Open up! - Why investors should celebrate diversity

This article was co-written with Alexander Stiehler, UBS Equity Reseach Analyst

It is National Inclusion Week in the UK. Aside from reminding us of an important social goal, this event also points to a compelling investment opportunity.

We found that, in the US, Russell 1000 companies with women making up at least 20% of the board and senior management were more profitable across various metrics relative to their less gender-diverse peers. To a certain degree, gender diversity serves as a proxy for good corporate governance practices that also incorporate other diversity considerations.

Studies have shown that diverse groups yield superior outcomes with respect to decision making and problem-solving tasks relative to homogeneous ones, which are more vulnerable to “group think,” the psychological phenomenon whereby the desire for conformity and harmony overrides rational decision making.

More gender-balanced companies outperformed broader MSCI World

We've analyzed returns over multiple years to independently assess whether more gender-balanced MSCI World companies outperformed the broader market. Our model found that, in general, more gender-balanced companies outperformed (after controlling for country weightings). The result seems to suggest that there is a positive relationship between gender-balanced companies and financial returns.

In our view, investors with an interest in gender equality have the ability to incorporate an element of sustainable investing into their portfolio.

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