Asia Pacific companies are lagging behind their global peers in racial equity, and they need to work harder in 2021 and beyond to ensure that their workforce reflects the diversity in society, argue institutional executives and industry experts.

While evidence has shown that racial equity is correlated with better business outcomes, aside from a few institutions the financial services sector lacks diversity, most acutely at senior levels.

The need to become more diverse in personnel has certainly gained greater momentum. US president-elect Joe Biden has publicly declared an intention to make his administration “look like the country,” the most prominent example of whom is Kamala Harris, a woman of Jamaican and Indian descent and the vice president-elect.  

US Vice President
Kamala Harris

However, diversity in Asia, compared with the US, looks very different. For example, Indonesia has hundreds of recognised ethnic groups with the majority being Javanese, while in Singapore, ethnic Chinese make up 75% of the population, with indigenous Malays and ethnic Indians comprising the bulk of the remainder. In New Zealand, indigenous Maori are the largest minority.

SKILL GAP CHALLENGE

New Zealand Superannuation Fund’s latest annual report, published in September, showed that internal staff numbers have grown 37% in the past four years. However, of up to 157 employees working out of the fund’s Auckland office, only two are Maori.

“While we do have broad ethnic representation in our workforce, we acknowledge and are certainly disappointed with the low representation of Maori,” Mika Austin, NZ Super’s general manager of human resources, told AsianInvestor.

There is no easy solution because of a scarcity of skilled people from ethnic minorities such as the Maori people of New Zealand and the Aboriginal and Torres Strait Island people in Australia.

“The investment and finance industry suffers from a lack of ethnic diversity at all levels,” said Austin. "We need more students coming through the education system, right through to the promotion of more people into senior positions.

Mika Austin, NZ Super

"It’s an issue we all need to focus on because studies show organisations with diverse and inclusive employee populations perform better, are more innovative and adaptable.”

NZ Super has responded by supporting the TupuToa programme, which seeks to provide internship opportunities at the super fund for Maori and Pasifika university students. It has also established relationships with Maori entities across New Zealand to establish investment partnerships and co-investment opportunities.

ASIA LAGGING BEHIND

The most recent Refinitiv Global Diversity & Inclusion Index, published in September 2020, showed that Asian companies are less diverse than their global peers. Of the 7,000 publicly listed organisations evaluated, only 20 of the top 100 most diverse and inclusive organisations are based in Asia Pacific – three in Japan, 10 in Oceania and seven in the rest of Asia (Korea, Singapore, Taiwan and Thailand).

Some major investors, such as Singapore’s GIC and Temasek, mention diversity on their websites. Still, the focus tends to be on support for employees' development, such as flexible work arrangements, mentoring, and family-friendly policies.

However, they go further than most. Temasek, for example, breaks down its employee base according to whether they are Singaporean (60%) or other nationalities. The gender breakdown also shows that the state asset manager has achieved close to parity in the last 10 years.

GIC's diversity initiatives include a dedicated taskforce focused on increasing women representation and a programme that hires and mentors individuals with physical disabilities. The sovereign wealth fund's website also provides testimonials by staff from different ethnic (non-Singaporean) backgrounds.

Others, such as Malaysian institutions Kwap and Khazanah, and Japan's Government Pension Investment Fund, do not address the issue directly. None of the three responded to requests for comment.

A GLOBAL ISSUE

Insufficient ethnic diversity is a global issue. A September 2020 paper by consultancy McKinsey that examined racial equity in the financial services sector, found that the proportion of people of colour at the entry-level of US firms stood at around 40%, in line with their representation in society. However, this share steadily fell further up the ranks, until nine out of 10 people at the C-suite level were white.

“Companies have significant work left to do to ensure people of colour will have an equal opportunity to be successful in the workplace,” McKinsey said in the report. The key is for institutions across the world is to develop policies and procedures that foster a workplace culture of diversity and inclusion.

Once employed, ethnic minorities especially face integration challenges, which warrants a need for employers to nurture a sense of belonging. Institutions “must create a sense of inclusion, embracing all employees and enabling them to make meaningful contributions," the McKinsey paper said. "Belonging – the degree to which individuals feel a sense of connection and are able to build meaningful relationships with others at work – is an important part of this.”

Sponsorship is another important element of any programme to ensure fair promotion. Again, research shows that ethnic minorities have to work harder to gain the same recognition given to white males.

“People tend to sponsor people who look like them,” the paper said. "Given the imbalance across race and gender at senior levels, intentional sponsorship programs can help ensure people of colour are getting access to the opportunities and relationships they need to advance."

Look out for a related article coming soon, in which asset owners outline their efforts to improve gender balance in the investment community