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Diversity within the ranks of Canada’s private capital providers is slowly improving, but employees who aren’t white heterosexual men feel marginalized, underappreciated and lack career opportunities, according to a survey to be released Thursday.

The report, titled State of Diversity & Inclusion 2021, found women account for 19.4 per cent of partners at venture capital (VC) firms – up from 11 per cent in 2019 – and 9 per cent of private equity (PE) firms, down from 11 per cent.

Racially and ethnically diverse minority groups account for 23.2 per cent and 10.1 per cent of partners at VC and PE firms, respectively, both up from 2019 levels. Those identified as LGBTQ represented between 10 per cent and 11 per cent of each. The share of all underrepresented groups, including those with disabilities, increased at the junior investment levels of firms and across most non-management ranks.

But the survey goes beyond counting heads to find out whether diverse employees feel they belong and can succeed in Canada’s private capital industry. The results paint a bleaker picture, particularly for women who have reached partner level.

Female partners at VC firms were six times likelier than white, heterosexual, non-disabled men to report harassment in the workplace or felt their opinions were not heard or valued – and nearly 12 times likelier at PE firms. Women VC partners were three and a half times likelier to feel no one was invested in their career growth. Their PE peers were three times likelier to feel the person to whom they report is unfair.

Partners in other underrepresented groups also felt less included. Women experienced “pervasive barriers and biases” at junior investment levels, while “all underrepresented groups reported facing bias from partners and feeling like leadership was not invested in their growth or development,” the report said.

“This is a conversation now that is in the open, and we need to acknowledge it and work toward actionable approaches to change some of the traditional makeup and dynamics,” said Michelle McBane, co-chair of the Canadian Venture Capital & Private Equity Associations’ (CVCA) diversity and inclusion committee. The study shows “there is need for improvement. The next step is we have to take action.”

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The report was prepared by the CVCA and Diversio Inc., a Toronto startup that measures diversity and inclusion data with a goal of identifying gaps and fixes for their corporate clients. The report was sponsored by BDC Capital, Canadian Imperial Bank of Commerce’s innovation banking unit and Calgary women-led investor group The51.

“It’s not simply enough to recruit diverse individuals into the industry, you have to help them succeed,” Diversio chief executive officer Laura McGee said in an interview. “White heterosexual males without disabilities consistently reported they had more opportunities for growth within their firms than folks in non-dominant groups. … If you’re not being mentored, not being supported, don’t have flexibility, if your opinion isn’t valued, you probably are not going to get the opportunity to be promoted.”

The study is part of a growing effort in the private capital industry to improve the state of diversity among their ranks and portfolio companies. Reports for years have highlighted that the partners at private capital firms skew heavily toward white, heterosexual men and that startups led by people who look like them receive the overwhelming share of investment dollars, despite evidence that companies with more diverse teams outperform those without. That, the CVCA-Diversio report states, is the result of unconscious bias that “is not intentional but [that] can have wide-reaching consequences for investment teams.”

The CVCA in 2019 pledged to help improve diversity and inclusion, tasking Deloitte that year to survey its members. That got 91 responses and produced limited data on inclusion. For the most recent survey, Diversio heard from 431 people up and down the ranks of 122 private capital firms.

“I think we’re seeing some improvement in terms of some of the metrics including women participation at the senior levels in venture capital” and a strong pipeline of diverse up-and-coming investment managers, CVCA CEO Kim Furlong said. But “then you turn to inclusion metrics and you realize there’s work to be done.”

Ms. McGee said private capital financiers need to “get tactical around the topic or pain points experienced by folks and start to change the culture.” She says she’s been “pleasantly surprised” by the commitment of CVCA members to address the issue.

The report follows the release last Friday by BDC Capital, the largest domestic backer of VC firms, of a reporting template to capture diversity, equity and inclusion data at Canadian private capital firms and portfolio companies. It’s based on a framework from the International Limited Partner Association, which represents global institutional investors. Without collecting the data, “we won’t understand how to improve and make progress,” said Alison Nankivell, a BDC senior vice president who chairs the ILPA.

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