The rise of issues such as Black Lives Matter has prompted Nucleus Wealth to include ‘diversity’ as an ethical exclusion in their portfolios.
The Melbourne-based wealth manager said the decision would give investors the option to remove companies from their portfolio if they did not have enough gender diversity on their boards.
As well as the worldwide Black Lives Matter protests, AMP was criticised for appointing a chief executive who had a verbal sexual harassment mark on his record.
Damien Klassen, head of Nucleus Wealth, said: “In an investment climate where diversity, specifically gender and race, are front of mind issues in the community generally two questions are suddenly more prominent.
“Does diversity improve financial performance? And, how can I, as an individual investor, express a preference for companies with diverse boards and management?”
The decision was taken in line with client demand and all investors’ assets were held in separately managed accounts meaning investors could take a bespoke approach to environmental, social and governance (ESG) metrics.
He said companies with good governance, a common ESG metric, tended to perform better than those with weaker corporate governance but that the data was mixed for the concept of diversity.
“There have been a lot of studies into the diversity of gender and race on company performance with, yes, diverse results. It still appears to be a good, but far from infallible, indicator of more innovative companies,” Klassen commented.
“On the positive side, group diversity increases networks, resources, creativity, and, importantly, innovation. On the negative side, more diversity can lead to less communication, increased group conflict, lower satisfaction and increased staff turnover.”