For the first time ever, BofA has published a comprehensive report analyzing diversity and inequality at major corporations, looking at factors such as race, ethnicity, gender, sexuality, immigration, and disability. The authors note that while diversity has become part of the corporate vernacular, the U.S. has a long way to go when it comes to true inclusion and the amplification of diverse voices.
There is, however, a silver lining. The writers note that if companies embrace true diversity and inclusion, "society can build back better, fairer and richer post-COVID." The U.S is only getting more diverse in makeup. If the workforce reflects that diversity, the report found, the economy could benefit.
"Today in the U.S., there are already more kids from ethnic minority backgrounds than white peers, more Spanish speakers than in Spain, while globally women are accumulating financial assets 1.5x faster than men. Full gender equality globally would increase world GDP by up to $28 trillion by 2025," the BofA team writes.
Corporate America is having an existential reckoning, as employees and stakeholders demand equality for historically underrepresented voices, ranging from women to LGBTQ+ employees and ethnic minorities.
While the idea of ESG investing, or putting money toward environmental, social and corporate governance initiatives, and supporting companies that value them, has been around since 2004, it's become a key part of conversation among money managers and investment professionals as analysis finds doing good does indeed contribute to the bottom line.
"Closing gender and race gaps in education and employment would have generated $2.6 trillion more in economic output in 2019 and the cumulative gains from 1990 would have been $70 trillion in 2019 dollars, all else equal. Furthermore, closing the racial earnings gap resulting from disparities in health, education, incarceration and employment opportunities would boost trend growth by 0.5% per year through 2050," according to the report.
While the gender gap had been worsening even before the pandemic, COVID-19 has been an additional setback. According to the report, 96 million people will slide into extreme poverty this year, 47 million of whom will be women. Jobs held by women were 19% more at risk and women took up an even greater share of childcare and unpaid labor as many had to juggle working from home. At today's rate, it will take 257 years to close the gender economic gap, a dramatic increase from 2016's projection of 170 years.
If executives needed further reason to invest in diversity and inclusion, it just makes plain business sense. According to the BofA report, "S&P 500 companies with above-median gender diversity on their boards see 15% higher return on equity. And overall more diverse companies see lower earnings risk one year out compared with less diverse peers."