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Sustainable & Impact Investing

May 16, 2023

Investing for Diversity, Equity and Inclusion 101

This article provides a high-level background on the rising investor-level interest in diversity, equity and inclusion (DEI), explains how DEI links to financial materiality and offers a framework for investors to consider when putting DEI principles into practice.

Why Invest with a DEI Lens?

Historically, policies and institutions in the U.S. have resulted in deep systemic inequities and the underrepresentation of marginalized communities in positions of leadership, all of which has further driven widening socioeconomic disparities.1,2,3 Recent influential movements such as Black Lives Matter and #MeToo have highlighted these differences and underscored the need and opportunity to invest in building a safer, more equitable society.

While there is both an economic and moral imperative, there is also mounting evidence of the financial materiality of DEI issues. A recent McKinsey study found companies at the top quartile of gender and racial/ethnic diversity were 36% more likely to experience above-average profitability than peer companies in the fourth quartile, an increase from prior years and further highlighting the widening earnings gap.4 Moreover, there is growing evidence that companies with good corporate DEI practices, for example, access to healthcare, fair chance employment and opportunities for skill development, are more likely to mitigate operational, regulatory and reputational risks and to build trust with workers, consumers and the communities in which they operate.5

DEI investing has attracted greater interest with advances in academic and corporate research on the financial materiality of DEI factors6,7,8 as well as a clear business case around the opportunity to invest in underserved and untapped markets. Shareholder resolutions related to social issues constituted the largest share (41%) of proposals submitted in the 2021-2022 season for the Russell 1000.9 In the current 2022-2023 season, DEI topics feature prominently in shareholder resolutions related to enhanced board, executive and workplace diversity; racial, gender and other pay equity disclosures; and political contributions and lobbying disclosures.10

The growing interest in DEI investment opportunities has also been marked by the launch of several gender lens investing and racial justice themed private and public market funds over the last five years. A 2022 Cerulli11 survey found more than one-third of asset managers currently provide or are developing products focused on DEI, and more than half of managers have impact investing strategies focused on community economic development. These shareholder resolution and product development trends demonstrate that investors increasingly believe that incorporating DEI factors into the investment process can be an important risk mitigation tool and can enhance their ability to generate sustainable returns.

Framework for DEI Investing

DEI investing cuts across different themes including racial equity, gender equity, LBGTQ+ rights, disability rights and veterans’ rights. Within these themes, DEI investing can be considered from the perspective of who distributes capital or how that capital is distributed.

Glenmede’s investor framework to DEI investing includes three applications, listed in order of level of impact:

  1. Investing in diverse investment managers.
  2. Investing in diverse companies.
  3. Investing in business models and investment strategies that provide opportunities and access to historically marginalized communities. Conversely, this also means engaging with or divesting from companies that exacerbate inequities.

The graphic below illustrates this framework when applied to racial and gender equity.

This framework offers a more in-depth approach to investing in DEI, requiring investors to collect demographic data (Application 1) alongside information on how companies are impacting society and communities across the supply chain. This could be additional qualitative information around a company’s efforts to build an inclusive culture, for example, providing robust parental leave and sourcing from diverse supply chains (Application 2), or it could be a focus on screening out exposure to industries that have historically harmed communities of color (e.g., private prisons12 and predatory lending13) and tilting toward companies that offer affordable housing and access to quality education (Application 3).

Challenges and Opportunities

While there continues to be growth in DEI investing, the industry faces several structural and systemic challenges:

1. Systemic biases in the due diligence process: According to a 2021 Knight Foundation study, women and people of color control only 1.4% of the U.S. asset management industry’s $82 trillion in assets.14 One of the biggest challenges to allocating more capital to managers who are women and people of color are the inherent inequities in the traditional due diligence process. For example, many emerging managers face significant barriers to growth due to minimum assets under management and track record requirements.

Opportunity: There is growing popularity for use of alternative due diligence frameworks, such as Due Diligence 2.0, which provides a rigorous yet more inclusive approach to assessing risk.

2. Lack of standardized corporate disclosures: While there continues to be calls for enhanced corporate diversity disclosures, only a fraction of companies currently discloses intersectional data about their employees. For example, only 34% of companies in the Russell 1000 disclose their EE0-1 report as of 2022.15 The lack of standardized measurement tools and data can make it difficult for investors to discern if and how a company has followed through on its commitments to DEI.

