The United Nations Principles for Responsible Investment provided new guidance in 2022 for considering diversity, equity, and inclusion (DE&I) in the investment decision making process. To access UN PRI’s full report, visit Diversity, equity & inclusion: Key action areas for investors.
The concept of DE&I has gone from a “soft” issue to one of measurable performance and risk. The report explores how DE&I fits into the PRI framework, what regional regulations are emerging that will hold companies accountable, and how investors can take action. The evidence that DE&I has an impact on corporate performance has been steadily mounting for decades. The degree to which companies fully embrace the backgrounds and perspectives of all employees can influence both their ability to grow as a company and to help bolster the economy as a whole. Reports from the International Monetary Fund, Accenture, the Kellogg Foundation, and many others point specifically to DE&I as a crucial lever to sustained economic strength.
Investors can consider these factors as they seek long term growth and a more stable economy overall. UN PRI explains:
Investors can apply DEI-related filters to potential investees to rule out the worst performers or include those investees and engage with them, demonstrating leading practice. Screening criteria for potential investees may include disclosure on DEI metrics, a diversity policy or a minimum level of diversity within the workforce, as well as disclosure and resolution of DEI-related grievances (such as lawsuits for pay/promotion discrimination and sexual harassment cases). Investors will need to develop clear screening criteria matched to their set objectives on DEI.
For passive strategies, investors can consider how the overall exposure to a particular DEI factor is reduced or increased by adjusting the weights of constituents, dependent on ESG factors. This may be reflected in a bespoke index.
To learn more about ESG Forward, head over to our Digital Product library.