Do the Nordics Lack Diversity?

    Stockholm (NordSIP) – On September 6, Thomson Reuters announced the ranking of the top 100 most diverse & inclusive organisations globally for 2018, according to the relative measurements of Thomson Reuters’s D&I Index. The index ratings rely on ESG data on over 7,000 companies worldwide in an objective and transparent way.

    This 2018 edition is the third of its kind. 52 new companies earned a top 100 spot on the index, while 17 companies remained ranked on the index for 2 consecutive years, and 12 companies regained a spot on the index.

    “Our Diversity and Inclusion index, now in its third year, highlights the companies who are leading the way in imbedding Diversity & Inclusion into their company strategy,” said Elena Philipova, global head of ESG at Thomson Reuters, Financial & Risk. “The industry is beginning to recognize the societal and business benefits of investing in diverse and inclusive companies and we are working closely with various investment firms who are looking to develop investable products based on our D&I index. We remain committed to providing industry-leading ESG data to help investors make smarter investment decisions.”

    At the top of the list are global companies a range of industries, with Healthcare and Consumer goods well represented. Surprisingly, no Nordic company makes it into the top 20, and only one makes it into the entire index of 100 companies: Saab AB in 95th position! This is an interesting result for a country where gender diversity on boards is among the highest in the world.

    The D&I index ranks the top 100 publicly traded companies globally with the most diverse and inclusive workplaces, as measured by 24 metrics across four key categories: Diversity, Inclusion, People Development and News Controversies. The Index is then calculated by weighing each metric based on importance in the market and how each company compares with its peers.

    Source: Thomson Reuters

    Diving into the details and looking at the components of the ranking above, we may be able to spot some technical explanations to why the Nordics are practically absent from the index. Day Care services, for example, may be an important indicator of “Inclusion” in some countries, but they are mainly provided by the state in most of the Nordic countries. Other factors may also be influenced by cultural differences, such as the number of controversies or the notion of diversity objectives and processes, which may not per se, impact the company’s actual diversity relative to other regions, even when compared with peers in the same industry. These examples illustrate the real difficulties that both data providers and investors face when integrating ESG data into their decision making process.

    The Matterhorn Group at Morgan Stanley was the first advisory team to effectively use this index to guide investment decisions, Thomson Reuters says. Over time, as investment professionals increasingly rely on data-driven ESG screenings as this one, the power and importance of data, rankings and classifications will grow, and the precision of the measurements may therefore ultimately play a crucial role in the company valuation. Currently, many systematic investment managers mention the lack of reliable data as the main reason they do not integrate ESG, as pointed out by the CFA Society in the latest edition of the Financial Analyst Journal. While the measurements may not yet be perfect, some positive correlations between diversity and positive financial performance have been spotted already, and used wisely, tools like the D&I index can point investors in the right direction.

    “Recent studies have revealed that diversity & inclusion is correlated to value-creation & profitability.  As such, financial services have an obligation to inform investors of these opportunities,” comments Will Jan, Vice President & Lead Analyst at Outsell for Thomson Reuters.

    Photo by from Pexels

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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