Photo by Austin Distel on Unsplash

Most investors understand the importance of diverse portfolios but even investment professionals haven’t kept up with the growing industry and academic research that companies that have more women on their boards tend to do better.

Here’s a quick overview of four industry studies with similar conclusions:

McKinsey & Company, “Delivering through Diversity,” 2018

McKinsey found that companies with higher gender diversity on their executive teams were 21% more likely to experience above-average profitability than companies with low diversity.

Bank of America Merrill Lynch, “Women: The X-Factor” 2018

Companies with more diverse boards were less volatile and had higher return on equity (ROE) than companies with less diverse boards.  

Morgan Stanley, “Why It Pays to Invest in Gender Diversity,” 2016

A study of 1,600 stocks worldwide shows that “high gender diversity companies have delivered slightly better returns, with lower volatility, compared with their low diversity or sector peers.”

MSCI, “The tipping point: Women on boards and financial performance,” 2016

MSCI’s analysis from 2011-2016 found that U.S. companies with at least three women on their boards had higher median gains in return on equity and earnings per share.

Companies are paying attention to diversity.

All California-based publicly traded companies should have at least one female director by 2020. Norway, Spain, France and Iceland all have similar laws.

Eighty-four percent of the directors in Pricewaterhouse’s PwC’s 2018 Annual Corporate Directors Survey agreed that diversity enhances board performance and not just for “political correctness.”

In 2018, 87% of S&P 500 boards had at least two or more women—up from 56% in 2008. However, corporate boards with two women out of 9-13 people remain overwhelmingly male.

How investors can support diversity in the workplace

Investors can choose no-load, sustainable funds at the Forum for Sustainable and Responsible Investment (USSIF) website. Sustainable funds invest in diverse companies with good governance.   

As You Sow’s gender-equality fund screener  helps identify funds that invest in companies with a good gender balance as well as strong policies on issues like equal pay.

Sustainable funds help investors build a truly diverse portfolio that supports their long-term goals.