For those that know me, you’ll be aware that I’m really passionate in my role leading on diversity, culture and protecting the environment. The more actively involved I get in talking about these important areas, the more I realise they are highly connected, and diversity is at the heart of this.
As an industry managing and controlling billions of dollars of assets, we have a huge collective responsibility to help address the big issues facing our society, such as climate change, but to do so means thinking differently. It means being open to diverse perspectives and ideas and moving away from the comfort our established norms.
Malcom Forbes, the American entrepreneur, once defined diversity as ‘the art of thinking independently together’. Today, attitudes around diversity are changing for the better. A work structure centred on diversity is both fairer and more equitable. Not only that, but by becoming more diverse we are able to make far better informed decisions. Indeed, in a complex, dynamic world we need a coalition of minds to make the right decisions – and this can only come about through cognitive diversity.
However, diversity also comes in many shapes and forms, and I believe we must look at the bigger picture if we truly want to address some of the biggest challenges of our times, such as climate risk and protecting the natural environment.
We only have to look at those organisations tasked with what seems to be ‘the impossible’ to see how they tackle diversity. Take NASA for example: They define diversity ‘broadly as the entire universe of differences and similarities’ and define inclusion as ‘the full participation, belonging, and contribution of organisations and individuals’.
Are we getting serious about diversity?
There are well-documented examples of how diversity challenges have created serious business challenges. If we go back to the near financial collapse in 2009, Iceland experienced a significant banking crisis, partly because of the lack of diversity and consensus decision-making. This led to soaring interest rates and inflation, together with record unemployment levels and unsustainable debts.
In developing economies, however, we’ve come a long way since then. For example, I really welcome the move to create more equitable representation on boards and at senior management level. In February this year, the UK government reported that the UK is now second in the international rankings for women’s representation on boards at FTSE 100 level, with nearly 40% of positions now held by women, compared with 12.5% 10 years ago. This is encouraging progress and the next step is to see how this thinking can be applied more broadly across businesses.
In a nutshell, one of the most important aspects for me is cognitive diversity and the need to think differently to the norms – if we can get this right, we can address some of the big challenges we face that I explained earlier.
Why cognitive diversity matters
If we look at diversity another way, having a diverse board or team that represents the diversity of your customers is an important element in creating the right corporate culture to deliver strong outcomes. It’s here that we need to think about the broader scope of diversity – in particular, cognitive diversity. This includes different backgrounds, ethnicity, gender, different intellectual capacity, a range of professional experiences, age and different personality types.
The Harvard Business Review (HBR) cited that ‘diverse teams lead to differences in perspective or information processing styles. It’s how individuals think about and engage with new, uncertain, and complex situations’.
Scott Page, in his book The Diversity Bonus: How Great Teams Pay Off In the Knowledge Economy (2017) argues that diverse groups are more intellectually challenging. They throw out more ideas, come from different identity groups and have different experiences. In short, he argues that a more diverse team will enjoy more cognitive skills than a more homogeneous team.
This is something I’m very familiar with because my goal here at CACEIS in the UK has been to build a team with different cognitive skill sets. It’s helped us think more creatively, challenge more and become highly collaborative, leading us to develop innovative solutions for asset managers and pension schemes, such as ESG and climate reporting, value for money and assessment of value. It’s also driven our culture, which I’ll explain a little later.
The HBR also cited that there is a growing body of evidence which shows that the more diverse a team of people, the better the performance outcome of the decisions that they make – when higher cognitive diversity correlates to better performance.1
Another factor that’s important to me is to ensure we don’t create barriers to building cognitive diversity within the team. It means that my senior managers need to have an open mind during the interview process for new candidates and understanding how to recognise when their own biases are creeping in. I’m also a big advocate of using the Hogan Assessment tool as part of the interview process, which looks at cognitive abilities, personality, and leadership skills. This provides us with real data that’s critical in building a diverse team, helping us to identify the right talent and fostering a culture that is open and honest, where challenge is welcome and a healthy part of the decision-making process. This ensures that herd mentality decision making does not happen.
