PRI: Improving diversity can help address climate change

Treat human rights and climate change with equal importance

A Principles for Responsible Investment (PRI) report published this week has urged investor action on diversity, equity & inclusion (DEI) more broadly, including by treating human rights and climate change with equal importance.

In its paper Diversity, Equity & Inclusion: Key Action Areas For Investors, the PRI said DEI issues are human rights issues, and encourages investors to view human rights issues “with as much importance as they view climate issues, aligned with the equitable adoption of Sustainable Development Goals into investment practices,” the body stated.

The report also argued improving diversity, equity and inclusion (DEI) can help address climate change.

“One study finds that diversity of skills, gender and age could accelerate the integration of climate-related issues by investors and boards of directors.

“Gender diversity is also said to lead to better identification of key ESG issues as critical to corporate strategy by the board,” report authors said.

Investor benefits

The paper sets out a series of further causal benefits of improved DEI – including reputation gains and access to untapped markets – and steps for investors to take when working with corporates in this area.

Diversity within investment organisations can also reduce conduct risk; prevent risky overinvestment decisions; result in fewer instances of fraud and fewer financial reporting mistakes and controversial business practices,” the report added.

For active investors, PRI suggested implementing a screening process to a set a firm floor for portfolio companies’ DEI standards. While a passive investor could consider how its weighting towards DEI factors is managed through mechanisms such as bespoke indices.

According to PRI, the broad areas companies should be working on to improve DEI are inclusive corporate cultures, inclusive business models and inclusive societies.

Elena Espinoza, senior specialist, human rights and social issues, at PRI said: “With this report, we’re encouraging investors to closely consider the issues at hand – namely, that addressing diversity must also entail addressing equity and inclusion too – in order to affect long-term systemic change.

“We’ve shown clearly the benefits of addressing systemic DEI issues, including to individuals, firms themselves, the communities most affected and the wider economy and society. Now, we’re asking investors to consider steps they can take to enact meaningful change.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...