How Can Investors Measure Diversity, Equity, and Inclusion? | Morningstar

Equity — in both senses of the word — is a significant indicator of investment risk and reward.

In a corporate world awash in acronyms, “DEI” is becoming as ubiquitous as USP and ROI. Diversity, equity, and inclusion was already a focus for many businesses, but the 2020 police killing of George Floyd, the subsequent movement for racial justice, and the societal inequities laid bare by the coronavirus pandemic provided fresh impetus.

Like so many long-running trends, corporate DEI initiatives have been accelerated. But is it just lip service? Are corporate execs saying what the moment requires, perhaps making some symbolic personnel moves while neglecting systemic change? Inevitably, some are, and some aren’t. So, the question becomes: How can diversity and inclusion be measured?

Fortunately, deep expertise can be tapped to answer this question. The NAACP, America’s oldest civil rights organization, for decades produced a corporate scorecard. Advancing its vision of “equality before the law and fair play everywhere,” the NAACP evaluates companies’ commitment to diversity and inclusion through policies, programs, and behavior. In 2018, Morningstar built a Minority Empowerment Index that selects U.S. stocks based on the NAACP’s framework. For the growing cohort of investors concerned about DEI, the index represents a slice of the business world that is serious about equity.

How Can Investors Measure Diversity, Equity, and Inclusion? | Morningstar

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