics have occasionally noted that efforts have largely had a singular focus on gender disparity through initiatives like the Women in Finance Charter.
And despite the widespread attention it has received, progress towards better gender equality has proven dishearteningly slow, with one 2020 report indicating the pay gap within the sector had actually widened from 22.2 per cent to 23.1 per cent over the previous two years.
But beyond the gender debate, the tumultuous past 18 months have undoubtedly served as a reminder that there are other important aspects of D&I.
Following the Covid-19 pandemic that has financially impacted some groups more than others, as well as the global conversations surrounding racial equity brought on by the murder of George Floyd last May, regulators and businesses alike have been increasingly looking inward at whether their structures and processes are exacerbating disadvantage.
And the FCA is no different, publicly committing to doing more and laying out its expectation that businesses should be working to improve diversity more quickly, with a particular focus on intersectionality.
What do we mean by D&I?
It goes without saying that there are a whole host of immutable characteristics that combine to make each of us unique and diverse, ranging from the outwardly visible, gender, age and ethnicity being obvious examples, to those that are less so, such as sexual orientation, disability or socio-economic background.
In their recent paper, the regulators discuss the protected characteristics within the framework of the Equality Act 2010, as well as socio-economic background, as areas that companies need to be focusing on.
It is notable that their definition of ‘diversity’ refers to diversity of thought – that is, recognising and valuing a range of different backgrounds and experiences that lead to different viewpoints. By defining diversity in this way, it is clear that the regulators are not prioritising any one characteristic over another, instead aiming for a more holistic approach that serves to move the dial forwards across all areas.