Companies with diverse leadership and workforces are more attractive to investors than those without, according to new research by Morningstar.

Advisors can use this information to differentiate themselves from the competition, which may only tell investors about financial returns, Morningstar said in its latest Investor Behavior research, which was released today.

“There has been increased attention to diversity, equity, and inclusion within the broader trend of sustainable investing, as companies and investors look to improve the representation and treatment of people from diverse gender and racial groups,” Morningstar said in the research.

Having the information produced by the Morningstar research gives retirement plan asset managers another metric to consider when weighing the merits of different funds that produce good returns, Michael Thompson, Morningstar behavioral researcher, said in an interview Wednesday. “A lot of research is focused more broadly on ESG, but this looks specifically at DEI.”

“We were excited to see that DEI information matters to investors,” added Steve Wendel, Morningstar head of behavioral science. Thirteen percent more money was put into funds that provided the information and showed good results, as well as showing high returns, he said.

“The investors’ appetite is there for information on funds’ DEI success,” Thompson said.

Companies often have detailed data about the diversity of their workforces for regulatory requirements, and increased investor attention to diversity initiatives has made many companies more willing to disclose such information” to investors, the report said. Investors want to “show support for companies with high levels of DEI and find investment opportunities at firms with competitive edges in this arena.”

The data was obtained by asking a total of 522 investors to allocate hypothetical retirement money to different funds, with everyone in the group receiving information on financial performance and a subset given information on the funds’ success in considering DEI.

The results: Compared with survey participants who received only financial information, participants who received diversity-related information allocated 6.7 percentage points more to funds with high DEI scores and 7.3 percentage points more to funds with high gender equality scores, Morningstar said.

Morningstar concluded, “Financial professionals can better serve clients' interests by providing DEI and gender equality information about funds and asset managers and by providing products that score high on these metrics.”

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