Sustainalytics Insight: DEI Rollbacks & Investor Implications
Should investors be concerned that big, well-known US companies like Meta, McDonald’s, Walmart, Bank of America and BlackRock have recently rolled back their diversity, equity and inclusion (DEI) initiatives? Could these changes have a material impact on company performance in the near- or longer-term?
The answer to this question isn’t immediately evident and depends on a range of factors, according to new insights from global sustainable investment data, risk ratings and research provider Morningstar Sustainalytics.
In a recent paper – DEI Rollbacks: Impact on ESG Risk Ratings and Broader Implications for Investors – Morningstar Sustainalytics director of ESG research & methodology Kasey Vosburg and head of sustainable investing research Hortense Bioy drill down on DEI changes and potential implications for investors.
The paper suggests that investors look closely at announced changes in DEI initiatives to better assess whether these changes represent materials shifts in corporate policy, which may result in increased ESG risks, or whether they are merely a reframing of the public discourse on DEI. It also highlights that we could see more significant changes in corporate ESG risks if the current rollback of DEI initiatives in the US signals the start of a broader trends towards reducing efforts in other ESG areas, such as carbon emissions and climate risk reporting.
Hortense Bioy, Head of Sustainable Investing Research, Morningstar Sustainalytics
“The DEI rollbacks have raised concerns among some investors, as many employers believe that diversity is good for business. Overall, we found that the recent changes will have a limited impact on ESG risk, but investors should focus on understanding the nuances between the different types of changes to identify those that matter most to them.”
To speak in more detail with Hortense, reach out to Tim Benedict at tim.benedict@morningstar.com or (203) 339-1912.
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