The Business Case for Investing in Diversity

Strategic Rationale for Diversity

• Goldman Sachs Asset Management (GSAM) views diverse investment teams as a primary driver of profitability and competitive advantage, rather than solely an issue of fairness.
• Teams with plurality of perspectives generate different viewpoints relative to the marketplace, positioning the firm to outperform competitors.
• The approach mirrors economic arguments used in the 10,000 Women Program: enfranchising underutilized groups (e.g., women) yields long-term GDP increases and high returns on investment.

Data and Performance Correlations

• Evidence indicates that companies scoring high on ESG diversity, inclusion, and workplace quality outperform across most sectors over the last decade.
• This performance correlation is a core driver for GSAM's investment process integration, stewardship, and engagement strategies.

Stewardship Actions and Voting Policies

• In 2019, GSAM became one of the first major asset managers to implement a voting policy against nominating chairs of U.S. companies with no women on the board.
• The firm voted against approximately 200 companies under the initial U.S. policy; 40% of those companies subsequently added a woman to their boards.
• In 2020, GSAM expanded this policy globally to vote against the boards of any listed company without at least one woman, voting against roughly 700 companies and 1,400 directors.
• Results from the global policy are expected to be available early next year.

Recruitment and Talent Development

• A critical factor for achieving diversity is placing senior women in seats of influence, authority, and risk-taking to counter "representative bias" (the belief that "if you can see it, you can be it").
• Successful representation in leadership roles creates an organic recruitment pipeline where diverse talent begins to seek out the organization.

Market Demographics and Consumer Trends

• GSAM prioritizes companies with cultures valuing diversity to ensure alignment with the "millennial consumer" demographic.
• Millennial consumption is projected to increase between 10% and 15% over the next five years, while baby boomer consumption is expected to decrease by 5% to 10%.
• Research cited (Edelman survey) indicates 60% of millennial consumers would buy or boycott a brand based on their reaction to racism, making diversity a direct factor in addressable market and brand trust.

Racial Diversity and Data Challenges

• Current data on racial equity in corporate leadership is sparse; historically, only 18 Black CEOs have led Fortune 500 companies, with only two being female Black CEOs.
• A key correlation found is that every instance of a Black CEO in the Fortune 500 had Black representation on the board, suggesting board diversity as a precursor to executive diversity.
• A significant barrier to progress is a lack of mandatory disclosure; only 20% of Russell 1000 companies report both gender and racial demographics.
• GSAM plans to engage companies throughout the remainder of the year and into 2021 to demand better demographic disclosure, operating on the premise that measurement is required for accountability.