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Companies with diverse leadership get higher environmental ratings

Companies with diverse leadership consistently achieve higher environmental ratings from MSCI, a leading ESG data provider. The experiences and perspectives brought by diverse board members drive stronger ESG priorities, making a compelling case for stakeholders to emphasize Diversity, Equity, and Inclusion (DEI) for a sustainable corporate future, new research shows. ESG is short for Environmental, Social, and Governance. 

A 10 percentage point increase in the proportion of females on a board — roughly equivalent to 1 additional female director — is correlated to a 17.5% increase in a firm’s environmental rating. A similar increase in the proportion of Black directors is associated with an 18.4% boost in MSCI environmental scores, the researcher, Ethan Moon, an associate consultant at Bain & Company, writes in Harvard Business Review.

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He previously researched corporate governance as a Fulbright scholar. His study comprises 15 years of data from the S&P 1500.

“Overall, there is a big opportunity for stakeholders to improve both leadership diversity and environmental performance. The spillover benefits that come with improved diversity make a strong case for placing DEI at the front of any business agenda.”

“Shareholders should understand that DEI is not just about improving diversity, but embracing the host of benefits that come along with it. Leadership diversity may bring broad-based benefits to society by promoting sustainable business practices. Thus, shareholders interested in improving their company’s ESG positions should also focus on promoting diversity of its leadership teamshe writes.

“Taken as a whole, the implementation of diversity rules would accelerate levels of diversity, bring positive environmental benefits, and ensure minority directors have a strong voice in the boardroom.”

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