Diversity and inclusion (D&I) was a buzzword in 2021. On the one hand, this led to greater scrutiny of corporate boards, better collection and disclosure of diversity data and increased efforts for regulatory oversight. However, on the other, commentators have warned of a box-ticking approach and the risk of moving away from the focus on people.
Going into 2022 a holistic understanding and approaches to inclusion must continue to develop to create better and fairer workplaces and investment opportunities.
Here, investment professionals focused on D&I shared their insights with ESG Clarity:
Take a more nuanced approach
Vaidehee Sachdev, impact analyst, Aviva Investors
“On diversity we’ve hit a roadblock. There’s a risk the ESG community has professionalised ‘diversity’ to the extent it can sometimes seem alienating to exactly the kind of people it is trying to embrace. It is positive that there are now more communities of practice on gender equality and systemic racism. I would hope that in the coming year or so, diversity conversations confront other dimensions of diversity, and how they intersect and accumulate. That means taking a more nuanced approach, which will be difficult. Instead of focussing on increasing the number of women or ethnically ‘diverse’ in the team, the discussion now needs to focus on a spectrum of characteristics – socio-economic, neurodiversity, sexuality alongside gender and race. Companies are not supporting equality if the sole objective is to hire a woman or minority to the executive to improve annual diversity figures. Enough with gender targets at the board level.”
Keep pressure on board disclosure
Stephanie Maier, global head of sustainable and impact investment, GAM Investments
“2021 brought greater focus on racial diversity, with increased disclosure rates – particularly in the US. Disclosure requirements are increasing on board composition and gender pay gap metrics. Regulators have turned their attention to diversity and inclusion, as we saw when the UK’s FCA issued a discussion paper about this.
“But although numbers have improved, in many countries gender balance remains poor at board level. Focused attention is required to build the pipeline throughout organisations.
“This year is likely to see continued focus by investors on these issues and improving disclosure to support decisions on proxy voting and inclusion in portfolios.”
Increasingly important for investors
Yijia Chen, ESG quantitative research analyst and index manager, Calvert Research and Management
“In the context of the ‘great resignation’ that will likely continue into 2022, companies’ diversity, equity and inclusion (DEI) practices, as an essential piece of their human capital management, are playing an important role in attracting and retaining talent. In 2021, many companies in developed markets improved their board diversity and have committed to create a more equitable and inclusive work culture for their employees, and this will continue in 2022. Companies that have not made much progress, especially in the sectors that heavily rely on talent (such as financials and consumer goods), may struggle to obtain talent in 2022 and, thus, should consider prioritising improvements on their DEI performance and workplace inclusivity practices.
“More companies are now disclosing their diversity data. This disclosure means more transparency for investors to make better investment decisions, which is the foundation of moving the needle toward positive societal changes. But despite this progress, diversity-related data availability and data quality remain the main challenges. Most disclosure is around board-level diversity data, but other levels of workforce diversity data and company DEI policies are also critical. Investors need greater transparency of diversity across workforce levels to understand a company’s performance in this area.
“Targeted engagement campaigns with company management focused on diversity issues will play a more critical role in directly improving specific corporate behaviours. Investors are increasingly employing these tools to encourage companies to change.”
