For the 21st century company, diversity is a fundamental element of corporate culture, a driving force for success in a rapidly changing economy, and one of the central paradigms of our era. To prosper and thrive in today’s global economy, companies must resonate with an increasingly diverse customer base. They must foster diversity internally and approach partnership in a more expansive and inclusive manner. Diversity must be seen as a core value and be deeply embedded in corporate culture.
Diversity and inclusion encompasses acceptance and respect and means that we acknowledge and value the contribution of each team member, regardless of who they are or how they look. It harvests the unique experience each person brings and aligns that contribution to the mission of the company. It makes everybody feel empowered and prompts them to bring their best to the office every day. The freedom to express views is a key element of diversity and helps nurture innovation, the holy grail of competitiveness.
We know diversity is good for business, good for the economy—and good for the world. But how can it be quantified? The Thomson Reuters Diversity & Inclusion index can help.
Responsible investing has undergone a remarkable evolution during the past decade and especially during the past five years, and has become a priority for many mainstream investors around the world. For some investors it’s about understanding how the world is changing and how companies will be affected; for others it’s about changing the world. Many people see responsible investing as building on traditional approaches by adding a layer of due diligence that incorporates environmental, social, and corporate government (ESG) factors.
ESG-based investing now accounts for about $21 trillion globally, up from close to zero a decade ago, and is likely to keep growing. Nearly 1,400 investors managing a combined $59 trillion signed the United Nations’ Principles for Responsible Investment. 40% of major global companies report significant ESG metrics to investors on a regular basis.
The Thomson Reuters Diversity & Inclusion index leverages these trends. It’s built on four pillars:
- Diversity: Gender and cultural diversity across management and boards, and diversity processes and objectives
- Inclusion: Flexible working hours, day care services, percentage of employees with disabilities, HIV/AIDS programs, and the HRC Corporate Equality Index
- People development: Internal promotion, average training hours, management training, career development processes, skill training, and employee satisfaction
- News and controversies: Media publication of controversies related to diversity/opportunity and wages/working conditions
Over a five year period, the 100 companies on our D&I index had a better return on equity, stronger operating profit margins, and better dividend yields than non-index companies, not to mention lower beta than the benchmark.
Why? Diversity and opportunity policies generally make for rewarding workplaces with productive, efficient employees who help generate strong financial performance. This allows companies to devote more time to progressive hiring policies, creating a self-reinforcing cycle that ends up benefiting all stakeholders—investors, customers, and employees. Not to mention having a workforce that resembles a more diverse customer base.
Thomson Reuters is proud to be on the index, and we hope to keep rising in the ranks. Our gender diversity programs are among the best in the industry, and we’re involved with a host of organizations that seek to give underprivileged and under-represented people in the job pool a leg up. But we still have work to do.
Launching the D&I index shows how important the process is to us. The fact that investors can benefit from diversity and inclusion makes the effort all the more worthwhile.