As ESG guidelines have become mainstream in the financial industry, financial organisations have been implementing diversity, equity, and inclusion (DEI) frameworks to keep up with the times and stay relevant amidst social and cultural changes in the industry. However, data from the FDM Group reveals that UK companies in the finance and banking sectors have not integrated DEI into their value-sets, but only maintain the visibility of doing so.

In conversation with Finextra, Sheila Flavell CBE, COO of the FDM Group, discusses the state of diversity in the UK and how financial institutions need to be more upfront and transparent about actively working towards inclusion.

Research from the FDM Group shows that the UK banking and finance sector has major gaps in maintaining DEI and is facing numerous challenges in putting diversity standards and expectations into action. The study reports that 70% of staff working in the industry see companies treat DEI as an afterthought and two-thirds feel that businesses have inadequate diversity policies and are not doing enough to emphasise diversity and inclusion.

Further, the report found that 69% of respondents believe their company does not represent DEI in their practice as a priority. DEI is used for visibility and promotion and does not accurately reflect what companies implement in their practice.

Flavell states that there has been success in female representation at the C-suite level, with women holding leadership roles in four out of five financial firms. However, she highlights that financial services need to support underrepresented groups in the sector more.

“In recent years, banks have made some efforts in promoting diversity and inclusion within their organisations. However, there are still areas where they can improve to ensure a more equitable and inclusive environment for all employees. One significant area where banks are falling short is in achieving diverse representation at leadership levels.

“While they have made progress in diversifying our workforce, the underrepresentation of women and individuals from minority backgrounds in top-level executive roles and board positions remains a challenge. It is crucial for the financial services sector to address this disparity as diverse leadership brings a wealth of perspectives, experiences, and ideas that can drive innovation and better decision-making.”

Why Gen Z workers demand diversity standards

With Gen Z entering the workforce, there is a heavier emphasis on the standards they hold for companies they choose to work for. Gen Z employees have greater expectations for the diversity and sustainability values of businesses, and prioritise workplaces based on alignment and commitment to DEI.

Research from Wiley’s Edge Diversity in Tech 2023 report found that there was a disconnect between what Gen Z workers want from their workplace and what businesses are presenting for new hires.

The report found that 64% of businesses struggle to retain diverse talent, while 75% believe that their DEI strategies are working, which translates as being rather contradictory.

The study also shows that over a third of Gen Z employees took over six months to find their first job in tech and that many are finding harder to join the workforce than expected. Diversity remains an issue in the recruitment process, with 92% of tech companies struggling to fill entry-level positions, and 70% stating that they are most likely to hire from top-ranking universities which often face their own issues with diversity.

How to integrate DEI into company policy

On how financial organisations can promote diversity, Flavell advises that companies implement DEI training for staff to confront unconscious bias, encourage cultural awareness in the workplace, and implement mentor networking policies to promote wellness and professional growth. To avoid bias in the hiring process, she encourages that hiring managers use blind CVs and allow more flexibility in candidates. These actions will allow for more underrepresented employees to rise through the ranks and feel more comfortable engaging and growing within the work environment.

“Through implementing these programmes, companies are able to accelerate the professional development of their employees, enhance their skills and foster a more diverse leadership pipeline within the company,” she explains.

Flavell continues that Black, Asian, and Minority Ethnic (BAME) are greatly underrepresented in the sector, and banks are looking to target these groups in new hires. She highlights that collaborating with organisations and educational institutions that support minority groups, companies can overcome obstacles in the path towards diversity and become more inclusive.

“For instance, we are seeing banks such as The Bank of England set themselves targets to have 18-20% Black, Asian and Minority Ethnic (BAME) leaders in UK senior management roles by 2028, and hope to build a more inclusive culture with mandatory training for all colleagues and an ethnicity ally programme. FDM’s survey also reveals that two-thirds of respondents believe the sector doesn’t support people returning to work after children, with limited flexibility and parenting schemes available, highlighting returners as an underrepresented demographic.”

It is now imperative that companies include DEI values in their corporate policies and recruitment processes to mitigate bias and make the financial and banking sector more successful.

Why diversity leads to success

Moreover, DEI can drive the sector towards success. The impact of diversity has a high success rate, with 75% of institutions with diverse and inclusive frontline decision-making teams exceeding their financial targets, according to Gartner.

There is a strength in gender, ethnic, age, race, and cultural diversity – the more inclusive a team is the wider range of mindsets and consumer base a company can tap into to form broader and more innovative strategies.

Forbes states that businesses that do not prioritise diversity and inclusion face financial losses, as there is less turnover with firms that have diverse and inclusive environments.

Companies that place more focus on ESG tend to create an environment that encourages employees to stay longer and form deeper commitments as there are more opportunities for collaboration, growth, and a healthy brand image. Inclusive environments flourish due to consistent communication, which is also a reason why they are more successful and have happier employees.

Flavell concludes: “Solving the diversity gap faced by businesses in the financial services sector isn’t an overnight task, but it is important to deliver constant progress towards the goal of creating a diverse workforce. Outlining flexible working policies such as remote working options for returners is a primary way to promote inclusion in the workplace. Setting out and maintaining commitments to diversity will begin closing the gap and foster an industry centred on diverse ideas and skillsets.”