Banking on diversity

In addition to its efforts on climate change (see The role of banks in addressing climate change) EIG has also been engaging on diversity and racial equity with the two banks in its portfolio (Scotiabank and Desjardins).

There have been some encouraging developments on this front as awareness of systemic racism throughout our organizational structures has grown.

• This spring, TMX Group made history when the company announced it would recommend a vote in favour of a shareholder proposal on Indigenous inclusion, the first time a proposal on reconciliation filed by a shareholder has ever been jointly endorsed by the board of directors of a Canadian company.  Shareholders voted nearly unanimously in favour of the proposal, which highlights multiple ways in which public companies like TMX Group can enact real change, including reporting on: development of internal diversity programs and policies; review of procurement from Indigenous-owned businesses; and engagement with Indigenous organizations. Ramifications of this vote are likely to affect all companies publicly traded in Canada.
• In early 2021, an Ontario task force on capital markets recommended that publicly listed issuers meet a 50% target for women on boards and in executive management within the next five years and a 30% target for BIPOC, LGBTQ+ and persons with disabilities within the next seven years, with specific emphasis on Black and Indigenous representation.

Our reflections on diversity and targets

It’s great that banks are making efforts to improve diversity, reporting on their progress, and signing on to various initiatives such as BlackNorth and the UN Global Compact’s Women’s Empowerment Principles. However, it can be a bit difficult to make sense of the varying ways diversity targets are set and reported on – or are not.

The question of assessing targets (and lack thereof) is one that that we’ve been wrestling with.

• When are targets important?
• What makes a good target?
• How specific should targets be?  

While we don’t necessarily have answers to these questions, some facts and figures extracted from Scotiabank’s 2020 Environment, Social and Governance (ESG) Report  (pp. 12-13, 31-34) and from Desjardins 2020 Social and Cooperative Responsibility Report (pp. 92-93) illustrate the difficulties.

What groups should be the object(s) of targets?

• The Ontario task force recommends targets for simply “boards and executive management” (50% women, 30% BIPOC, LGBTQ+ and persons with disabilities, with specific emphasis on Black and Indigenous representation). They have no recommendations for other employees.
• Scotiabank on the other hand, has different targets for different groups: women on boards (30% each gender), women in senior management (40%) and visible minorities in senior management (30%; Blacks 3.5%).  There are also some notable omissions. For boards, for example, it has no targets other than for women. It has some targets for employees generally (persons with disabilities 20%; Indigenous 2.66%) but not for others (visible minorities including Blacks; LGBTQ+), although it does have a target for incorporating Black students into the workforce (5%).
• Desjardins has a similar, incomplete mix of targets: boards of directors in the Caisse network (50%); women in senior management positions in the business sectors and support functions (50%, interim target 30%) and in the Caisse network (45%-55%); Blacks in senior management (3.5%); Black students in the workforce (5%). Desjardins’ biggest gap is the lack of any targets for marginalized groups other than Blacks, particularly Indigenous.
• We are currently not aware of targets set by employment or seniority level, e.g. management vs non-management.

How long should be allowed to achieve targets?

• The Ontario task force recommends targets for women be achieved by 2025 and for BIPOC, LGBTQ+ and persons with disabilities by 2027.
• Scotiabank’s targets are generally set to be achieved by 2025, whereas Desjardins aims for 2024, with interim target by 2022.

On what basis should targets be set?

• The Ontario task force chose its targets to be proportionate to the demographic makeup of Canada, which it considered a reasonable standard.
• Scotiabank generally correlates its targets with data on employees obtained from the Canadian Employee Diversity Survey. In some cases this correlates well with general population data, e.g. Black senior management 3.5%. In other cases, targets are below what either sets of data would suggest, e.g. women in senior management 40%, compared with women employees generally 55% and women in Canada 50.4%.[i] The poorest correlation, for those groups where targets are even set, is for Indigenous employees generally, 2.66%, compared with 4.9% in the overall population (and predicted to grow 4 times faster than the rest of the country).
• Desjardins’ targets, where it has them, are generally higher and correlate better with population data. Of note though is the serious gap in targets for marginalized groups.

