How Diversity, Equity & Inclusion Informs ESG Analysis

August 18 marks the 100th anniversary of the beginning of women’s suffrage in the U.S. When Tennessee ratified  the 19th Amendment of the Constitution in 1920, women nationwide gained the right to vote. However, not every woman felt the effects of its passage immediately; women of color  faced additional hurdles when trying to exercise their constitutional right.

100 years later, gender equality issues across all aspects of society remain an important global focus. In this article, ESG Analyst Hannah Herold discusses the importance of gender equality initiatives in corporate workplaces and boardrooms.

Diversity, Equity and Inclusion May Affect the Bottom Line

From an investment perspective, research increasingly shows the financial benefits to companies that emphasize diversity, equity and inclusion (DE&I) in their organizations and business strategies. For example, the Pipeline’s “Women Count 2020 ” report found FTSE 350  companies with executive committees comprised of at least 33% women had a net profit margin over 10 times greater than companies with no women on their committees.

Investors place growing importance on this topic and are the main drivers of momentum in the U.S.  DE&I is also playing a larger role in manager selection as asset owners  and large investment consultants  include more questions and criteria during the due diligence process. A survey  by the CFA Institute found that 83% of institutional investors value gender diversity specifically, with 55% believing that it drives better performance in investment teams. Even so, governments are passing new regulations to establish quotas for female participation and revamping older regulations with stricter requirements. Examples include Germany , France  and California (the first and only U.S. legislation).

How We Factor DE&I into Our Investment Analysis

We believe companies lacking transparency in this area or trailing their peers’ DE&I efforts may see negative impacts to their long-term competitiveness, brand reputation or financial condition. Therefore, when evaluating companies for our portfolios, the ESG and Investment Stewardship Team uses a proprietary framework to assess each company’s risks related to environmental, social and governance (ESG) issues. Within this framework, we consider DE&I to be sector agnostic and include it under both the Social and Governance pillars of the ESG equation.

Our Commitment to DE&I

At American Century Investments, we believe our workforce should represent a diversity of backgrounds, experiences and thought. A diverse and inclusive culture helps us better understand our clients, deliver superior performance and build long-term relationships.

Our DE&I activities include:

• Serving as a founding member of NICSA’s Diversity Project, an initiative focused on increasing diversity within the asset management industry.

• Signing the CEO Action for Diversity & Inclusion pledge.

• Partnering with Girls Who Invest, a nonprofit dedicated to increasing the number of women in portfolio management and executive leadership in the asset management industry.

Internally, we provide employees programs that offer female-centric resources for career advancement, firmwide exposure and holistic advice. Accelerate—the firm’s business resource group (BRG) for women—provides opportunities for involvement in DE&I policy initiatives and the RISE (Reach, Inspire, Support, Empower) mentorship program. These programs, along with other BRGs, seek to foster a diverse, inclusive workplace aligned with our mission, values, goals, business practices and objectives.