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There Is More to Diversity Than Initially Meets the Eye.
How Intersectionality in Portfolios Is Limited by Data Availability

Values-Aligned Investing
April 16, 2021

Earlier this year, I had the pleasure of attending GenderSmart’s Investing Summit that drew together fund managers, venture capitalists, investment intermediaries, development finance institutions, and gender experts from across the world to tackle complex challenges in gender finance. One of the topics that was discussed in several sessions was the concept of intersectionality—how gender intersects with other aspects of identity such as race, ethnicity, class, sexual orientation, religion, and physical and mental ability, and the implications for social and political equity. In other words, there is not only breadth in diversity, but also depth.

Diversity—What’s in It?

Historically, diversity efforts have mainly focused on gender and race/ethnicity. These two categories are covered in companies’ EEO-1 reports to the US Equal Employment Opportunity Commission, and while many companies do not disclose these statistics to the public, for all but small companies, the data exists. There is, however, much more breadth to the concept of diversity, also spanning attributes such as age, sexual orientation, physical and mental ability, and veteran status, as well as parental status, religion, national origin, and many more. Data on many of these attributes is based on voluntary disclosure by employees and is in general sparse. Many employees choose not to disclose this information, whether because deemed irrelevant for their job duties or for fear of discrimination or retaliation. And even if employees were to disclose this data, the statistics often reveal persistent inequities and discrimination, so many companies would likely still not publish it.

In addition to the breadth in diversity, there is also depth in it, in how the different diversity dimensions intersect with each other. For example, while persistent pay gaps exist along gender lines, additional layers of pay disparity exist within gender. Consider the statistics laid out in the chart below, from the report The Wage Gap: The Who, How, Why, and What to Do published by the National Women’s Law Center in September 2019.

Source: National Women’s Law Center, The Wage Gap: The Who, How, Why, and What to Do report.


While full-time working women in the US are paid 82 cents for every dollar paid to their male counterparts, this figure drops to 62 cents for black women and 54 cents for Latinas. Full-time working mothers typically make less than fathers; the overall gender wage gap grows by age; and women with disabilities also experience a wage gap. Further (not depicted in the chart), lesbian women make less than men, regardless of their sexual orientation, and transgender women make less after they transition.

In this gender pay gap example, intersectionality, the different layers of identity, reveals additional inequities beyond those associated with a single level of identity, gender. The discrimination and the disproportionate impacts go beyond pay equity and encompass a range of ESG issue areas from climate change to human rights and banking. As such, for a holistic assessment, various diversity categories need to be analyzed and addressed jointly and concurrently, rather than incorrectly assuming that they are independent segments. In other words, intersectionality should be explicitly modeled and studied to better understand diversity data patterns and their underlying social, societal, and political causes and contributors, as well as their implications.

Implications for Investment Portfolios

Many of today’s socially focused public equity ESG strategies incorporate broad diversity, equity, and inclusion; women’s inclusion; and/or racial justice considerations. Investors who are looking to support specific equity and fairness efforts and help stave off discrimination, and progressively more so the less privileged and historically marginalized the specific segment of the workforce, may wish to deploy additional levers in their portfolios. For example, they may incorporate metrics from the intersection of gender and race/ethnicity. An investor may also consider combinations of ESG factors beyond diversity metrics to more holistically align with specific concerns or themes of interest, such as climate change, poverty, human rights abuses, or weapons proliferation. For example, as laid out by the United Nations Framework Convention on Climate Change, women globally are disproportionally affected by climate change.

From the perspective of an asset manager, diversity considerations highlight the challenges in aligning portfolios with clients’ personal values. Different asset owners may have very different views, interpretations, and reasons to care about one or several dimensions of diversity, and how these dimensions intersect. Listening to the investor and asking them questions has to therefore be a foundational part of the investment process. The values can then be translated to specific issues with dimensions of intersectionality built in, if desired, and mapped into various data series to create customized portfolios when feasible and appropriate.

One of the main challenges in incorporating layers of diversity into portfolios is the lack of available data. While pressure has been mounting on companies to disclose their diversity statistics, the data is still directional at best, and it mainly covers company directors and senior-level executives in the mandated disclosure categories. The narrower the metric an investor focuses on—for example, the intersection of gender and sexual orientation—the harder it is to come by data to make comprehensive assessments across companies in an investment portfolio.

As such, investors interested in intersectionality may choose to use their shares to directly engage in a dialogue with companies to push for more data disclosure, more diversity on companies’ boards, and policies and practices that are supportive of minority employees. Quoting GenderSmart: “This is the beginning of a journey, and we are always striving to do better.”

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