The experience of Igneo Infrastructure Partners illustrates private infrastructure’s challenge with regard to diversity and inclusion. While the firm has made significant progress on gender diversity at boardroom level (the number of women on its portfolio companies’ boards has risen from 10 percent six years ago to 21 percent last year), head of ESG Sophie Durham explains that diversity across all employees has proved harder to increase, and has “hovered around 30 percent” for the last six years.
Increasing employee-wide diversity in infrastructure portfolios is a well recognised challenge. While it is difficult to distil DE&I across private infrastructure into a single metric, women remain underrepresented in the workforce, IFM Investors‘ recent Infrastructure Outlook report observed. This is in part due to a lack of female representation in STEM subjects, which are key for the industry.
The numbers back this up. Just 6.6 percent of female graduates were from engineering or manufacturing courses, compared with 24.6 percent of men, according to 2019 data in a World Economic Forum report. The same report found that only 16 percent of leadership roles in infrastructure were held by women.
The fact that renewables projects tend to employ a more diverse workforce than other portfolio companies was a common observation among market sources, though there is no consensus on the reason why. Jennifer Gandin, principal at CIM Group, posits that geographic bases of leaders in decarbonisation tend to be more “urban and diverse”. As an example, “in the US, far and away the leader in decarbonisation is the state of California, which has some of the largest cities in the country and the most diverse workforces”.
Igneo’s Durham has a different take: “It can be challenging to recruit young people into sectors such as oil and gas. Renewables is much more interesting to them.” She points to Scandlines, a shipping company in Igneo’s portfolio, as an example of the kind of infrastructure asset that attracts diverse talent. The company has “high” female representation, in part due to its progress in decarbonisation. A younger, more diverse workforce is attracted to the company because it is “not just some old shipping company that’s running […] diesel vessels and not doing anything about it”.
Working practices also play a role in limiting diversity. Some infrastructure projects, such as LNG terminals, may require workers to be based offshore for several weeks at a time. It is much harder to improve gender diversity in these and other operational areas compared with office-based roles, notes Durham. It appears to be an intractable problem: “Depending on the nature of the business, it may not be possible to change that fundamental model”, she says.
How are GPs trying improve diversity at the portfolio level? Many have strategies in place. For example, IFM recommends four focus areas for improving diversity in infrastructure portfolios:
- Invest in diversified talent pools. For example, Manchester Airport group, one of IFM’s portfolio companies, has established an academy to help unemployed local residents to gain skills and jobs
- Implement policies to support inclusion, especially in relation to mental health
- Measure employee satisfaction and engagement to track the success of different strategies
- Expand diversity focus to “external stakeholders” in order to engage with the local community in which an asset operates
Igneo requires its portfolio companies to do the following:
- Set out clear priorities for increasing diversity
- Report progress at least annually, and at least on female representation
- Conduct employee engagement surveys, including questions on diversity and inclusion
Durham notes that most portfolio companies choose to prioritise female representation, but there is geographical variation. Companies in the US, Australia and New Zealand are more likely to focus on ethnic diversity, while some Scandinavian companies have prioritised age.
Portfolio-level diversity data has not historically been high on LPs’ wish lists, according to Luba Nikulina, who spent nearly 15 years assessing managers when at consultant Willis Towers Watson. LPs did not typically ask for a full breakdown of diversity metrics of their managers’ portfolio companies as it became “impossible to manage”, said Nikulina, who is now chief strategic officer at IFM.
Rather, investors were more likely to look at selected case studies. Ultimately, LPs were more interested in diversity at manager level, and only looked at portfolios to make sure managers practised what they preached.
However, there are signs that LPs are taking the issue more seriously. While portfolio level diversity is “probably less of a focus” for LPs than boardroom make-up, Durham notes that initiatives such as the Asset Owner Diversity Charter, a cross-company scheme championing diversity in UK investment, are increasing the focus on employee-wide inclusion.