Investor Guidance on Diversity, Equity and Inclusion amidst the Turmoil

Separating relevant information from meaningless noise is an essential function of any investment professional that has only gotten harder in recent years. However, it can spell the difference between strong investment analysis and getting lost in the static.

That’s why, as we’ve witnessed politically motivated attacks on diversity, equity and inclusion ramp up within the United States (and, to a lesser degree, Canada), we’ve had to take a step back and evaluate what’s truly changing for investors and investee companies — and what’s not.

Some of what’s changing is the legal context around diversity, equity and inclusion — actual decisions and regulatory actions that cannot be ignored. There may also be some relevant brand-related risks from online campaigns. But the extent of the legal risks is more specific than general, and the brand risks may be more smoke than fire.

In fact, recent data from the Society for Human Resource Management found that rollbacks in diversity, equity and inclusion have an adverse impact on attracting and retaining talent: 82 per cent of employees say that rolling back diversity, equity and engagement initiatives makes them less engaged in their work, 80 per cent report an intention to seek a new job within the year and 70 per cent state that they would not apply to a company they believed was pulling back on diversity commitments.

Diversity, equity and inclusion matter; so how can investment professionals and corporate leaders distinguish the real risks from the rhetoric?

SHARE’s latest investor brief goes into greater detail on the tangible ways to distinguish the risk from the rhetoric. The fundamental takeaway for investors is that we need to accurately assess what brings value to our portfolios and not be distracted by attacks from special interests.

When it comes to building strong, resilient portfolios, diversity, equity and inclusion is not a distraction—it’s a driver. After all, it’s performance, not politics, that pays the bills.