Diversity and Inclusion in Investing
Between a global pandemic that has cost trillions of dollars and witnessing protests against police brutality, this year has triggered many current events that are reshaping how we view the world. People of all races are starting to ask the tough questions about racial equality that many people may not want to discuss. Many investors are starting to figure out how they can position their investment portfolio to align their money with their values on racial equality.
Socially Responsible Investing (SRI) has been growing in popularity over the last decade. An increasing number of asset management firms are creating funds that either tilt towards companies that show a higher degree of diversity and inclusion among their workforce and boards, or are creating funds that exclude companies that don’t exhibit this type of diversity. Data is currently available that supports that having an equity portfolio that consists of companies that take diversity and inclusion seriously can actually boost performance. For instance, research from the Wharton School at the University of Pennsylvania showed that a value-weighted portfolio of Fortune’s list of best companies to work for based on opportunities, benefits, and diversity generated an alpha of 3.5% in the twenty-five years from 1984 to 2009, which was 2.1% higher than the benchmark.1