ESG Investing

Fortune 500 Prioritizes Diversity with New Metric


June’s annual and venerable Fortune 500 list featured something new—a set of metrics called Measure Up that ranks major corporations’ embrace of racial and gender diversity and inclusion practices.

In what Fortune calls the result of “heightened international focus on social injustice and racial inequality,” Measure Up was created in partnership with global financial market data and infrastructure provider Refinitiv. The initiative “aims to make diversity, equity, and inclusion disclosure and performance a critical metric for successful businesses.”

Breaking Down How Companies Measure Up

The new ranking assesses companies through 14 metrics, including the percentage of board members who are minorities, the percentage of employees who are women, and the percentage of employees with disabilities. However, the inaugural ranking uses a smaller sample size than the long-standing Fortune 500 due to data availability.

Although about half of the companies published some relevant racial and ethnic data during the previous year, just 22 had a full breakdown of the percent of minorities in their organizations based on four key categories: Black, Hispanic, Asian, and other.

Microsoft earned the winning spot as the top-ranked firm. In 2020, racial and ethnic minorities made up 39.7% of the company’s board, and 49.8% of its workforce included racial or ethnic majorities. Microsoft’s managers comprise 41.3% racial or ethnic minorities.

These figures show clear progress; yet they also reveal some of the work still to be done at Microsoft, particularly regarding gender equity. Company data showed just 28.6% of its employees and 26.3% of its managers were women.

Measure Up rounded out the rest of the top 10 companies with Centene in second place, followed by Target, Gap, Biogen, Intel, Verizon Communications, Allstate, PVH, and Bank of America.

Measure Up dovetails with a surge in initiatives by companies to include diversity metrics and key performance indicators into their operations.

Tracking Efforts to Measure Up

Measure Up dovetails with a surge in initiatives by companies to include diversity metrics and key performance indicators (KPIs) into their operations.

In March, General Motors announced plans to join the Gender & Diversity KPI Alliance. This group of corporations, academics, trade organizations, and others promotes workplace diversity via a universal standard for measuring results. To that end, it relies on three KPIs to drive change:

  • Percentage of representation on an organization’s board
  • Percentage of representation by employment category
  • The ratio of compensation by employee category

General Motors joins many corporate supporters of the alliance, who range as widely as Bank of America and Chevron to Visa and Dell Technologies.

Efforts to measure up are also underway globally, as major asset owners begin directing investments to companies with strong diversity policies. In December, Japan’s mammoth Government Pension Investment Fund, overseeing $1.4 trillion in assets, announced it had invested $2.8 billion in a gender diversity index launched by Morningstar and Equileap for 1,765 companies in developed countries. The index focuses on 19 gender equality criteria, such as gender balance across the workforce, the gender pay gap, and paid parental leave.

The bottom line is that when impact investors focus on racial and gender equity, they can turn to a growing array of diversity metrics to help make informed investment decisions.

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