REAL ESTATE NEWS

For companies under political pressure to retreat from diversity, equity and inclusion efforts, the central concern is often not philosophical. It is financial: Will customers walk away, investors react or regulators make resistance too costly?

A new study suggests that, at least for large public companies, maintaining DEI programs did not come with a measurable market or revenue penalty. The research, by Hanna Folsz of Stanford University and Jacob Grumbach of the University of California, Berkeley, examined how S&P 500 firms performed after the Trump administration's January 2025 executive order directing federal agencies to target what it characterized as illegal DEI programs.

That finding matters well beyond corporate human-resources departments. For commercial real estate investors, occupiers and operators, corporate DEI decisions can affect tenant brand, workforce strategy, consumer relationships and the broader operating environment. The study's conclusion is not that DEI guarantees better financial performance. Rather, it challenges the assumption that preserving it necessarily hurts the bottom line.

A Clear Test Of Corporate Resolve

Executive Order 14173, issued Jan. 21, 2025, directed agencies to end certain diversity-related policies and identify potential civil compliance investigations involving large companies, nonprofits and educational institutions. In the months that followed, corporate responses diverged. Some firms curtailed or rebranded their programs, while others publicly reaffirmed them or continued them with relatively little change.

Folsz and Grumbach focused on S&P 500 companies, comparing firms that maintained DEI with those that did not. Their narrowest group of eight companies included Apple, Cisco, Costco, Delta Air Lines, Dollar Tree, JPMorgan Chase, Microsoft and Pfizer.

The researchers did not rely on a single definition of corporate resistance. They also used an outside classification from DEI Watch, analyzed DEI-related language in companies' SEC filings and examined firms whose shareholders rejected anti-DEI resolutions. That broader approach is important because corporate commitments can be difficult to assess from public statements alone. A company may retain a program but change its branding, or issue supportive language while quietly reducing staff and resources.

Across those measures, the study reached the same basic result: firms that maintained DEI did not perform significantly worse than firms that rolled back their programs.

Stocks Sent No Clear Warning

The researchers used daily stock-price data and a standard four-factor finance model to measure cumulative abnormal returns. In simple terms, that approach attempts to separate company-specific stock performance from broader market movements, including market, size, value and momentum effects.

The analysis found no statistically significant difference in cumulative abnormal returns between firms that maintained DEI and their peers. The result held across cross-sectional comparisons, difference-in-differences models and alternative measures of DEI maintenance.

The researchers also examined the first seven trading days after the executive order, a period when markets might have quickly registered concern about firms viewed as resisting the administration. Again, they found no significant difference in abnormal returns between firms that maintained DEI and other S&P 500 companies.

The study does not say every individual company was unaffected. Individual firms, sectors and brands followed different paths. But at the group level, the data did not show that investors systematically discounted companies for preserving DEI commitments.

That distinction is especially relevant to real estate. Investors often make decisions based on perceived downside risk, whether tied to tenant demand, public sentiment, operating costs or regulatory exposure. The study indicates that fears of a broad investor-led penalty for maintaining DEI may be larger than the financial evidence supports.

Revenue Showed The Same Pattern

Stock prices are forward-looking, reflecting what investors expect may happen. Revenue offers a different test: whether customers actually changed their spending behavior.

Using quarterly revenue data from company filings between early 2024 and mid-2025, the researchers found no significant revenue effect associated with maintaining DEI. In their preferred models, which compared companies within the same industry and quarter while accounting for firm-specific characteristics, the estimated effects were essentially zero.

The revenue result is particularly notable because consumer backlash is often presented as the most immediate business risk of maintaining DEI. The study found no broad evidence that such backlash materialized in a way that created a measurable revenue disadvantage for the firms that held their positions.

The report also points to competing risks. Scaling back DEI can provoke backlash of its own, particularly from employees, customers and community organizations that view inclusion as part of a company's identity and obligations. For companies with large physical footprints, public-facing brands and workforce-intensive operations, that balance can be consequential.

The Real Estate Relevance

Commercial real estate is not insulated from this debate. Office owners and employers are navigating employee expectations around culture and belonging. Retail landlords depend on tenants whose consumer brands can be affected by public controversy. Industrial, hospitality and healthcare properties all rely on large and often diverse workforces. And investors increasingly assess management quality through the lens of a company's ability to manage reputational, regulatory and labor-related risk.

The study offers a disciplined counterweight to the idea that DEI is inherently incompatible with financial performance. It does not establish that every DEI initiative produces a return, nor does it eliminate the legal and operational questions companies face in designing compliant programs. The researchers also acknowledge a limitation common to observational research: companies that maintained DEI may have differed from others in ways that affected their decisions and outcomes.

Still, the evidence is meaningful. Across stock-market performance, revenue and several measures of corporate commitment, Folsz and Grumbach found no sign that S&P 500 companies paid a significant financial price for maintaining DEI after the 2025 executive order.

For investors and corporate leaders, the practical takeaway is straightforward. Decisions about DEI should be grounded in legal guidance, workforce needs, company values and long-term business strategy—not an untested assumption that the market will punish firms for holding their ground.

Source: GlobeSt/ALM