Published on Friday, November 20, 2020

Companies that invest in diversity can have higher profitability margins.


Committing to diversity isn’t just the right thing to do. It can make business sense, according to Leah Stearns, CBRE’s Chief Financial Officer.<

On CBRE’s “The Weekly Take” podcast, Stearns said that it is important for companies to identify and see how diversity can yield tangible benefits from a financial perspective. She cited a study from Boston Consulting Group that found that companies with more diverse management teams have 19% higher revenues due to innovation. <

But that is just one example. Stearns points to studies that have been done by well-respected institutions that have proven that companies that invest in diversity recognize have higher revenues, margins and are more profitable. “So from a quantitative perspective, I can say that I believe strongly that investing in diversity pays off,” she says. “It’s something that brings innovation to the table.”<

Diversity also matters to clients, according to Tim Dismond, CBRE’s Chief Diversity Officer. “We know that DNA is important to our clients, and when we show up, they expect us to be diverse and to talk about our programs,” Dismond says. “So, again, it’s good for our company, it’s good for our clients and it’s good for our economy.”<

Right now, $400 billion of capital is in place to invest in environmental, social and governance initiatives. By 2030, that number is likely to hit $5 trillion, according to Dismond. Since CRE represents about 15% of institutional capital allocation, there will almost be $750 billion of additional capital targeting CRE in the next decade. <

“This is good news for the industry overall and great news for all ESG, including communities of color,” Dismond says.<

Dismond says ESG will target minority-owned businesses and real estate types that cater to parts of cities with large minority populations, such as affordable housing. “I think the odds for success of ESG are quite good, especially when compared to Opportunity Zones under the 2017 Tax Cuts and Jobs Act that fell short of expectations in terms of deploying this capital in disadvantaged communities,” he says.<

Other firms are recognizing the importance of ESG. This month, Blackstone hired Eric Duchon as global head of real estate ESG, a newly created position. In this new role, Duchon will work with Blackstone’s global real estate asset management teams to build and scale existing environmental, social and governance efforts. He will also work with portfolio companies on sustainability, diversity and inclusion issues. <

What many companies are finding is that investors will put their money behind ESG if it makes sense. “If you can demonstrate to them that an investment actually makes practical business sense, regardless of their belief in sustainability, climate change or the value of ESG, you help them start to realize that this actually saves money, improves their bottom line and helps improve the wellbeing or publicity of the building,” Matthew Ganser, EVP Engineering and Technology at Carbon Lighthouse, told in an earlier interview.<