Major UK investors have called on the financial regulator to introduce mandatory ethnicity pay gap reporting for financial institutions.
In a letter to the Financial Conduct Authority (FCA), spearheaded by responsible investment charity ShareAction, 10 investors said that transparently sharing racial pay disparities would catalyse further action to create more equitable workplaces.
Signatories include the UK’s largest pension provider Nest, the Church of England Pensions Board, Brunel Pension Fund, Pensionbee and Ethical Partners Fund Management.
The open letter, released on Monday, said black, Asian or other ethnic minority staff currently hold only one in 10 management roles in the UK’s financial institutions.
This number must be doubled if it is to reflect the FCA’s own targets and the UK’s ethnic make-up, it warned.
The letter noted that many firms in the investment industry voluntarily produce ethnicity pay gap reporting, including the FCA itself, PwC, State Street and Bridgewater.
It said: “The process a company undertakes to report its ethnicity pay gap is a catalyst for further action.
“ShareAction’s research, which involved interviews with 17 FTSE 100 financial sector companies, revealed reporting of ethnicity pay gaps was the first step to bringing transparency and action.”
But it added: “Although companies who voluntarily report their ethnicity pay gap found that often the gap was due to underrepresentation, simply reporting their ethnicity representation is not enough – there could be stark pay differences between ethnicities at each seniority level of the company.”
It recommended measures like reporting on employee ethnicity, broken down into the most appropriate categories and quartile pay bands, in addition to the overall pay gap, as well as asking companies to disaggregate data by ONS ethnicity categories.
The investors, who together manage 118.78 billion dollars (£93.44 billion) in assets, signed the letter in response to the FCA’s consultation on improving diversity and inclusion in the financial sector.
Earlier this year, the Government rowed back on a 2018 commitment to mandate ethnicity pay gap reporting, saying it would prefer a voluntary code.
However, ShareAction said there is significant support across the business community for clarity and statutory guidance.
The letter said: “We would argue that ethnicity pay gap reporting is merely a disclosure; it’s not prescribing how companies act on DEI issues.
“Companies can come up with their own solutions, as we ask them to publish a narrative and action plan to complement the disclosure of their ethnicity pay gap.”
Kohinoor Choudhury, senior campaigns officer at ShareAction, said: “We are pleased to see the FCA taking action to improve diversity and inclusion in the financial sector.
“This is not just about fair pay, it is also about ensuring that our financial institutions adequately reflect the British society they are supposed to serve.
“The FCA should heed investors’ call for ethnicity pay gap reporting to be mandatory, as a crucial first step to raising workforce standards across the sector.”
The PA news agency has contacted the FCA for comment.
