Diversity and inclusion in the financial sector – is the tide turning?
Posted: 19/03/2025
With the new Trump administration in the US, there has been a cascade of articles detailing the rolling back of diversity initiatives and, in some cases, the cessation of programmes, including job losses. The political imperative on the other side of the Atlantic cannot be ignored; the UK is sometimes said to be trailing behind the US politically by a few years.
We have seen British headquartered companies such as KPMG, Accenture, and Deloitte cut back on the diversity agenda in the US. The commentary on this ranged from highly political ‘anti-woke’ campaigners with descriptions of ‘toxic’ programmes and the need to ‘defund DEI’, to the more economic argument that they impede growth, allow for poor job retention, and, in fact, in some of their structures, actually create discrimination. Most financial companies have removed some D&I goals and reporting obligations, whilst maintaining that they will adhere to the highest ethical standards.
So, is the tide turning and have all the initiatives since the ‘MeToo’ culture change of 2017 now been reversed? The short answer is no. In the UK, the progress continues. Well before Trump’s election, the Treasury Select Committee identified in its March 2024 ‘Sexism in the City’ report that the City regulators should drop their plans for extensive data reporting. Ever since the publication by the FCA of Diversity and inclusion in the financial sector – working together to drive change in September 2023, there has been concern that this requirement to produce data was burdensome and possibly even intrusive on the personal data of individuals.
A firm’s drive for inclusivity relies on solid foundations of data, but the Treasury Select Committee pointed out the danger of just carrying out ‘tick box compliance exercises’ rather than focusing on the necessary changes. There has certainly been no softening of ambition by the committee, which has stated the need for a sustainable improvement in gender diversity in the financial sector, equalised parental leave, and a recognition that sexual harassment is famously still prevalent in the financial services industry.
The FCA and the PRA have responded to the consultation and to the concerns of the committee by notifying it that they will not be proceeding with their proposals for data disclosure. Frustratingly, the whole inclusivity drive by the FCA has been subject to long delays, and now it has said that its new rules on non-financial misconduct, which of course include sexual harassment, will not be in place until June 2025. It would be cavalier though to believe that there is going to be any less importance attached to these.
The FCA’s two previous diversity and inclusion papers, and the existing practice of so many City institutions, has long been to class harassment that takes place in work or work-related functions as a breach of the FCA Conduct Rules. Harassment outside of work can still affect an individual’s fit and proper status. In addition to these ethical and regulatory factors is, of course, the economic argument that a more diverse range of decision makers at a firm will make better decisions.
In the wider context, it would be a serious mistake to ignore the increasing importance of combatting sexual harassment. Last year, a new law came into being, placing a positive duty on firms to protect their staff from harassment, alongside the strong existing duties under the Equality Act. In addition, as part of the Labour government’s employment law reforms, the requirement to publish policies on parental leave and statutory discrimination questionnaires, which existed until 2014, is coming back.
So, whilst Goldman Sachs famously declared in February that one of its internal diversity rules could be ditched because it had ‘served its purpose’, inclusivity here in the UK is still going to be an ongoing daily imperative.
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