How should you measure “DEI”?
– The metrics used to measure D&I vary among raters. And among companies.
– Morningstar has an index that has been around since 2018.
What are the appropriate metrics to measure the social stuff? What about diversity & inclusion?
Morningstar has an index – the “Minority Empowerment Index” (which may need to be renamed since some consider “minority” to be a term that marginalizes). This article explains how that index works. Here’s an excerpt:
The index starts by excluding several classes of companies in the parent index. Securities classified in the Security Services and Correctional Facilities subindustry are ineligible given racial inequities within the criminal justice system. Businesses involved with tobacco, riot control-related products, and predatory lending are also excluded.
The index avoids companies assessed by Sustainalytics to carry high levels of carbon risk or those that are noncompliant with the United Nations Global Compact, which signals commitment to sustainable, socially responsible business practices. Finally, companies involved in serious social-related “controversies,” are excluded. Eligible companies are then selected based on their Minority Empowerment Scores with a target constituent count of 200. A total of 18 indicators assessed by Sustainalytics contribute to the score.
And this ValueEdge blog summarizes a House hearing from a year ago about how diversity data can measure commitment by companies to D&I.