Dimensions of diversity beyond gender: ethnicity
Dimensions of diversity beyond gender
Diversity, equity and inclusion (DEI) has been a focal point on the investor agenda for many years but the scope of diversity is evolving. Although gender continues to be a central and critical theme for DEI progress, investors can broaden the areas of diversity they can engage on. ‘Gender and Beyond: Diversity, Equity and Inclusion’, published by the First Sentier MUFG Sustainable Investment Institute highlights four broader dimensions of diversity: disability and neurodiversity; LGBTQ+; Ethnicity; and Socioeconomic background. These dimensions have been underexplored but are increasingly attracting stakeholder attention, alongside gender.
Investors have an opportunity to address DEI concerns through engagement and voting among investee companies. To support investors in deepening their understanding in this important area, we provide an overview of disability and neurodiversity in the workplace context, including actionable insights and engagement questions.
Ethnicity
Workplaces around the world comprise employees of many ethnicities; however, this aspect of diversity is often less understood due to its complexity and variations across different regions. While employers increasingly begin to focus on this topic, challenges linked to inequality and discrimination of individuals with specific ethnic backgrounds remain frequent. For example in Australia, only 10% of ASX300 directors were of non-Anglo-Celtic background, while approximately half of the Australian population is of non-Anglo-Celtic ancestry, based on 2021 data.1 Aboriginal and Indigenous populations in Australia face additional challenges, evidenced by surveys of Aboriginal and Torres Strait Islander workers who reported being twice as likely to experience discrimination and harassment as non-Indigenous employees.2
Studies have highlighted the economic and business advantages of acting on ethnic diversity. For example, it was estimated that for the UK economy, equal participation from racial minorities was valued at £24 billion per year or 1.3% of GDP. Similarly, a US study found that the total average earnings of all workers would be 33.5% higher, US GDP would have been US$7.2 trillion higher, and the national poverty rate dropped from 10.5% to 6.6% if ethnic and gender divides were closed.
Workplace challenges
There are multiple challenges linked to closing the ethnicity divide in the workplace. One relates to lack of data: on a global level ethnicity reporting is not developed; disclosure requirements related to ethnicity in most countries are limited and are largely voluntary, with marked differences across regions. In the UK, it is relatively common for large employers to collect non-publicly disclosed employees’ ethnic origin data however in other countries such as France and Germany, the collection of such data is largely prohibited for employers.3
Furthermore, both globally and regionally, there are major variations in how ethnicity is defined, which requires employers and investors to take a regional vantage points on race, ethnicity and Indigenous populations when considering the optimal approaches for improving ethnicity in workplace DEI strategies. For example, in Australia, 27.6% of the population were born overseas with the top countries of birth being England, India and China. The most common ancestries are English (33%), Australian (29%), Irish (9.5%), Scottish (8.6%) and Chinese (5.5%)4, while Aboriginal and Torres Strait Islander peoples represent 3.2% of the population.5 Within countries like the UK, metropolitan centres may accommodate larger ethnicity diversity than non-metropolitan areas. For example, according to 2021 census data, 18% of the UK population was from a minority ethnic background, but London’s population was estimated at over double the national figure to include over 40% from Black, Asian & Minority Ethnic (BAME) heritage.6
Race and ethnicity remain important factors linked to pay disparity, especially when they intersect with existing gender pay gaps. For example, in 2022, Black and Hispanic women in the US experienced the largest wage gap compared to white men at 70% and 65% respectively[i]. This disparity also affects the rate at which gender pay gap closes over time. Importantly, while in some cases employees of minority ethnic origin are more likely to be in lower paid jobs and have lower earnings, even with similar educational qualifications, some sections of ethnic minority communities are not subject to the same pay gaps. In this way, it is important that ethnicity is not used to encompass a group homogenously subject to the same trends, treatment and levels of discrimination.
Best practice
Employers can use two base indicators to identify the extent of ethnicity pay gaps and integrate this insight into their overarching DEI strategy7; the proportion of employees from minority ethnic backgrounds by country, and the proportion of employees who have disclosed their ethnicity (see image 1).
Table 1: Ethnicity pay gap context indicators
| Indicator | Explanation |
|---|---|
Proportion of employers workforce from minority ethnic backgrounds by country (where local regulations allow) |
It is helpful to publish any company figures with reference to national context and potential narratives for any deviation. (Non-urban centres may typically have far lower proportions of ethnic minorities than major metropolitan areas.) |
| Proportion of employees who have disclosed their ethnicity | Low disclosure rates may improve over time as a company culture better foregrounds DEI and employees understand the benefits of disclosure. For the percentage of workforce not disclosing, an understanding of those who are not included in the scope of survey and those who “prefer not to give a response” can be a helpful indicator. |
Source: SII, CIPD Ethnicity Pay Gap Reporting Guide for Employers
Alongside ethnicity considerations, Indigenous inclusion is another key concern for employers and investors in countries with Indigenous populations (e.g. Australia, New Zealand, the US, Canada); in this context, incorporating Indigenous cultural perspectives into the DEI approach is particularly important.
Company engagement questions on ethnicity:
- How is ethnicity integrated into organisation approach to DEI?
- Is ethnic diversity part of the consideration criteria for board recruitment and succession planning?
- How does board ethnic diversity compare to the industry average? Are there any goals / commitments to increase board diversity?
- Does the company non-discrimination policy include ethnicity?
- Are local targets set for representation of ethnic minority employees in regions where regulations allow it?
- Does the company collect and disclose data on the number of nationalities employed globally? Does this meaningfully track against the geographic footprint of the company?
- Is the company considering measuring its ethnicity pay gap as part of its DEI approach?
Dimensions of diversity beyond gender series
3 Gov.UK, Comparing ethnicity data from different countries,2022
4 Australian Bureau of Statistics, Cultural Diversity of Australia, 2021
5 Australian Bureau of Statistics, Aboriginal and Torres Strait Islander people: Census, 2021
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