Top 5 Emerging Investment Trends to Promote Diversity & Inclusion
June 22, 2018
Investing alongside social values, specifically strategies to encourage diversity and inclusion has garnered significant attention. The takeaways below serve as a starting point for investors.
1. Promoting Gender Diversity.
Gender-lens investing seeks to empower women and girls and has exploded in growth. One reason is the data indicating firms with gender diverse characteristics may have lower risk with competitive market returns. Another is the realization that investors can encourage gender diversity via engaging directly with management at public corporations. In 2017, shareholder proposals encouraging board diversity reached an all-time high. One successful proposal submitted by the City of Philadelphia Public Employees Retirement System to Cognex Corporation requested that the company require at least one qualified female and minority candidate be included in the search new board members.
2. Emphasizing Ethnic Diversity.
For public market investors, there is little data available on the ethnic diversity characteristics of management and employees at corporations, though that may change in the years ahead as demand grows. In the meantime, some investors are engaging with management at public firms to adopt formal diversity practices. For example, California’s Treasurer asked America’s two largest pension funds, California Public Employees Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS), to encourage corporations to meet a diversity standard of 30% women and 30% diverse representation in terms of sexual orientation and cultural and ethnic composition.
3. Advancing LGBTQ Rights.
The Corporate Equality Index developed by the Human Rights Campaign rates workplaces on LGBTQ equality, among other things. Investment managers are taking note of the framework. One manager on our platform deploys a strategy that emphasizes corporations with exemplary Corporate Equality Index scores, domestic parent benefits to same-sex couples, and diversity training initiatives, to name a few.
4. Lifting the Base of the Pyramid in Private Markets.
The base of the pyramid is defined as people earning less than $8 per day. And there are 4.5 billion of them globally. Private market investments, as opposed to public stocks, provide an opportunity to make a measurable, tangible impact on underserved populations. We have identified the six most investable impact private market sectors as: (1) Sustainability & Energy Access, (2) Health & Wellness, (3) Food & Agriculture, (4) Education, (5) Financial Inclusion, and (6) Affordable Housing. Within each sector, there are investment opportunities that have the potential to lift the base of the pyramid. Of course, it is important to note that private market investments are not suitable for all investors given the increased risk and illiquidity.
5. Funding Female and Minority Entrepreneurs.
Get this. Only 3% of global venture funds go to female-founded startups; only 1% of American venture capital founders are black; less than 3% of employees at venture capital firms’ full-time investment teams are black or Latino. That’s a problem. There are a growing number of investors and grass root organizations trying to close the gap by directing investments to female and minority entrepreneurs. These efforts seem to be helping. In 2017, startups founded by black women raised five times more venture capital funding relative to the prior year.
At Glenmede, we use a quantitative approach to assess the risk and return implications of aligning social values, such as diversity and inclusion, with investments. To learn more, contact Laura LaRosa, Executive Director of Client Development, at Laura.LaRosa@glenmede.com.
Glenmede’s Top 5 is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment, estate planning, tax or legal advice. Investment and wealth advice depends on many individual facts and circumstances we cannot account for here. For legal and tax advice, consult your lawyer or accountant. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information gathered from other sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Please contact your Glenmede representative to discuss the applicability of any matter discussed herein.