ILPA asks LPs and GPs to lead by example with new diversity initiative

The initiative has 46 founding signatories, including venture firms .406 Ventures, ForgePoint Capital and Insight Partners as well as LPs, such as Teacher Retirement System of Texas and CPP Investments.

The Institutional Limited Partners Association has launched an initiative to encourage investors and fund managers to lead by example on diversity, equity and inclusion.

The Diversity in Action initiative serves as a means for general and limited partners to publicly acknowledge their commitment to take concrete steps to advance diversity, equity and inclusion within their organization and the industry more broadly, according to a statement.

Signatories will be required to undertake four essential DEI actions and at least two additional actions, from an optional set of nine. The initiative has 46 founding signatories, including venture firms .406 Ventures, ForgePoint Capital and late-stage investor Insight Partners, as well as LPs, including Teacher Retirement System of Texas and CPP Investments.

“As the private equity industry strives to make even more significant progress on DEI, a limiting factor has been the challenge associated with knowing how your peers are approaching the issue,” Steve Nelson, ILPA’s chief executive, said in the statement.

“The Diversity in Action Initiative offers, for the first time, a platform not only to showcase the incredible work underway but also to surface ideas and resources that may inspire others to do more on DEI; the value of that information is really hard to overestimate.”

From March, ILPA will publish quarterly updates listing all Diversity in Action signatories and including a thematic analysis of the range of specific actions that signatories have in place, including emerging best practices.

The four required activities for participating organizations are:

  • Having in place a DEI statement or strategy, communicated publicly, and/or a DEI policy communicated to employees and investment partners, that addresses recruitment and retention;
  • Tracking internal hiring and promotion statistics by gender and race/ethnicity;
  • Setting organizational goals that result in demonstrable practices to make recruitment and retention more inclusive;
  • Requesting from LPs, or providing GPs with, DEI demographic data, such as the ILPA Metrics Template, for any new commitments or fundraises.

The optional activities are:

  • Tracking gender and race/ethnicity statistics within partner organizations (LPs: managers; GPs: portfolio company boards/management teams).
  • Assigning senior-level DEI accountability, aligned with an investment or senior management role.
  • Providing unconscious bias training for employees on an ongoing basis.
  • Having in place diverse employee resource groups.
  • Incorporating contributions towards advancing DEI into employee performance reviews.
  • Committing to encourage and promote diversity within boards of directors at portfolio companies.
  • Requesting from LPs, or providing GPs with, DEI demographic data, such as the ILPA Metrics Template, for all funds, and not solely new commitments/new fundraises.
  • Supporting DEI research in the private markets industry by participating in surveys that capture data on diversity in the workforce.
  • On a programmatic basis, supporting industry efforts to educate underrepresented groups about careers in private markets.

This year, ILPA published its Diversity and Inclusion Roadmap for the Private Equity Industry, an online and open-source resource that outlines 30 best practices and more than 100 resources and reports.

Evidence of diversity and inclusion at the GP level now forms either a minor or major part of the process for 80 percent of LPs, according to Private Equity International’s LP Perspectives 2021 survey, published this month. Still, only 13 percent of LPs have ever refused an opportunity based on a lack of diversity and inclusion.

Last month, one member of the Los Angeles City Employees’ Retirement System’s board challenged the $20.3 billion pension’s staff and consultants at a recent meeting to give women of color an opportunity to sit at the table, affiliate publication Buyouts reported.

“I’m not saying give them contracts, but ensure that they have an opportunity to sit at the table and bring opportunities that can bring alpha to the table,” said Nilza Serrano at the close of a November 10 investment committee meeting.

This article first appeared in affiliate publication Private Equity International