Diversity as a Business Performance Driver: New Index Ranks the World’s Most Diverse and Inclusive Companies

In recent years, businesses have increasingly focused on diversity in the workplace for both financial and non-financial reasons—not only is encouraging diversity a good corporate social responsibility practice, but it can also help to enhance economic performance. Thomson Reuters has been collecting comprehensive environmental, social and governance (ESG) data to evaluate over 5,000 companies for over seven years. Now, this data can be used to measure the relative performance of the world’s largest companies based on 24 metrics designed to assess diversity and inclusion. Thomson Reuters recently launched its Diversity & Inclusion (D&I) Index, which ranks the world’s 100 most diverse and inclusive companies. The D&I Index uses Thomson Reuters’ ESG data to assess company performance in four areas—diversity, inclusion, people development and news controversies. Reflecting the growing awareness that diversity is a business performance driver that can yield long-term success, this index makes it easier for investors to take diversity into account when making investment decisions.

Research shows that a diverse and inclusive workplace boosts morale and productivity and encourages creative ideas and problem-solving. Promoting diversity of, among other things, race, gender, thought, experience and background has been found to be key to innovation, growth and recruiting talent, and reports indicate that diverse companies are, as a whole, more profitable than those that are not. Using the Thomson Reuters Global Development Index (a global index of 7,549 stocks of developed companies) as a benchmark against the D&I Index, the top 100 D&I companies on average had better return on equity, stronger operating margins, better dividend yields and lower beta than companies in the benchmark index. The emergence of organizations devoted to achieving gender balance in corporate boards and tools like the D&I Index underscore how important it is for corporations to have employees, executives and board members who represent the broader community.

While the benefits of diversity and inclusion have been established, the full impact of the D&I Index remains to be seen. Thomson Reuters reports that the Matterhorn Group at Morgan Stanley is the first investment advisory team to use the D&I Index. It will be interesting to see whether and how other investors make use of this tool. We hope that this index will incentivize more businesses to join the conversation on issues surrounding diversity and inclusion and will drive competition among companies to land a spot on the list.

Maria Navarro is an associate in Debevoise’s New York office.

Comments? Suggestions? We’d love to hear from you. Send us an email at women@debevoise.com.