The Big Exchange discuss why we believe it’s important that investment firms managing your money have an open and flexible culture with robust accountability structures…
Environmental issues may be in the spotlight, given the climate emergency, but at The Big Exchange we understand that social and governance standards are equally a concern for many of our investors.
Whilst we expect Asset Managers to assess the behaviour of companies held in their funds, we believe it is just as important that the investment firms managing your money have an open and flexible culture with robust accountability structures in place.
Financial crises and scandals may have tainted public perception of the investment industry yet some of these could have been avoided by better governance and transparency on culture. To help improve transparency, the ACT Framework has been created by City Hive, an independent think tank and advocacy group with a mission to democratise access to investing and investments.1 It’s co-founder Bev Shah is a non-executive director at The Big Exchange.
City Hive aims to build an inclusive Investment Management Industry and an equitable and sustainable society. Its leaders are recognised as a driving force for change, championing greater transparency, accountability, and equality in the industry.
City Hive advocates for the investment industry to better represent the makeup of society and for access to investing to be democratised. The ACT framework mark is an assurance that the values of the signatory companies are aligned to their behaviour. It goes further than being a commitment or a disclosure framework, in helping firms to understand how to progress towards a more inclusive culture.
Culture in this context is the environment in which investment professionals operate and make decisions. A good culture facilitates appropriate levels of risk-taking, debate, innovation and trendsetting. It encompasses integration of social and governance issues into the investment process.
The framework, involving the completion of a detailed questionnaire, is a standardised disclosure that enables investment firms to articulate, assess and demonstrate how its external and internal cultural values on diversity, equity and inclusion align.
Three core pillars cover the approach to culture and inclusion across the business.
We ask all firms listing funds on our platform to complete the ACT questionnaire (designed for professional fund selectors) and the information provided helps us form a view of the commitment by the asset manager to transparency and the quality of their reporting.
The ACT framework recognises the importance of a positive culture of inclusion which is essential for sustainable growth. It helps firms to understand, create and advance cultural change and communicate progress via reporting channels.
City Hive ‘currently has 20 signatory firms, and they have established a stewardship council to oversee the framework and ensure they are asking the right questions at the right time.
We consider that adopting the ACT Mark shows commitment to transparency on culture through an external, third-party process and we encourage our asset managers to become signatories. Currently CCLA, WHEB, Edentree, Jupiter, LionTrust, Schroders, Federated Hermes, and RBC BlueBay Asset Management are among the signatories.
Meanwhile, abrdn, Artemis, Columbia Threadneedle, First Sentier (Stewart Investors), JO Hambro (Regnan), Janus Henderson, T.Rowe Price, and UBP (UBAM) have also, at the time of writing, completed the framework questionnaire we requested.
Culture and diversity have become a standalone pillar of due diligence, alongside other ESG (Environmental, Social & Governance) criteria. With growing regulatory pressure for more disclosure DEI (Diversity, Equity & Inclusion), investment firms are increasingly expected to demonstrate how they take culture into account.
Recent policies, including Consumer Duty, SDR (Sustainability Disclosure Requirements), the Corporate Governance Code, and the FCA (Financial Conduct Authority) Consultation on proposals for DEI show these factors need to be addressed to meet regulatory requirements.
Lack of diversity and internal inequalities are increasingly in the spotlight. If a company states that they are committed to DEI, then this should be reflected in their culture. So, what does this mean?
In essence, diversity is the element of culture that creates an environment where there is space for everyone to bring diversity of thought. Equity ensures everyone gets what they need to thrive by addressing any imbalances. Inclusion is how people feel about the culture and view their participation; in an inclusive culture people feel like they belong.
Stewart Investors, who have 7 funds listed on TBE, state: "We believe that diversity is an integral part of sustainable development and is important to us as employers, investors, and as members of society. We understand that diversity needs to go hand in hand with equity and inclusion to make a real difference". Read more about their commitments and how these influence their investment approach here.
The latest Alpha Female Report, based on Citywire’s database of over 18,000 portfolio managers globally, tracks progress towards gender parity in investment roles. Over the past 12 months the proportion of women in portfolio management positions has risen from 12.1% to 12.5%.2
The report also found that 19.5% of the funds in its database are run by a woman, a team of women or a mixed team of women and men.2 However, the pace of change is still slow and turnover, and retention of female managers is still problematic for investment firms.
We have a filter to show which funds on The Big Exchange are jointly or solely managed by women. We’re pleased to report that at approximately 26%, it is above the industry average in the Citywire study though clearly there is some way to go.3
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Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
This article does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
The Big Exchange (TBF) Limited is a wholly owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048). (CaRA: 8761)
