The debate is long over, the business case for Diversity & Inclusion (D&I) is compelling: D&I contributes to increased productivity, more innovation, and greater business profitability. It helps to unlock opportunities that might otherwise go unnoticed. Here are ways D&I policies and inclusive and equitable investment practices can contribute to the bottom line:
- Companies with greater ethnic and cultural diversity outperform in profitability more than a third more versus their peers with less diversity.1
- D&I produces dynamics that lend themselves to disruptive innovation, because companies gain the ability to find and unlock innovations from anyone, anywhere. Access to new concepts and perspectives can lead to new paradigm shifts and the development of new markets.2
- When asset management firms improve their diversity, they improve their investment and business opportunities. Businesses and industries benefit from the talent diversity that fuels biotech, technology, and other growth sectors, and from strategies that also meet Environmental, Social and Governance (ESG) investors’ needs.
- More investors have demanded D&I as a factor in their investments. Within the Morningstar universe, mutual funds that include D&I criteria (including ESG) in their investment strategies saw their assets under management more than double in two years, to $49 billion.3 And publicly traded equity funds investing in companies with more women in leadership positions and strong additional equality metrics saw their assets grow 51% in 2021.4
- Thinking diversely and acting inclusively are essential for preparing for unpredicted challenges. The pandemic forced industries, communities, and countries to rethink, reshape, and provide transparency. Inclusive practices and diverse viewpoints enabled companies to move faster to produce strong results for all people and stakeholders.
D&I strategies and actions accelerate sustainable and inclusive growth from the innovations they foster, preparing companies to thrive and survive. As our investment industry progresses and prepares for shifts in global populations and transitions of generational wealth, engaging D&I lenses increases wealth creation, identifies untapped opportunities, increases profitability, cultivates innovation, and reduces risk. Highlighting D&I as a firm business imperative will not guarantee success—but a lack of focus on it will put you at a competitive disadvantage.
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1. Source: “Diversity Wins: How Inclusion Matters,” McKinsey & Company report, May 19, 2020.
2. Source: “Women and Innovation: Making the Connection,” Stanford Social Innovation Review, April 4, 2016.
3. Sources: “Asset owners eye gender lens funds,” Pensions & Investments, April 29, 2022; and “In the Pursuit of Equality, Gender Lens Investing Can Help Tip the Scale,” Morningstar, March 2, 2022.
4. Source: “Gender- and Diversity-Linked Funds Ballooned in 2021,” Ignites.com, June 10, 2022.