Investment manager M&G is expanding its range of sustainable solutions with the launch of an equity strategy investing in companies demonstrating gender and ethnic diversity.

The M&G Diversity and Inclusion Fund, managed by Thembeka Stemela Dagbo and supported by John William Olsen, is a global equity strategy with a concentrated portfolio of 30-40 stocks.

The fund is a hybrid strategy incorporating sustainability and impact considerations into the stock selection process:

At least 15 percent of the portfolio is invested in companies providing solutions to empower social inclusion. This portion of the fund follows the same investment approach and process as M&G’s positive impact and climate solution strategies that assess stocks with the ‘III’ framework, assessing the Investment, Intention, and Impact of each company, and classifying them as ‘pioneers,’ ‘enablers’ and ‘leaders.

The rest of the fund is allocated to sustainable companies demonstrating gender and ethnic diversity at work. The analysis goes beyond representation by extending the assessment of diversity to factors such as targets, processes, and policies. All stocks in this part of the portfolio must have a minimum of 30 percent women and/or ethnic minority representation at board level at the time of purchase and must pass the ‘E.Q.L’ framework, where the team assesses ESG credentials, quality of the business model and leadership characteristics of each stock.

Thembeka Stemela Dagbo, manager of the fund, said: “Social inclusion and diversity are not only the right thing to do, but they also make good economic sense. Left unaddressed, the exclusion of disadvantaged groups and the lack of diversity can be costly and result in lost GDP and human capital wealth, whereas pioneers of the diversity and inclusion initiatives are being increasingly recognised for their financial outperformance.”