ESG objectives increasingly focus on diversity

While climate change continues to be the main driver behind the push for wider and deeper adoption of environmental, social and governance (ESG) standards, diversity is increasingly being scrutinised by investee companies and their external managers to ensure their employees come from a variety of backgrounds, cultures and perspectives.

Asset owners have acknowledged that inequality is a systemic risk to be addressed, 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.

Large cap companies in the US with ethnically diverse boards have achieved an average 1.5% higher stock return price compared to those that were not ethnically diverse, according to research by investment management company Calvert.

Furthermore, a “modest increase” of women in the US workforce could add US$511 billion to GDP over the next 10 years, according to a recent study from benchmark and analytics provider S&P Global.

“Diversity and inclusion (D&I) is just as much a global priority as climate change,” said Alison Lee, responsible investment manager at London CIV in an interview with ESG Investor.

“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.”