At BNY Mellon Wealth Management, we believe we have a responsibility to improve lives through investing. Our commitment to creating an inclusive, sustainable world that encourages people to thrive informs everything we do, not just within our organization but also with our clients. Individual investors and asset managers have the opportunity to make direct social, market and global economic impacts with their investments — but that's not the whole story. The evidence shows that in doing so, they also have the potential to generate significant financial returns, as well.

Companies that make a concerted effort to build diverse teams see gains in profitability that set them apart from the competition. Investors who recognize this have an opportunity to benefit by identifying companies that are designed to succeed in the modern marketplace.

1

Studies Show a Direct Tie Between Diversity and Performance

Companies in the top 25% for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians — 15% higher for gender and 35% for racial and ethnic diversity. For every 10% increase in racial and ethnic diversity on the senior executive team, earnings before interest and taxes (EBIT) rise 0.8%.1

2

It Starts With the Leadership

Companies that want to reap these benefits need to have leaders who recognize the potential of a diverse team. Leaders who actually seek out and appreciate the opinions, perspectives and ideas from a wide range of employees are more likely to behave inclusively and unlock the innovative capacity of their team.

3

Women Executives Provide Added Benefits

The presence of women executives is associated with strong firm performance as measured by both gross and net margins.2 There is also evidence that female managers are better at engaging employees, by encouraging development, fostering a positive work environment and delivering consistent feedback and recognition.3

25%

Companies in the top 25% for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians.

30%

When women make up 30% of a company's board of directors, it correlates with a higher return on investment capital and other measures of business success.

>50%

The U.S. Census Bureau projects that by 2044, more than half of all Americans will belong to a minority group4

“Studies have already shown that companies with a diverse leadership team and workforce are seeing better financial performance.”
Investors could benefit by embracing this investment approach
Know how to evaluate a company's commitment to diversity

For investors looking to be more hands on in their approach, there are resources available that can help them evaluate if companies are cultivating a successful, diverse workplace. For example, Bloomberg has created a Financial Services Gender-Equality Index, which includes 26 public companies in the financial services sector.

Make decisions based on measurable results

Companies should be able to measure results on issues like compensation, development opportunities and the makeup of its workforce and leadership team to show their progress toward diversity.5 Investors should focus on those that can link these strategies to employee satisfaction, performance and the bottom line.

Stay ahead of this growing trend

Demographic trends indicate that the U.S. population will only become more diverse in the future. To remain successful, companies need to reflect these changing demographics in order to better understand the point of view of their consumers and retain top talent among their employees.

  • Footnotes

    1 Vivian Hunt, Dennis Layton, and Sara Prince, "Diversity Matters," McKinsey, February 2015.

    2 According to a Peterson Institute survey of nearly 22,000 firms from 91 countries.

    3 Kimberly Fitch and Sangeeta Agrawal, "Why Women Are Better Managers Than Men," Gallup, October 16, 2014.

    4 Sandra L. Colby and Jennifer M. Ortman, "Projections of the Size and Composition of the U.S. Population: 2014 to 2060," U.S. Census Bureau, March 2015.

    5 Judith Lindenberger, "Diversity and the Workplace," Experience by Symplicity, 2017.

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