Becoming more diverse in our thinking about responsibility
I’m really struck by the vision that Credit Agricole has, which is ‘working every day in the interests of our customers and society’. This looks at making progress available to everyone and address new needs, including societal transformations – a key area as we transition from a high to a low carbon economy. It also means being useful to everyone, regardless of wealth and background.
What does this mean in practice? Diversity and responsibility lie at core of Credit Agricole. For example, it has a youth programme for the onboarding and training of 50,000 young people in France and abroad between 2022 and 2025. It involves extensive education to all employees on corporate social responsibility. And it means actively helping clients through the energy transition. This entails building a framework for responsibility at a local level – what’s known as the ‘Human-centric project’.
As an industry, managing and controlling billions of dollars of assets, we also have a huge collective responsibility to help address climate change, but to do so means thinking differently. We therefore need to be open to diverse perspectives and ideas, moving away from the comfort our established norms. In short, we have to be comfortable feeling uncomfortable.
What can biodiversity teach us?
In addition to climate risk, addressing our natural footprint (the elements of the natural environment that provide valuable goods and services to society) is going to be an important consideration across the financial services industry, especially with the emergence of new reporting frameworks such as the Task Force for Nature Related Financial Disclosures. Nature loss is now a frequently reported topic given that over half of global GDP is moderately or highly dependent on nature – the scale of the challenge is significant.
If we take climate risk, for example, which is more understood, in a recent survey we undertook with fund professionals earlier this year, 72% said the industry could be facing a potential skills shortage in this area. I’d expect that figure to be higher when it comes to natural capital.
Tackling this requires a different cultural mindset: One that is squarely focused on diversity to drive different perspectives and having an openness to learn.
‘One particular culture style that differentiated diverse and inclusive organisations from those that were not, is a learning-orientated culture that emphasises flexibility and open-mindedness, equipping organisations with the ability to adapt and innovate’, which findings from a recent study by Harvard on diversity highlighted.
This is because diversity removes confirmation bias, which stifles innovation. Furthermore, a learning-centric culture, one that is open to new ways of thinking, is an important part of diversity and a critical one to address given that new challenges require a different approach.
But can the concept of biodiversity also teach us about the importance of human diversity?
The American Museum of Natural History’s definition of biodiversity is ‘the variety of life on Earth at all its levels, from genes to ecosystems, and can encompass the evolutionary, ecological, and cultural processes that sustain life. This includes humans and human cultural diversity as part of biodiversity’….’this concept recognises that human use, knowledge, and beliefs influence, and in turn are influenced, by the ecological systems of which human communities are a part’.
Human culture has also placed significant importance to biodiversity for thousands of years, where plants or animals have symbolic significance. And with its link to culture, we value biodiversity because of how it shapes who we are.
I think the Centre for Biological Diversity sums it up really well: ‘Greater biodiversity in ecosystems leads to greater stability. Species with high genetic diversity and many populations that are adapted to a wide variety of conditions are more likely to be able to weather disturbances, disease, and climate change.’
For me, this is what biodiversity teaches us – it’s all about adaptation. And adaptation is a trait across well-diversified teams – and when I mean diversity, it’s in the broadest sense – cognitive, mindset, impact on culture and a belief that everyone has a voice. We have to start thinking about diversity in much broader terms so we can successfully adapt to the changing geo-political, economic, and climate-related backdrop and successfully guide our clients through these changes too.
I’m also a firm believer that diversity plays an important role in developing a responsible and committed culture. It helps set the right tone and ensures everyone is on the same page. From my own experiences in leading our UK team, diversity creates a culture that brings with it collaboration, flexibility, adaptability, and innovation.
Good progress has been made but we have a great opportunity to accelerate our thinking on diversity. And this may mean we have to get comfortable feeling uncomfortable. And then we can make real change.