April 1, 2022

4 Ways to Advance DEI in Private Markets

In March 2022, Novata’s Chief Impact Officer and Head of ESG Lorraine Wilson moderated a panel at the  Private Equity International’s Responsible Investment Forum in New York. Her session focused on the impact that Diversity, Equity, and Inclusion (DEI) policies and programs – a fundamental topic in Novata’s on-ramp to ESG reporting – can have on business and the future of the private sector. Panelists included industry visionaries across private equity, consulting, and wealth management. 

The panel dialogue proved DEI is a topic of growing importance in private markets, with more investment and executive attention focused on it. Panelists were in agreement that DEI initiatives are critical to building and executing successful ESG strategies, pointing to research showing companies with greater ethnic and gender diversity were more likely to experience greater profitability. The group also discussed how standardization in reporting DEI initiatives is necessary in the private sector, while pointing out quantitative metrics are generally still new to most in the space. That said, here were some of the ways participants noted private market players can implement DEI initiatives that have been found to lead to positive business results:  

  • Implement internal policies, practices and procedures to hire, retain and engage a diverse workforce – both at your firm and within portfolio companies.
    • Require employees to complete anti-racism training and implement programs around inclusive leadership to increase manager awareness of existing biases 
    • Establish DEI recruiting initiatives and support internal promotion of diverse employees
    • Set ambitious diversity targets, track progress through various metrics, and tie compensation to performance on the defined metrics.
  • Support external DEI initiatives outside your firm.
    • Participate in and provide financial support for DEI efforts outside of your business. Consider activities ranging from recruiting from organizations that support diverse candidates to making supply chain decisions based on organizations’ DEI representation. 
  • Consider DEI efforts as part of portfolio company evaluation.
    •  Bringing DEI into investment decision making, including evaluating and measuring performance of portfolio companies can lead to achieving more inclusive capitalism from a macro level.  
  • Leverage software tools to keep portfolio companies accountable.
    •  A successful DEI strategy requires investment and commitment to results. Initiatives are only as good as the measurable impact they have. Tools like Novata can help make setting targets, collecting data, and tracking progress easy. 

Creating and fostering a diverse workplace with a commitment to representation and equity is a critical component of ESG. We built Novata as an ESG data management on-ramp for GPs, LPs and portfolio companies to help track your ESG data, including DEI metrics. Let us help you get started today.