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Investing in equality: diversity and inclusion

Gender diversity on corporate boards and senior management has been a material issue for investors for more than a decade. Investors recognize the growing body of evidence that board diversity is directly linked to a number of indicators of profitability, financial health, and even ESG-related controversies.17

Should board minority diversity targets be adopted?

Board diversity targets

The past five years have continued to build on this momentum. In particular, the importance of these issues was underscored by the COVID-19 pandemic, which highlighted both societal inequalities related to gender and race, as well as the importance of sound corporate governance and employee management practices.

While the importance of board and workplace diversity are generally understood, investors’ views on addressing these issues are split. For example, RBC GAM first asked about board diversity targets in 2020 and found that 44% of investors were in favor – but 28% were not, and the rest were unsure. By 2021, 35% said they were not in favor of targets. Instead, investors seem to prefer to leave it to ‘market forces’ to improve diversity.

What is your preferred approach to have more gender diversity on corporate boards?

While anti-discrimination protests and campaigns have been taking place for decades, the events of the past few years have galvanized many organizations to make changes. Within financial services, companies and industry groups have published statements of support and action plans to improve their diversity credentials and address inequalities.

The UK’s Investment Association has set up several programs designed to improve hiring diversity in the country’s £9.4 trillion ($12.3 trillion) asset management industry. Investment 20/20 is an employment project designed to widen access to the sector for school and college leavers as well as university graduates. It has lent its support to the Diversity Project and Women in Finance Charter, which address racial inequality and the gender pay gap.18

Other investment programs have emerged targeting improvements in corporate diversity and investment into minority-run businesses and communities.

 RBC GAM survey

Between 2007 and 2020


There was a 38% increase in the number of minority-owned businesses operating in the US, according to the SEC.19However, such companies often find it harder to raise capital than those run by white owners. The SEC found a similar story for women-owned businesses: while numbers have improved, female entrepreneurs find it harder to raise capital compared to businesses run by men.

Regulatory response

Governments and regulators in several jurisdictions are responding to these events through new rules and guidelines relating to diversity and inclusion.

 RBC GAM survey

In Canada, for example, listed companies have been required to disclose diversity data since 2014. Women now account for almost a quarter (23.4%) of board members of companies listed on the Toronto Stock Exchange.20

In Australia, the proportion of female directorships on the boards of the country’s 200 biggest listed companies rose from 26.2% to 34.2% between 2017 and 2021.21

In the US, the NASDAQ stock market introduced new rules for listed companies to have at least two “diverse directors”, defined as at least one “self-identified female director” and one director who “self-identifies as an underrepresented minority”, including a racial minority or LGBTQ+.22

Elsewhere, the Japan Exchange Group, which owns the Tokyo Stock Exchange, revised its securities listing rules in June 2021 to require listed companies to introduce a policy and “voluntary measurable targets” for diversity in senior management, including appointing women and non-Japanese professionals.23

Rules requiring the disclosure of the gender pay gap and the social profile of company boards have helped shed a light on gender and racial imbalances. Building on this, regulators are exploring additional rules to require more diversity at the senior leadership level of listed companies.

Rules requiring the disclosure of the gender pay gap and the social profile of company boards have helped shed a light on gender and racial imbalances. Building on this, regulators are exploring additional rules to require more diversity at the senior leadership level of listed companies. In a 2021 report, the Organization for Economic Cooperation and Development (OECD) recommended pay transparency rules similar to those in force in 18 of its member states to “identify and address the gender wage gap”.24

These moves are based not only on responses to societal demands, but also influential research that suggests companies led by diverse boards and senior management tend to perform better in the long term.25

Beyond listed companies, asset managers and other investment service providers are also coming under the microscope on diversity measures. Investment consultancies such as Willis Towers Watson incorporate diversity factors into manager research and analysis, having found evidence that increased diversity is positively correlated with better investment performance.26

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