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Taking Advantage of the Diversity Premium

Posted on: March 13, 2017

On March 8, International Women’s Day, I attended a special women’s networking event in Guelph, Ontario. During the evening, which celebrated thriving local businesses that are female owned or managed, it was striking to see the other forms of diversity in the room: women of every colour and ethnicity, young women from the local university just beginning their careers, others who are closer to the end of theirs, and everyone in between. Businesses large and small were represented, from financial services and legal firms to an indigenous environmental science company, organic farming, and a business that makes “vegan” laptop covers (meaning no leather, I think) in a rainbow of colours. There were even a handful of brave men in the crowd, lending their support.

Meanwhile, in New York City, another significant business event was taking place: the 2017 Catalyst Awards dinner, the annual gala celebrating innovative corporate initiatives to accelerate the progress of women in the workplace. This year the three recipients were:  3M, Rockwell Automation, and, I’m very proud to say, BMO Financial Group (one of only nine firms in the world to have won the award twice).

The importance of these events, to me, is that they underscore the following: having women occupy significant decision-making roles is good for business.

A number of recent reports indicate a clear link between board diversity and improved business performance. For example, a 2016 Credit Suisse study found that companies where women made up at least 15% of senior managers had more than 50% higher profitability than those where their representation was less than 10%.

Governments are also appreciating the benefits of businesses that promote greater gender equality, though Europe seems to be ahead of North America on that score. According to a recent report by Sustainalytics (a global leader in ESG and corporate governance research and ratings), 2017 is the deadline in France, when corporations must comply with a minimum of 40% female inclusion on boards. It is one of nine European countries to introduce a corporate gender quota. Meanwhile, in the US and Canada, where there are no government targets for gender diversity on boards, the US has female board representation of 19%, while, according to the Toronto Star in 2016, Canada’s was 12% of 677 TSX-listed companies.

So, winning awards is great, and quotas may nudge corporations to cast their nets wider when recruiting for senior positions and board members. But at its heart, the best reason for including more women, and in fact more of everyone that represents our diverse population, is because companies that do so tend to make better decisions, take fewer risks, bring creative and diverse solutions to business problems, and more often than not, make more money  - what Sustainalytics calls the “diversity premium”.

As an investor, it’s hard to ignore the diversity premium's benefits. We invite you to connect with us to discuss how to incorporate this, and other responsible investment ideas into your portfolio. Call us at 905-681-2141, or email at ginny.arnott@nbpcd.com.