Where We Are and Where We’re Going: Leveraging DEI Data to Chart Our Way Forward
On this International Women’s Day, we are reminded of how far we’ve come, and the work still needs to be done on the inclusion of women and diverse voices in our industry.
In line with the CVCA’s mandate to improve diversity, equity, and inclusion (DEI) in the Canadian private capital market, the CVCA and Diversio released the results of a comprehensive study on the state of diversity and inclusion in private capital. Diversio collected 8,260 data points from 413 employees in Canadian private capital — a 30% survey response rate that outperforms the industry average (~20%), capturing self-identified data on gender, racial/ethnic background, sexual orientation, and disability status. The study revealed that private capital is making inroads in the representation of women and other diverse groups. Based on data collected by the Women in Venture Report we know that in 2019, 15.2% of Partners in venture capital were women. Within 2 years, there has been a 4.2% increase in women’s representation at the partnership level, indicating an impressive advancement in women’s growth in senior VC leadership.
A similar upward trend in DEI is also evident in terms of diversity of sexual orientation, where a greater percentage of partners in private capital identify as LGBTQ+ than in broader financial sector employees, which indicates a greater culture of inclusivity in private capital that results in a higher level of comfort being “out” in the workplace. The increased diversity representation at the senior leadership level indicates that there may be more mentorship opportunities for underrepresented groups. According to a 2016 HBR Report, formal mentoring programs focused on increasing diversity and inclusion boosts advancement and representation in leadership positions.
More representation at the senior level is undoubtedly also driving the level of diversity and inclusion in the talent pipeline. Perhaps the most encouraging trend from the report to me personally as a woman of colour was the representation of racial and ethnic minorities at the junior level in private capital, which outperforms the Canadian demographic statistic as well as the broader financial industry average. The pipeline for diverse talent is strong and growing, and we can look ahead to greater diversity at the senior level in the coming years, creating a virtuous circle as diverse junior talent are more likely to advance and remain in the industry when they feel supported and encouraged by diverse leadership.
ILPA’s new DEI reporting requirements released in 2021 standardized a reporting framework for ongoing monitoring of progress related to DEI, further highlighting the reality that reporting and improving on DEI is not a passing trend but one that will become a key factor for the success of GPs.
The growing importance of DEI metrics is a clear signal that Canadian private capital and the broader corporate industry are evolving in regard to how we measure success. The focus on Environmental, Social, Governance (ESG) standards in the current climate cannot be overstated as the benefits to incorporating ESG and DEI are well documented. According to a Harvard Business Review study, diversity unlocks innovation and drives market growth. Employees that feel supported and safe in the workplace are more engaged, productive, and innovative. A report released in 2019 by McKinsey highlights how ESG can create higher corporate value. However, unlike DEI, there is less harmonization across ESG reporting given that regulators have been slow to establish mandatory standards. This lack of harmonization has resulted in an “alphabet soup” of reporting standards for measuring corporate adherence to sustainability. Some of the top ESG frameworks include:
- SASB Standards identify the sustainability information that is financially material to understanding how an organization creates value.
- GRI Standards are one of the world’s most widely used sustainability standards.
- CDP issues an annual survey to score companies and cities based on their journey through disclosure and toward environmental leadership.
- SBTi uses science to help businesses set and reach targets to reduce greenhouse gas emissions to meet the goals of the Paris Agreement.
- UNGC asks companies to report on their sustainable development progress
As these options demonstrate, a harmonization of reporting standards will likely be an important next step in the evolution of ESG in our industry. The CVCA is committed to supporting its members on this journey to invest in economic growth and prosperity while creating a sustainable impact on the environment and society at large.
One of the strongest indicators of how far we’ve come is that these conversations on DEI and ESG are no longer limited to International Women’s Day. Their adoption into everyday societal and workplace conversations, and the results of the 2021 Report with Diversio demonstrate that efforts are not merely performative. The COVID-19 pandemic has put a spotlight on the inequalities women experience at a global scale, but also on how we can work to re-shape a more equal future and recover from the pandemic.
While this is only the beginning of the industry’s work on DEI, we celebrate the advancements of women at the CVCA on this International Women’s Day, recognizing our influence and responsibility to support our members to further advance DEI through the continued efforts of our D&I committee and our Diversity Talent Program.
Together, we can continue to foster diversity of thought, build inclusive teams, advocate for more opportunities for underrepresented groups in our industry, and drive better results