ILPA launches 'diversity in action' initiative

Out-Law Legal Update | 11 Dec 2020 | 6:06 pm | 2 min. read

The 'diversity in action' initiative, launched by influential US-based organisation the Institutional Limited Partners Association (ILPA), highlights support for advancing diversity and inclusion amongst both fund managers and institutional investors, encourages actions to be taken now, and provides a platform for shaping and adopting best practice over time.
  • ILPA announces founding signatories for its new 'diversity in action' initiative;
  • demonstrates the private equity industry's commitment to diversity, equity and inclusion (DEI), both internally and within the industry more broadly;
  • will encourage other fund managers (GPs) and institutional investors (LPs) to join them in undertaking DEI actions and also in sharing ideas and resources.

The ILPA represents more than 550 institutional investors that together hold more than $2 trillion in private equity funds. In February 2020 it published its broader diversity and inclusion roadmap for the private equity (PE) industry, which set out best practices that both GPs and LPs can adopt to advance D&I at their own organisations and throughout the PE industry more widely.

The ILPA's diversity in action initiative is an extension of the roadmap, with participating organisations required to commit to all four of the "foundational required activities" and select at least a further two "optional activities" to engage with too.

The foundational requirements are that organisations:

  • Have in place, and communicate publicly, a diversity, equality and inclusion (DEI) statement or strategy, and/or a DEI policy communicated to employees and investment partners, that addresses recruitment and retention – and further address harassment either within the DEI policy or within a separately articulated policy or statement;
  • Track internal hiring and promotion statistics by gender and race or ethnicity, where the capture and reporting of the latter is permitted in the jurisdiction;
  • Have in place organisational goals that result in demonstrable practices to make recruitment and retention more inclusive;
  • Request (LPs) or provide (GPs) DEI demographic data for any new commitments (LPs) or new fundraises (GPs) – again, at a minimum, gender data, and racial or ethnic data as well in jurisdictions allowing for the capture and reporting of such information.

There is a list of nine optional activities that participating organisations can choose to adopt. These include assigning senior-level DEI accountability, aligned with an investment or senior management role; providing unconscious bias training for employees on an ongoing basis; and incorporating contributions towards advancing DEI into employee performance reviews.

On 7 December the ILPA announced more than 40 organisations had elected to participate in its diversity in action initiative as founding signatories. Founding signatories include Blackstone, the Carlyle Group and Teacher Retirement System of Texas, with each signatory making a public commitment to advancing DEI ILPA intends the network of committed organisations to grow over time.

MacGregor Elaine_April 2020

Elaine MacGregor

Legal Director

In requiring a commitment to undertake specific actions, ILPA's diversity in action initiative will actively encourage organisations to take practical steps to advance diversity and foster inclusion.

From March 2021, the ILPA will publish quarterly updates listing all signatories and providing analysis of specific actions that signatories have in place as well as emerging best practice. Jennifer Choi, managing director of industry affairs at the ILPA, said: "Our aim is to celebrate and elevate the specific measures taken by a wide range of organisations to make the private equity industry more diverse and inclusive."

Investment funds expert Oliver Crowley of Pinsent Masons, the law firm behind Out-Law, said: "The ILPA's new diversity in action initiative is a welcome public commitment from the private equity industry that diversity and inclusion is still very much a strategic priority, not just within each signatories' own organisation but also in encouraging DEI more widely throughout the industry."

"Institutional investors have been focusing on ESG issues to help reduce risks and achieve sustainable, long-term financial returns. By encouraging more diverse and inclusive organisations, this can play a part in fostering resilience and encouraging new perspectives to tackle a post-Covid 19 landscape," he said.

Elaine MacGregor, also an investment funds expert at Pinsent Masons and co-chair of the firm's Disability and Wellbeing Group, said: "In requiring a commitment to undertake specific actions, ILPA's diversity in action initiative will actively encourage organisations to take practical steps to advance diversity and foster inclusion."

"The ILPA shows commendable commitment to keeping momentum on the advancement of diversity and inclusion by regularly measuring industry progress and also providing a platform for collaboration amongst signatories throughout the private equity industry to share new ideas and develop best practice over time," she said.