KEY DEFINITIONS FROM THE CODE

Diversity: The full spectrum of human attributes, perspectives, identities, and backgrounds

Equity: Fairness of access, opportunity, and advancement for all within an organization, which requires eliminating barriers and root causes that have prevented underrepresented groups from full participation within the workplace

Inclusion: A dynamic state of operating in which any employee can be and feel respected, valued, safe, and fully engaged

CFA Institute views diversity, equity, and inclusion (DEI) as critical to the investment industry’s success. DEI results in a diversity of perspectives, which can produce better investor outcomes, create better work environments, and improve our ability to serve our diverse clients. CFA Institute, with the support of several partners, has been working to develop a voluntary DEI Code to improve DEI in the industry.

The Code sets standards for the implementation, reporting, and monitoring of DEI to help drive change in the industry. The Code is accompanied by an Implementation Guide to help support organizations with concrete and actionable implementation strategies.

How was the investment industry involved in the development of the Code?

The investment industry played an integral role throughout the process of developing and implementing the Code, as shown in the timeline below. This is one of main benefits of the Code: it is a Code built for the industry by the industry.

• 2017–2018: CFA Institute holds a series of DEI workshops across North America with nearly 100 industry organizations  
• September 2018: Based on the workshops, Driving Change: Diversity & Inclusion in Investment Management is published, which includes a list of twenty recommended actions
• 2019–2020: CFA Institute Experimental Partners Program takes place: 41 organizations commit to working on and reporting on three or more of the recommended actions within their organizations. The results are published in Accelerating Change: Diversity, Equity, and Inclusion in Investment Management and form the basis for draft versions of the DEI Code and Implementation Guide
• July 2021: CFA Institute runs a 60-day public consultation for both drafts to gather feedback
• February 2022: CFA Institute launches the DEI Code North America, incorporating public consultation feedback
• Next steps: Regionally differentiated versions of the Code will be created for adaptation

The Code and implementation guide

The Code includes six core principles that specify specific areas of focus for organizations to embed and improve DEI. The principles are based on a holistic approach, recognizing the need to expand the pipeline of diverse talent before the next generation even enters the workforce. Beginning to address DEI issues only in the recruitment phase may be too late in the process, as the talent pool at this phase is determined by the pipeline.

The strategies in the Implementation Guide have been developed in a way that ensures all organizations, regardless of their current DEI status, size, or capacity, can apply the DEI Code to select and create a variety of effective and tested strategies that work for them.

The six principles of the Code & their implementation strategies

The six principles are listed below, along with examples of strategies that organizations can use to implement each principle. The strategies described are merely illustrative examples and reflect only a very small subset of the strategies available in the Implementation Guide, which is itself not an exhaustive list.

1. Pipeline: Expand the pipeline of diverse talent
   • Conduct regular outreach to a broad array of institutions, including smaller ones
   • Engage with high school career counsellors
2. Talent acquisition: Design and implement inclusive and equitable hiring and onboarding practices
   • Use standardized, competency-based questions in interviews and score these answers numerically
   • Train recruiters and hiring managers on implicit bias
   • Include diverse members of the organization in interview panels
3. Promotion and retention: Design and implement inclusive and equitable promotion and retention practices to reduce barriers to progress
   • Ensure transparency in processes for internal opportunities and promotions
   • Identify diverse high-potential talent as part of a succession planning program
   • Conduct stay and exit interviews with employees to understand their reasons for staying and leaving
4. Leadership: Promote and improve DEI outcomes in the industry; be held responsible for own firm’s progress
   • Hold formal, regular DEI training and coaching for leaders
   • Review organizational systems, people processes, and decision making, using the lens that current systems may be supporting the status quo to help identify obstacles to DEI
5. Influence: Increase measurable DEI results
   • Conduct annual surveys of managers’ progress on DEI metrics, requesting action plans from those not making progress
   • Incorporate DEI goals in investment policy statements
   • Publicize signatory status and ask managers and consultant partners to become signatories
6. Measurement: Measure and report firm DEI progress
   • Measure DEI progress by completing the Reporting Framework
   • Start by establishing a baseline and regularly check progress
   • Consider tracking the following: gender identity; self-identification of race and/or ethnicity, ability, and sexual orientation; veteran status; age; and neurodiversity
   • Refer to the Guide for metrics to measure the other five principles

Industry comment letters

CFA Institute received 100 responses during its 60-day consultation period, with 49 supporting the introduction of the DEI Code and 32 opposing. Opponents see the Code as being outside of CFA Institute’s scope, arguing that they should focus solely on investments, or they disagree that there is a link between diversity and better investment results. Supporters believe the Code will improve DEI and ensure the industry’s continued prosperity by aligning the industry with guidelines and best practices.

What makes this attempt to improve DEI more likely to succeed?

CFA Institute acknowledges that prior attempts to address DEI issues have been unsuccessful but emphasizes that several aspects differentiate this attempt. Specifically, with the DEI Code:

• The investment community has been an integral part of the creation of the Code and Implementation Guide
• The Code is metrics-based and not simply an aspirational designation. The sixth principle, measurement, is essential because it ensures measurement and tracking of improvements in DEI performance in relation to the other five principles
• The Code includes senior leadership commitment to lead by example and hold their organizations accountable
• Signatories confidentially report their progress to CFA Institute, who will report on industry-level statistics and provide private feedback to those firms about their reports relative to the industry
  

The future of DEI & the Code

The long-term success of the Code and related DEI improvement within the industry will depend on several factors, including its uptake. Successful implementation of the principles will require the support of leadership and a firm’s commitment to work on and promote the principles and collaborate with others in the industry.

Tackling DEI can seem to many organizations as too difficult a challenge; however, the Code and accompanying Guide provide a framework of concrete and actionable steps to create a more diverse, equitable, and inclusive industry for all.