EIG's engagement actions

Scotiabank

Among the shareholder proposals for Scotiabank’s AGM in April 2021, there was one that aimed to set a target of 40+% of Board Directors being women (as opposed to the current target of 30%). Our analysis was that this was unduly narrow in scope, and perhaps not necessary to focus on, given good female representation on the Board in recent years (currently 46%). We voted against the proposal and followed up with a letter to two senior executives explaining the reasons for our vote and encouraging the Bank to:

• set diversity targets for different echelons of seniority within the “employee” category.
• set diversity targets systematically (noting the absence of targets beyond gender for the Board and incomplete targets for senior management and employees generally, as detailed above), with specific emphasis on Indigenous representation.

In its response, the Bank noted that our concerns aligned well with theirs, while welcoming further engagement from EIG.

 

Desjardins

As mentioned in a previous article[ii], engaging with Desjardins is a bit more complicated. EIG cannot engage directly with the umbrella organization, Desjardins Group, which undertakes major initiatives and sets general policies, but only with the Caisse d’économie solidaire Desjardins, of which we are a member and which has a certain independence in terms of its own initiatives and policies. Concerns related to Desjardins Group must be submitted to the Caisse with a request that they be passed along.

In February 2021, EIG sent a letter that included questions of diversity within both Desjardins Group and the Caisse:

(1) Desjardins Group

We noted our satisfaction with some recent commitments:

Founding signatory of the Canadian Investor Statement on Diversity & Inclusion.

• Joining the BlackNorth initiative, including firm commitments to the Black community regarding funding and workplace targets.
• In the announcement, Desjardins supports diversity: creation of its SocieTerra Diversity Fund; signing on to the UN Women's Empowerment Principles.
• Targets for gender parity by 2024.

(2) Caisse d’économie solidaire Desjardins

We asked what initiatives the Caisse was undertaking regarding diversity, equity and inclusion, particularly for marginalized communities such as First Nations, Inuit and racialized people.

We were happy to receive a detailed response from a Director at the Caisse, first in a phone conversation (May 2021), then subsequently with written responses to additional questions (June 2021). Ongoing initiatives include:

• A fertile collaboration with La Fédération des coopératives du Nouveau-Québec (Inuit).
• Many projects – including business support, outreach, housing, circus arts -- in St Michel, Villeray, Parc-Extension et Montréal-Nord, e.g. La Maison d'Haïti; Parole d’excluEs; Les Fourchettes de l'Espoir.
• Projects supporting street workers with the homeless and similar social initiatives, e.g. Dans la rue; Execo.
• Funding for organizations that help immigrants and refugees in obtaining microcredit loans and getting their training and diplomas recognized, e.g. Microcredit Montréal; Windmill Microlending.
• Mandatory diversity and inclusion training for employees, including awareness of stereotypes, prejudices and unconscious bias.

During the phone conversation, EIG took the opportunity to make two suggestions that were well received:

• We’re aware that Desjardins Group has set some targets for the entire Caisse network but we would like to see the Caisse d’économie solidaire set its own diversity and inclusion targets for women and marginalized groups.
• While Desjardins has a professional development program that specifically targets women, it would be even more effective to supplement this with a mentorship and official coaching program targeting people from marginalized groups.

What’s next?

Much has happened in the area of diversity, equity and inclusion in the last year or so. Companies are gradually becoming aware of the need to voluntarily develop meaningful ways to measure and disclose data on workplace diversity and to set concrete goals – before they are required by regulation to do so. It’s only when the numbers are out there for all to see that real change can be effected. EIG will be keeping abreast of this evolution and will continue to engage on the issue with the companies in our portfolio.

 

Visit our website for full details of our shareholder engagement with Scotiabank and Desjardins.

By Judith Bird and Heidi Monk

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[i] Visible Minority and Black Canadians. Wikipedia.

[ii] The role of banks in addressing climate change