“Diversity and inclusion is just as much a global priority as climate change,” says London CIV’s Responsible Investment Manager Alison Lee

In an ideal world, all workplaces would reflect the diversity of the world we live in. Unfortunately, this tends not to be the case, with minority groups consistently under-represented amongst entry level employees and, more strikingly, in the upper echelons of corporate management.  Asset owners are increasingly scrutinising both investee companies and their external managers on their efforts to ensure that their employees come from a variety of backgrounds, cultures and perspectives. 

“Diversity and inclusion (D&I) is just as much a global priority as climate change,” says Alison Lee, Responsible Investment Manager at London CIV. Asset owners are increasingly recognising that inequality is a systemic risk which needs to be addressed, both for the good of society and their business. Inclusive companies benefit from access to a wider talent pool and increased diversity of thought, both of which will help them better connect with consumers and other stakeholders.  US large-cap companies with ethnically diverse boards logged an average 1.5% higher stock return price compared to boards that were not ethnically diverse, according to research by investment management company Calvert. Further, a “modest increase” of women in the US workforce could add US$511 billion to GDP over the next ten years, benchmark and analytics provider S&P Global noted in a recent study.  

Asset owners speaking to ESG Investor highlight a variety of groups that they want to see better represented in the workplace. “Gender diversity is the most widely considered because it’s the easiest to measure, followed by ethnic diversity,” says Alison. “However, given the current cost-of-living crisis and the ongoing impact of the pandemic, socioeconomic diversity is rapidly rising up the investor agenda.”  

To measure current D&I-related efforts and to drive more positive change – both among the companies in their portfolios and the managers engaged to act on their behalf – asset owners need accurate and reliable data, but also frameworks and policies to turn information into action.  “We need to gather as much information as we can on gender, ethnicity and broader diversity characteristics, in conjunction with developing a process where we can take action on this information to drive improvement,” Honor Fell, Sustainable Investment Officer of the Cambridge University Endowment Fund, told ESG Investor.  

Given that the quality and consistency of ESG-related data continues to be subject to debate, asset owners aren’t waiting for perfect information on D&I. “Even across topics where the data isn’t so readily available – like with socioeconomic – that shouldn’t prevent questions being asked or asset owners having conversations about socioeconomic diversity with companies and managers,” says Sarah Miller, Vice President of the Manager Research Team at investment consultancy firm Redington.

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