American financial companies could soon have to comply with DEI regulation in what could have significant ramifications for what happens next in Australia.
The U.S. Securities and Exchange Commission (SEC) has introduced its inaugural Diversity, Equity, Inclusion, and Accessibility Strategic Plan, which charts the course for the fiscal years 2023 to 2026. Although this concise plan primarily centers on internal policies, it carries notable implications relating to diversity, equity, and inclusion in the financial sector.
The plan includes two vital objectives aimed at harnessing the regulatory authority of the SEC to advance the inclusion of underrepresented groups, which could usher in a new era of regulations surrounding diversity, equity, and inclusion within the financial industry’s upper echelons.
According to Forbes, these developments signal a pivotal juncture for companies at the apex of the financial sector, who will need to navigate a rapidly evolving landscape of Diversity and Inclusion expectations and regulations.
If US companies are forced to prioritise DEI initiatives, this could pave the way for the Australian Securities Exchange to potentially follow suit. The big question is will it?
As it stands there are no specific DEI regulations for compliance in Australia.
The closest things relate to the Respect at Work legislation and the need for companies to take proactive steps to prevent sexual harassment at work, and the other being changes to the Gender Equality Act, which will take place from 2024 requiring companies with over 100 employees to publicly disclose their gender pay gaps.
Diversity and Inclusion has been squarely in focus over the past week in Australia after the majority of Australians voted no in the Voice Referendum to give Indigenous Australians a greater say in legislative decision making. One of the key criticism of the Voice was that the campaign itself failed in helping the general Australian community comprehend exactly what was in the Voice.
If Australia does follow suit to impose regulations that prioritise Diversity and Inclusion practices, it will most certainly need to ensure that any plan has extensive community consultation, buy-in from corporate Australia and importantly state clearly what the benefits are to business – all of which would be needed for it to be successful and sustainable.
The sphere of Diversity, Equity, and Inclusion (DEI) often encompasses the internal policies of companies or government entities, particularly focusing on elements such as ethnicity, gender, and sexual orientations among their employees.
On one end of the spectrum, DEI endeavours to reduce discrimination and amplify the voices of underrepresented individuals within the organization, creating opportunities for their advancement.
On the contrary, it can sometimes be perceived as a platform for promoting a specific political ideology that may not align with an entity’s core values and may inadvertently discriminate against demographic groups not traditionally considered underrepresented.
The ascent of DEI is intrinsically linked to the global surge of interest in Environmental, Social, and Governance (ESG) considerations. ESG investing involves weighing non-financial factors when making decisions.
While ESG primarily revolves around environmental policies and the overarching objective of achieving net-zero emissions by 2050 in line with the Paris Accords, it is noteworthy that the social category within ESG has stirred considerable debate.
In the United States, in particular, this category has been the center of controversy as certain fund managers and businesses have incorporated DEI policies within it.
DEI has taken center stage under the Biden Administration, as highlighted by an executive order issued in June 2021. This directive urged federal agencies to develop Diversity, Equity, Inclusion, and Accessibility (DEIA) plans and appoint Chief Diversity Officers, with a particular focus on the composition of the federal government’s internal workforce.
The executive order explicitly stated, “The initiative will advance opportunities for communities that have historically faced employment discrimination and professional barriers. This includes people of colour, women, first-generation professionals and immigrants, individuals with disabilities and LGBTQ+ individuals” as well as other minority groups.
Financy covers gender finance, diversity, inclusion and ESG issues. We advocate for gender equity change through the Women’s Index report and help businesses take action on DEI through tech solutions like IMPACTER.