On Jan. 5, the Consumer Financial Protection Bureau released its report on diversity and inclusion within the financial services industry, an effort from its Office of Minority and Women Inclusion (OMWI) to assess how companies are executing D&I programs created from section 342 of the Dodd-Frank Act.
The report uses publicly available D&I information collected from websites and annual reports of financial services companies. Part of its goal is to assess how financial institutions demonstrate a commitment to D&I through public channels. The OMWI’s goal in creating it is to set reasonable standards for D&I programs that can be expected of companies of all sizes.
OMWI assessed 270 different organizations on 20 different criteria that measured efforts around workforce diversity metrics, internal recruitment practices and strategies, D&I training, ERGs, supplier diversity programs, as well as the amount of information these companies were sharing publicly.
Each organization is federally regulated, with services ranging from mortgage lenders to banks, credit reporting companies, debt collectors, small-dollar lenders, credit card companies and more.
The State of DEI in Financial Services
One key component of the report is its measurement of organizational commitment to DEI. To measure this, the OMWI assessed how organizations structured their DEI efforts in terms of who was in charge of it, what sort of training they developed to support it, and whether they shared that information or DEI reports with the public.
Some notable points from the findings include:
- 17% of companies promoted their annual reports on their websites
- 15% published details about the training of employees
- Less than 13% of companies had a formal body dedicated to advancing DEI.
One of the troubling findings was that companies left their DEI strategy to the HR department in lieu of a dedicated diversity executive or council.
When it came to practices around the workforce these companies recruit, hire, retain and promote, there was less transparency than you might expect. While DEI has become a social justice imperative in the eyes of the public, only 21% of financial services companies shared demographic metrics or profiles of their management teams. Roughly the same percentage shared information on ERGs, recruitment practices and makeup of either their boards or new hires.
Depository lenders led the way when it came to supplier diversity, with 59% reporting their spending on minority and women-owned businesses for contracted services. However, only 13 financial services companies did the same outside the depository lending category.
Given the volume of companies lacking in this area, an opportunity may exist to educate these companies on the importance of supplier diversity, both as a business strategy and a contributing factor to building a comprehensive and more effective DEI program.
The Importance of the Data
In the end, the CFPB report highlights just how far financial services as a sector must go on taking DEI seriously and making it part of their image. While the report focuses on the public sharing of information, many in the financial services may be hesitant to do so given the historical lack of representation for minority groups in the sector.
DiversityInc works with several financial services institutions around their DEI efforts and others to start evolving the way the industry, as a whole, views DEI. The companies DiversityInc works with include:
- Mastercard (No. 5 on The DiversityInc Top 50 Companies for Diversity list in 2021)
- TIAA (No. 9 in 2021)
- TD Bank (No. 14 in 2021)
- KPMG (No. 16 in 2021)
- S. Bank (No. 18 in 2021)
- KeyBank (No. 23 in 2021)
- Wells Fargo (No. 25 in 2021)
- Capital One (No. 28 in 2021)
These leading companies are making a difference, but the report highlights how far there is to go for small and mid-size firms.
For companies of that size, clear diversity statements, a commitment to supplier diversity and a greater focus on leadership commitment and accountability were highlighted as areas for these companies to start.
Transparency around data and having a third party examine your DEI practices and scorecards is a valuable tool. Larger-size organizations may want to consider the value of publicly disclosing their diversity metrics and being transparent about diversity on their leadership teams. Doing so is a powerful recruitment tool to attract candidates looking for companies taking proactive steps toward building a diverse and inclusive workforce.
At larger organizations, a designated DEI leader is needed. While human resources is capable of doing great things at smaller organizations around DEI, once the company reaches a certain size, DEI efforts take on a scale and scope that warrants an executive with a support team focused on those efforts.
Larger companies should also focus on supplier diversity details, as their corporate citizenry is more likely to be placed under a microscope than smaller organizations. Additionally, companies of this size should look to make public details around ERGs and programs related to mentoring, sponsorship and allyship. Doing so shows their commitment to workforce development and the advancement of people within the organization. When coupled with effective DEI practices and leadership commitment, the impact of DEI programs becomes more visible for people to see, both internally and externally.