Where Do Investors Stand in the DEI Debate?

Driven by social movements, as well as regulatory requirements (such as Equal Employment Opportunity (EEO) reporting in the US and gender pay gap reporting in the UK), Diversity Equity Inclusion (DEI) has been a corporate focus for the past decade. However, a strong counterargument has emerged in favour of Merit, Excellence, and Intelligence (MEI), advocating for prioritising qualifications and performance over diversity metrics. This debate has gained particular prominence in the US, where political and legal shifts have intensified the divide and led some companies to scale back DEI initiatives. Despite these opposing views, based on current disclosures, investors appear to remain interested in understanding companies’ DEI commitments, and how they are integrated into governance structures, and how transparent they are with their progress.

The Changing DEI Landscape

Recent headlines highlight a divide between companies rolling back programs in response to external pressures and those remaining committed to embedding DEI into their human capital strategy.

1) Scaling Back Commitments:

• Walmart, a large private employer in the U.S., announced it is ending racial equity training programs for staff and evaluating supplier diversity programs, which previously aimed to increase partnerships with businesses at least 51% owned or managed by women, minorities, veterans, or LGBTQ individuals (Source). Walmart cited “legal challenges” as a reason for phasing out some diversity-themed supplier programs as well as said it would phase out the term ‘diversity, equity and inclusion’ in company documents (Source).
• Meta (the owner of Facebook) is making broad cuts to its DEI efforts as well, stating it will eliminate its dedicated DEI team and end equity and inclusion programs. Meta also announced changes to hiring and supplier diversity practices, suggesting a shift away from DEI-focused initiatives as a corporate priority (Source).
• Toyota Motor Corporation announced that it would end its sponsorship of LGBTQ+ events and narrow its community activities to align more with ‘STEM education and workforce readiness’, citing the “highly politicized discussion” of corporate DEI efforts as a primary reason for these changes (Source). Like Walmart and Meta, Toyota faced criticism from American activist Robby Starbuck. Starbuck’s targeting highlights that even non-U.S. companies may be vulnerable to U.S. conservative activists if they have a major presence in the U.S.

2) Strengthening DEI Commitments:

• JPMorgan Chase continues to embed DEI as a core component of its strategy, stating: "Building a stronger, more inclusive economy that benefits everyone is good for people, business, and society." The firm prioritises leadership diversity, supplier partnerships, and community investment, ensuring accountability through performance metrics and governance reporting (Source).
• Microsoft’s Chief Diversity Officer reiterated the company’s DEI values in a LinkedIn post in December, stating that “the business case for D&I is not only constant but is stronger than ever, reinforcing our belief that a diverse and inclusive workforce is crucial for innovation and success” (Source).

Industry Expectations

1)  UNPRI (Principles for Responsible Investment)

UNPRI positions DEI within a broader human rights framework, urging investors to hold companies accountable for measurable DEI progress. "Investors have a very important role in advancing DEI efforts for all groups in society, including indigenous communities, women, people of colour, religious minorities, and others." Companies are expected to ensure consistency in DEI reporting through standards such as GRI (Source).

2)  Proxy Advisors

Proxy advisors play an influential role in shaping corporate DEI policies, primarily through voting recommendations on shareholder proposals and director elections. Both ISS and Glass Lewis assess DEI proposals on a case-by-case basis, focusing on board diversity, corporate governance practices, and transparency. However, their approaches diverge in key areas, including expectations for specific indices and how they evaluate racial and gender representation.

• Glass Lewis: Glass Lewis evaluates DEI with an emphasis on board diversity and oversight responsibilities. For companies in the Russell 3000, the firm may recommend voting against the chair of the nominating committee if there are no women on the board, while Russell 1000 companies are expected to demonstrate racial and ethnic diversity. Proposals aimed at improving DEI reporting are assessed based on a company’s existing disclosures, responsiveness to prior concerns, and whether the requests are practical and feasible (Source).
• ISS (Institutional Shareholder Services):  ISS focuses on diversity and governance risks, with recommendations tailored to Russell 3000 and S&P 1500 companies. ISS may recommend votes against nominating committee chairs if boards lack women or racially/ethnically diverse members, though exceptions are made when the board previously had diversity and commits to restoring it within a year. ISS also considers risks related to regulatory exposure and reputational harm, aligning its evaluations with industry standards and company-specific disclosures (Source). 

Investor Expectations

The recent divide between companies embedding DEI and those scaling back is also reflected in shifting investor expectations it seems. Some asset managers remain firm in their DEI expectations from portfolio companies, while others are moving away from rigid targets in favour of more flexible frameworks.

Using the AQTION Platform, we highlight the below investor expectations on DEI:

1)  BNP Paribas Asset Management

BNP Paribas AM takes an active voting stance, regularly supporting shareholder proposals for gender diversity and pay equity. "We have a very strong record of casting proxy votes in support of greater gender diversity on boards and challenging executive compensation." Companies failing to demonstrate progress risk shareholder dissent (Source).

2)   Nordea Asset Management

Nordea AM views DEI as key to long-term financial performance, stating: "Investors have an interest in trusting companies committed to diversity and inclusion. They will be better able to seize long-term growth opportunities."  Nordea AM urges companies to provide clear DEI data and demonstrate measurable progress (Source). 

3)  AllianceBernstein

AllianceBernstein sees DEI as a competitive advantage, stating: "DEI can contribute to an inclusive corporate culture and provide firms with a distinct edge over less-proactive competitors. For investors, the key is knowing which criteria to look for when evaluating companies." Companies are expected to link DEI to business strategy, talent retention, and innovation (Source).

4)  BlackRock (Refining Its Approach in 2025)

BlackRock’s 2025 EMEA policy moves away from rigid diversity targets toward a case-by-case assessment of board composition. The firm now emphasises diversity of thought to avoid groupthink, stating: "We see it as a means of promoting diversity of thought to avoid ‘group think’ in the board’s exercise of its responsibilities to advise and oversee management." Instead of fixed quotas, BlackRock considers board size, business model, strategy, and location, expecting companies to explain how their board composition supports governance and long-term strategy (Source).

Conclusion 

Companies are increasingly facing challenges due to the polarized discourse surrounding Diversity, Equity, and Inclusion (DEI), particularly in the United States. Despite this, the majority of investors continue to view DEI as a critical component of corporate strategy, pushing for greater transparency and measurable progress from their portfolio companies. Many institutional investors remain committed to assessing how organizations integrate DEI into their operations, governance, and workforce policies.

However, a subset of investors has adopted a more flexible or cautious stance, reflecting the broader societal and political divide on the issue. The coming years will be pivotal in determining the extent to which investor priorities on DEI evolve. Voting behavior and engagement activities will serve as key indicators—will investors retreat from holding companies accountable due to the contentious nature of DEI, or will they use their influence to ensure boards and executives actively foster more inclusive and equitable corporate environments?

For more information on investor expectations regarding DEI, please contact us at enquiries@aqtion-platform.com.