Michael Moore’s Outlook on the latest spotlight on diversity in the industry

Progress, but it’s slow. That’s hopefully a fair assessment of the latest snapshot of the industry’s diversity and inclusion after the publication of the 2023 report by Level 20 and the BVCA. A lot of effort has been made in recent times, but clearly there’s much more to do.

Let’s zoom in on the senior ranks of the industry. Five years ago in the larger firms (with AUM over £100m), the percentage of women in senior investment roles was 6%. The proportion rose to 10% at the time of the 2021 report and is now 11%. So the improvements in gender diversity continue, but the pace needs to pick up again.

And that is even truer of ethnic diversity. This is only the second time that ethnicity data has been collected alongside gender diversity. So the report features a smaller sample of 4,500 investment professionals at 126 firms. And not every data point could be provided by those participating.

But for all the limitations, the picture isn’t hard to work out – 10% of the investment teams are from Asian, Black or other ethnicities. All-white investment teams stand at 26% of the sample. And the figure for ‘Female, senior and black’ individuals? Zero. That all makes for uncomfortable reading, as it should.

Now, if we zoom out and look at investment teams across all tiers, there is a more encouraging picture. The 11% share of senior investment team positions held by women more than doubles for the middle echelons, and in the junior group it is edging towards two fifths.

In an industry firmly based on the apprenticeship model of ‘learning by doing’, there are grounds for hope in these stronger figures. Add to that the industry’s famed single-mindedness, here focused on changing things for the better, and things begin to feel more optimistic.

The Level 20 / BVCA research looks hard at the drivers that lead women to leave the industry - family leave, transparency and fairness are clear factors. Ditto promotion procedures, firm culture and leadership. Each has an impact on the firms – so today’s best practitioners are relentlessly focused on how to attract, promote and retain women and those from ethnic minorities.

Retention is key – a disproportionate drain of talent is a poor outcome for those who leave, disadvantaged, and for those who remain. Nobody is seriously arguing that the status quo is the key to a successful future. And that’s just as well - at a time of huge economic and societal changes that would be tone deaf.

Private capital, with an increasing focus from the institutional investors in the funds, sees the evidence that diverse teams operate better and, importantly, generate greater returns. So improving diversity is smart business on a number of fronts. And what is also encouraging is the appreciation that a broader diversity in socio-economic backgrounds and consideration of neurological diversity bring dividends, too.

So, it is the right thing to do, and it is good business sense. But there is another angle, too - increasing external scrutiny. As the holders of a complex ‘licence to operate’, private equity and venture capital have no choice but to address the issues here. Political expectations are increasing and won’t reverse course.

The industry is not alone here and continues to work alongside others facing similar truths. Alison Rose DBE, the CEO of NatWest Group, leads the eponymous Rose Review Board, of which the BVCA is a member. Amongst a range of initiatives, the board is commissioning research, examining ways to promote the VC Investing Guidelines and tracking data from the UK government’s ‘Investing in Women Code’.

Separately, the ’10,000 Black Interns’ initiative, which includes leading lights from the industry as founders and leaders, is focusing welcome attention on key issues relating to ethnicity and doing something significant in response.

All of these efforts are complementary to the industry’s own efforts. Level 20 leads on the issues with energy, and together with the BVCA and our European counterparts, is building more support for individuals and firms, ensuring that diversity and inclusion are central to the industry’s mission.

The good news is that the levels of engagement and investment, from firms of all sizes, are increasing. Given where we find ourselves, who could settle for anything else?

Michael Moore
Chief Executive, BVCA

This article was originally published on 12 June 2023 on the Private Equity News website here.