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June 9, 2021—M&T/Wilmington Trust has a proud history of valuing diversity and being active supporters of the LGBTQ community. However, sustainable investing is distinct from our organization’s philanthropic efforts as we are not looking to give up returns in exchange for supporting causes that align with our values. Rather, we see diversity (in all its forms) as a material financial factor for analysis. When incorporating the issue of LGBTQ inclusivity as environmental, social, and governance (ESG) investment managers, we look through the lens of human capital and diversity under the social pillar (the “S” in ESG). Research highlights the correlation between diversity of lived experiences and perspectives that lead to better decision making and financial outcomes for all stakeholders.

Recent Credit Suisse research supports the view that LGBTQ-inclusive companies outperform their benchmarks. They ran a study in which they selected 350 companies based on their approach to LGBTQ equality in their workforce and aligned the sector weightings to that of their benchmark to assess performance. When compared to their MSCI ACWI benchmark (ex the LGBT-350), they found that the LGBT-350 outperformed by 378bps since 2010 (Figure 1). This is consistent with our view that high-quality companies see financial benefit from investing in inclusive hiring processes.   

Figure 1: Share price performance statistics of the LGBT-350

*Compounded annual growth rate is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s life span.

Source: Credit Suisse Research; Klerk et al., 2020. Data January 2010–October 2020.

Research on the positive financial implications of diversity has also been done at length by McKinsey & Co. In their most recent diversity study, McKinsey found that companies in the top quartile for gender diversity were 25% more likely to financially outperform their counterparts, and companies in the top quartile for ethnic diversity were 36% more likely to outperform the companies in the fourth quartile. (Dixon-Fyle, et al. 2020). This was attributed to a deviation from “group think,” which tends to occur in homogenous groups, as well as an increase in innovation stemming from the variety of perspectives.

Another study by the Boston Consulting Group added to the findings on innovation. Their research found that among the 1700 companies surveyed worldwide, those with above-average leadership diversity scored 19 percentage points higher in innovation revenue than their counterparts (Lorenzo, et al. 2018). As innovation is key for companies to remain competitive in an everchanging landscape, those that can attract and retain diverse human capital are well positioned in the marketplace.

Managers across industries are beginning to appreciate how important inclusion is for retaining talent to both decrease costs and increase value. With diversity having the most impact at the leadership level, companies can capitalize on the potential for increased innovation by fostering integration and inclusion in the workplace. Further, the annual turnover rate as of 2019 was 26.9% and with the estimated cost of replacing an individual employee being 50% to 200% of pay, companies that are successfully able to implement inclusion practices can significantly decrease costs. While the cost of turnover is high and can be a drain on company resources, implementing inclusion practices can have a marginal price tag in comparison. That is, not only can the expense of investing in diversity and inclusion be minimal, but it’s return can also be significant.

Core narrative

When analyzing companies as investors, we evaluate a wide variety of factors to maximize risk-adjusted returns for our clients. Like other financially material environmental, social and governance factors, we believe, and recent research supports the view, that workplace diversity and inclusivity are important assets of any company. Bringing together different lived experiences, perspectives, and points of view to decision making can impact a company’s ability to create long-term value, improving outcomes for all stakeholders.


Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of Wilmington Trust or M&T Bank who may provide or seek to provide financial services to entities referred to in this report. M&T Bank and Wilmington Trust have established information barriers between their various business groups. As a result, M&T Bank and Wilmington Trust do not disclose certain client relationships with, or compensation received from, such entities in their reports.

The information on Wilmington Wire has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. The opinions, estimates, and projections constitute the judgment of Wilmington Trust and are subject to change without notice. This commentary is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or a recommendation or determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the investor’s objectives, financial situation, and particular needs. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will succeed.

Past performance cannot guarantee future results. Investing involves risk and you may incur a profit or a loss.

There is no assurance that any investment strategy will be successful. A strategy’s focus on ESG factors will cause it to sell or avoid certain stocks. Such stocks may subsequently perform better than stocks selected considering ESG factors.

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Reference to the company names mentioned in this blog is merely for explaining the market view and should not be construed as investment advice or investment recommendations of those companies. Third party trademarks and brands are the property of their respective owners.

LGBT-350 Market Cap Weighted includes listed companies that have either openly LGBT+ senior managers and/or are voted top LGBT+- inclusive employers in leading benchmark surveys such as Stonewall’s Top 100 Employers, HRC’s Corporate Equality Index and DiversityInc’ Top Companies for LGBT+ employees.

LGBT Sector Adjusted Mkt. Cap Weighted to assess returns for the LGBT-350 companies a sector adjusted, market cap weighted approach is used. Furthermore returns are compared not to the default MSCI AC world index but the index without the LGBT-350 constituents in order to properly assess alpha.

MSCI ACWI is a stock index that tracks about 3,000 stocks in 49 developed and emerging market countries, representing a total market capitalization of tens of trillions of dollars.

MSCI ACWI ex LGBT MSCI ACWI Index but the index without the LGBT-350

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