What to Read This Week : “SmarterMoney Review” Highlights Diversity
In this week’s edition of our new series “What to Read this Week”, we focus on the Spring 2017 issue of SmarterMoney Review.
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SmarterMoney is a seasonal publication produced by Big Path Capital, which also hosts several ‘convenings’ throughout the year. Its most recent conference, the Impact Capitalism Summit — The Path Ahead: Building An Economy That Works For All — was held in Chicago at the end of April.
The Summit’s speakers included such respected thought leaders as Fran Seegull, Executive Director of US Impact Investing Alliance; Debra Schwartz, Managing Director of the MacArthur Foundation; and Paul Herman, CEO & Founder of HIP Investor. Discussion topics emphasized social equity and included the panels Trump Effect on the Market Across Asset Classes and Ted Talk: Making America JUST Again.
Themes of diversity and inclusion are also reflected in the Spring 2017 issue of SmarterMoney Review. This special edition spotlights ten recent studies on investing in diversity. Editors chose from a list of over three dozen studies addressing relationships between diversity and financial performance. They favored substantive, recent research that makes an explicit, compelling case for how diversity improves broad financial performance.
The selected reports are categorized under the headings of “Workplace Diversity”, “Role of Women” and “LGBT”. Efforts were made to represent LGBT equality, race and ethnicity, age, disability and other forms of workplace diversity. Still, the more high-profile issues of women and the diversity of boards and top management are disproportionately represented, possibly highlighting how advanced “gender-lens investing” has become in relationship to other areas.
Some of the interesting findings supporting the link between diversity and a company’s financial performance from the collective reports include:
- Based on analysis of the leadership of more than 350 public companies, companies in the top quartile for gender diversity were 15 percent more likely to have financial returns higher than their national industry average, and companies in the top quartile for racial and ethnic diversity were 35 percent more likely to have higher-than-average returns.
- Of approximately 8,000 US companies, firms led by diverse management teams dramatically outperformed more homogeneous companies during the 2001-2014 period.
- US companies that began the 2011–2016 period with at least three women on the board generated stronger ROE and higher earnings per share than companies that began the period without female board representation.
- As companies broaden levels of gender diversity within senior management — from at least 15 percent to more than 50 percent — investment out-performance tends to increase.
- Companies that adopt inclusive LGBT policies and commit to implementing them over the long term tend to provide higher shareholder returns than their sectoral peers.
List of Included Studies
- Analysis of Board Diversity and Performance by André Chanavat and Katherine Ramsden from Thomson Reuters
- Diversity Investing by Alberto Manconi, A. Emanuele Rizzo, and Oliver Spalt from Bocconi University and Tilburg University
- Why Diversity Matters by Vivian Hunt, Dennis Layton, and Sara Prince from McKinsey & Company
- A Framework for Gender Diversity in the Workplace by Eva Zlotnicka and Jessica Alsford from Morgan Stanley Research
- On the Road to Parity: Gender Lens Investing by Laura Kane and Stephen Freedman from UBS
- The CS Gender 3000: The Reward for Change by Julia Dawson, Richard Kersley, and Stefano Natella from Credit Suisse Resarch Institute
- The Tipping Point: Women on Boards and Financial Performance by Meggin Thwing Eastman, Damion Rallis, and Gaia Mazzucchelli from MSCI
- Investing in Equality: Integrating LGBT Issues into Total Portfolio Activation by Kristin Lang and Joshua Humphreys from Trillium Asset Management, Social Justice Fund NW, Croatan Institute, and Out Leadership
- LGBT: the value of diversity by Julie Dawson, Stefano, Natella, Richard Kersley, Rose Thomas, and Brandon Vair from Credit Suisse
- Return on Equality, the Real ROE: The Shareholder Case for LGBT Workplace Equality by John N. Roberts and Cristian A. Landa from Denver Investments
More about Big Path Capital
Big Path Capital was founded in 2007 to advance an expansive economy built on natural, social, and financial capital. This new path conducts business for profit and impact.
Today, Big Path Capital is a leading boutique impact financial services firm delivering capital raising experience and merger/acquisition services for impact focused companies, funds and investors. Big Path also organizes several marquee events for impact investors throughout the year, and curates top impact research and content.
Its next Impact Capitalism Summit — At the Helm: Women + Millennials + $60 Trillion Wealth Transfer — will take place in Nantucket from July 19th — 20th. Will you go? Family Offices, Foundations, Institutional Investors, Wealth Advisors and Asset Managers are invited to attend.