Opportunity: Fund managers with a robust process for identifying and engaging on DEI issues related to portfolio companies may be better positioned to generate long-term value for their investors.

3. Lack of standardized manager disclosures: Fund managers have been increasingly asked to report on their diversity as clients continue to demand diverse managed funds.16 Unfortunately, there is no standard template for collecting information about the DEI characteristics of fund managers, and many, especially those with smaller teams, are also conscious of data privacy concerns. This has led to disclosure fatigue as fund managers complete varying templates from different asset owners requesting DEI information.

Opportunity: The emergence of manager DEI reporting frameworks, including the Institutional Limited Partners Association Due Diligence Questionnaire and the eVestment framework, may position investors toward standardized sources to better understand the underlying diversity of their investment portfolios.


As the industry continues to evolve with increased pressure from investor coalitions, shareholders and regulators to advance DEI topics and improve disclosures, there is an opportunity for investors to enhance their ability to mitigate risk and generate long-term sustainable returns.

To learn more about the different facets of DEI investing, including gender lens and racial equity investing, please see the Appendix below and visit our website. For information on investment solutions that seek to advance diversity, equity, and inclusion, please reach out to us at

Want to learn more about DEI investing?

Glenmede’s Sustainable & Impact Investing Capabilities brochure details our approach, platform offerings and resources. Please email to request a copy.

Glenmede’s S&I Investing thought leadership page features several articles of interest:



1 Shapiro, T., T. Meschede, & S. Osoro. “The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide.” Institute for Assets and Social Policy (IASP) at the Heller School at Brandeis University, 2013.

2 Weler, C. E., & L. Roberts. Eliminating the Black-White Wealth Gap Is a Generational Challenge. Center for American Progress, March 19,
3 Alexander, M. The New Jim Crow: Mass Incarceration in the Age of Colorblindness. (New York: The New Press, 2010).
4 McKinsey. “Diversity Wins: How Inclusion Matters,” May 19, 2020.
5 Duty and Diversity. Harvard Law School Forum on Corporate Governance, March 4, 2021.
6 Morgan Stanley. “Does Ethnic Diversity on Corporate Boards Affect Stock Prices?” January 5, 2022.
7 Rock, D., & H. Grant. “Why Diverse Teams Are Smarter.” Harvard Business Review, November 4, 2016.
8 Lawrence, S. “Diversity Matters: The Role of Gender Diversity on US Active Equity Fund Performance.” SSRN, March 23, 2022. https://
9 Litowitz, D., & L. Aryani. “Trends in E&S Proposals in the 2022 Proxy Season.” Harvard Law School Forum on Corporate Governance, 2003.
10 Ibid.
11 “Growing Demand for Diversity Investment Products.” ESG Clarity, February 8, 2023.
12 Mission Investors Exchange. “Racism in the Criminal Justice System,” February 2019.
13 Rothstein, R. The Color of Law: A Forgotten History of How Our Government Segregated America (New York: Liveright, 2016).
14 Rosevear, C. “Knight Diversity of Asset Managers Research Series: Philanthropy,” 2022.
15 Patni, M. “Companies Disclosing Their EEO-1 Reports Saw Higher 2022 Returns.” Just Capital, March 16, 2023.
16 Albright, A. “Endowment Pros Look to Funnel Trillions to Diverse Fund Managers.” Bloomberg, February 28, 2023.


This material is intended to review matters of possible interest to Glenmede clients and friends and is not intended as personalized investment advice. When provided to a client, advice is based on the client’s unique circumstances and may differ substantially from any general recommendations, suggestions or other considerations included herein. Any opinions, recommendations, expectations or projections expressed herein are based on information available at the time of publication and may change thereafter, and actual future developments or outcomes (including performance) may differ materially from any opinions, recommendations, expectations or projections expressed herein due to various risks and uncertainties. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. In particular, information obtained from third parties relating to “ESG” and other terms referenced in this article vary as each party may define these terms, and what types of companies or strategies are included within them, differently. Glenmede attempts to normalize these differences based on its own taxonomy, but those efforts are limited by the extent of information shared by each information provider. Definitional variation may therefore limit the applicability of the analysis herein. Any reference herein to any data provider or other third party should not be construed as a recommendation or endorsement of such third party or any products or services offered by such third party. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.