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Dec 8, 2021

New Institute for Private Capital Tool Helps Companies Evaluate DEI Goals

The Institute for Private Capital’s newly-released interactive model that aims to help private equity leaders assess diversity, equity and inclusion (DEI) goals was featured in a report by Ernst & Young.

“This interactive tool was constructed to help PE firms more fully understand the implications of their practices in the areas of recruitment and retention,” Greg Brown, research director for the Institute for Private Capital (IPC) and executive director of Kenan Institute of Private Enterprise, said in a press release published by Ernst & Young (EY).

IPC’s Diversity Integration Model, developed with EY, can help private equity (PE) leaders configure a realistic – and effective – plan for growth by using nine simple inputs to calculate how long it will take firms to achieve their diversity goals.

According to Brown, it’s important for firms to understand how recruitment and retention – the top “fundamental levers” available to firms – interact with each other.

“DEI is a long-term effort, and some firms might be surprised at how long it will take to reach their diversity targets unless they implement substantial changes in both these areas,” Brown said.

Published in partnership with IPC, the report assesses private equity’s efforts to address DEI as the COVID-19 pandemic and recent social justice movements continue to highlight social and racial inequalities in the U.S.

According to the report, women only account for one-third of the PE workforce, including 20% of mid-level roles and 10% of senior roles, and Black employees only represent 3% of all roles at PE firms – a figure that declines even more among senior roles.

The findings show DEI metrics shape the industry’s ability to meet stakeholder demands, compete for talent and win deals, and it found 10 characteristics of the private equity culture that can hinder DEI, affect performance, and diminish employees’ experiences in the field.

EY’s 2021 Global Private Equity Survey – which received responses from 127 chief operating officers, chief financial officers and financial executives – found talent management priorities include increasing gender and ethnic minority representation across the front and back offices, the report says. More than 70% of respondents also said they’re launching documented or informal DEI initiatives.

“While initiatives are beginning to proliferate, the scope of the challenge remains large,” the report says. “The world of finance is infamous for its challenges with diversity, and the problem is particularly acute in PE and other alternative asset classes.”

The findings show DEI requires long-term investment and generates long-term value, the report says, and some organizations have made progress while others are falling behind.

Reasons for the difference include a lack of awareness about DEI’s impact, a lack of resources to manage and implement DEI, or a disproportionate focus on DEI at the portfolio level rather than the organizational level, the report says.

Read the full report here.

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