Stephan Langen: Thinking beyond pigeonholes

November 25, 2025

Diversity

_{This column was originally written in Dutch. This is an English translation.}

By Stephan Langen, Head of Portfolio Management at ASN Impact Investors

Diversity and inclusion are on the list of words that the Trump administration wants to ban. I am now seeing that the American companies in which we invest are also becoming increasingly cautious in their reporting on these issues. Does that make the work of an impact investor more difficult?

The answer is more nuanced than you might think. First of all, my impression is confirmed by recent research by The Conference Board, which shows that more than half of the largest US listed companies have adjusted their communications on diversity. A third completely removed the term “equity” (as in: equality), and data on ethnicity almost completely disappeared from reports on diversity in boards.

For us as investors, this may mean that we need to look more closely and ask more questions. Companies that still consider diversity important often mention it in their sustainability reports. They use different wording and have become more cautious. This makes the work more difficult, but not impossible.

Nevertheless, from an investor's perspective, you need to be wary when it comes to diversity data. Don't get me wrong: representation of underrepresented groups is very important, and role models at the highest level within companies have a major positive influence. But let me put on my financial glasses for a moment: how important is diversity for the performance of companies?

For years, the reports published by McKinsey from 2015 onwards on diversity in the boardroom were considered the ultimate proof: the most diverse companies were dozens of per cent more likely to achieve above-average profit margins. On that basis, policies were formulated, indices compiled and investment strategies forged. Until, in recent years, academic counterarguments emerged.

Scientists who attempted to replicate the results for S&P 500 companies found no statistically significant link between diversity in terms of race and gender and company results. At most, there was a correlation between mixed boardrooms and profits, but that does not constitute a causal link. Incidentally, those index products also performed poorly, lagging hopelessly behind non-diverse benchmarks.

Does this mean that diversity does not matter for business performance? On the contrary. It means that we need to look at diversity differently in this regard. We will continue to hold directors accountable for including marginalised groups that deserve a greater voice. But the diversity that matters for better management decisions is about differences in experiences, knowledge and perspectives: cognitive diversity. And that cuts across all colour, gender, sexuality or anything else. Skin colour and gender are not perfect indicators of diversity of thought.

Recent research by the London Business School (notably on the boards of asset managers) recognises that a variety of mindsets and perspectives leads to better performance. With one very important precondition: only in a psychologically safe environment, where people dare to express their different opinions. In other words, an inclusive boardroom, to use another forbidden word.

For us as investors looking for the best-performing companies, life has not necessarily become more difficult as a result of the vague reports on diversity in the McKinsey style. It was already difficult. How do you determine whether dissenting opinions are valued? Whether there is room for constructive criticism? Whether people with different backgrounds and expertise actually influence decision-making?

This requires far-reaching commitment. The British study concludes that it is particularly difficult for companies to manage cognitive diversity effectively. But that makes the search for companies that do do it well all the more interesting. Inclusive companies have a sustainable competitive advantage that others cannot easily match.

For impact investors, this may mean looking not for companies that tick boxes, but for companies that genuinely make room for different ways of thinking. That diversity is more difficult to measure, but it has a real impact on performance.

Stephan Langen is Head of Portfolio Management at ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.