Diversity comes of age as an investment theme Exhibit 1: gender diversity KPIs for MSCI ACWI index constituents (database of 2,753 companies) % of companies disclosing the share of 85% women at the board of director level % of companies disclosing the share of 78% women at the executive management level % of women at the workforce level 63% % of companies disclosing the share of 29% women at the senior management level % of companies which disclose all these data 15% Source: MSCI, as at 10 March 2022 percentage of women at board level, and there is rising including diversity, aligning with Nasdaq rule changes 8 pressure to improve disclosure (see Exhibit 1). For example, related to board diversity and disclosure. The European 7 9 the Securities and Exchange Commission is planning to Commission recently proposed a new directive updating publish amendments to disclosure regulation this year to the current text on equal pay, with new dispositions to improve transparency into the composition of the workforce, improve pay transparency, including adjusted pay gaps. Growing opportunities to invest for greater diversity Many of the available instruments and sustainable Away from screening for weak diversity “footprints”, investment offerings use the United Nations’ 17 there are increasing opportunities to invest in companies Sustainable Development Goals (SDGs) as a with a broad and positive diversity “handprint” – those framework. SDGs 5 and 10 specifically address gender companies that have a positive impact in society beyond diversity and reduced inequalities, but SDG 3 (Good their own footprint. For this reason, diversity lends itself health and Well-being), SDG 6 (Clean Water and to impact investing where a positive measurable benefit Sanitation) and SDG 8 (Decent Work and Economic is targeted. Growth) can have meaningful ancillary benefits for inclusion, especially in resource-constrained, Emerging opportunities include social, sustainability lower-income economies. In 2019, the Global Impact and sustainability-linked bonds. These debt instruments Investing Network published its Gender Lens Investing can direct capital either to specific diversity projects 12 Overview , which provided a framework for investors or provide capital for a company that is committed to which could similarly be adapted to improve other stated diversity goals. For instance, the Social Bond workplace diversity weaknesses. Principles specifically aim to address social issues 10 To conclude, the pandemic not only illustrated the related to diversity. For example, an emerging-markets telecoms operator has issued a sustainability bond fragility of diversity but also brought it to centre stage to fund information and communication technology for the investment community. The momentum for training for women, boosting their participation in the investors to act as change agents for greater diversity digital economy. In the US, Fannie Mae’s Sustainable in workforces, as well as wider society, is significant and Bond Framework makes home ownership and rental still growing. In many ways, the present time will prove possible for millions of Americans, specifically including to be a coming of age for DEI. 11 underserved communities. 7. US Securities and Exchange Commission, Prepared speech before the PRI “Climate and Global Financial Markets” Webinar, July 2021 https://www. sec.gov/news/speech/gensler-pri-2021-07-28 8. US Securities and Exchange Commission, Statement on Nasdaq’s Diversity Proposals – A Positive Step for Investors, August 2021 https://www.sec. gov/news/public-statement/statement-nasdaq-diversity-080621 9. EU Action for Equal Pay, Equal pay for equal work, March 2020 https://ec.europa.eu/info/policies/justice-and-fundamental-rights/gender-equality/ equal-pay/eu-action-equal-pay_en#pay-transparency 10. International Capital Market Association, Voluntary Process Guidelines for Issuing Social Bonds, June 2021 https://www.icmagroup.org/assets/ documents/Sustainable-finance/2021-updates/Social-Bond-Principles-June-2021-140621.pdf 11. Fannie Mae, Social Bond Framework, April 2022 https://capitalmarkets.fanniemae.com/media/20616/display 12. GIIN, Gender Lens Investing Overview, 2019 https://thegiin.org/gender-lens-investing-initiative 3