In recent months, several major U.S. corporations, including Harley-Davidson and Tractor Supply, have scaled back their diversity, equity, and inclusion (DE&I) initiatives. This retreat follows mounting political pressure and concerns over potential legal challenges. Despite this shift, leading investment firms continue to advocate for DE&I in discussions with their portfolio companies.
Aeisha Mastagni, Senior Portfolio Manager at CalSTRS, shared with Responsible Investor that the pension fund has reached out to S&P 500 companies that have been retreating from their DE&I commitments. She acknowledges the growing influence of anti-ESG sentiment but emphasizes the importance of maintaining a balanced conversation.
“We are seeing reports of companies pulling back from DE&I efforts, so we want to ensure our perspective is heard. Effective human capital management and strong DE&I strategies are essential for mitigating risks within our portfolio,” Mastagni explained. She also pointed out that a lack of such initiatives can pose legal and reputational risks related to employment and discrimination laws concerns that CalSTRS has underscored in its engagements with companies.
The Role of Human Capital Reporting
In the U.S., organizations are required to report workforce and human capital data through the Employer Information Report (EEO-1). Established in 1966, this requirement applies to companies with at least 100 employees, mandating annual submission of demographic data—including sex, race, and ethnicity nto the Equal Employment Opportunity Commission (EEOC).
While filing these reports is mandatory, public disclosure remains optional. However, transparency in workforce demographics has gained traction in recent years, with over half of companies opting to publish their EEO-1 reports in the past year.
Investor interest in human capital disclosures surged following the murder of George Floyd and the rise of the Black Lives Matter movement. John Wilson, Executive Director of Corporate Engagement at Calvert Research and Management, noted that DE&I engagement efforts have encouraged S&P 500 companies to share their EEO-1 reports more openly.
“After George Floyd’s death, there was a heightened focus on these issues, prompting companies to be more responsive,” Wilson explained. Calvert began broader conversations about EEO-1 disclosures in 2020, leveraging shareholder proposals when necessary.
Between 2020 and 2023, Calvert filed 20 shareholder proposals advocating for EEO-1 transparency, successfully negotiating voluntary disclosures in 14 cases. Wilson observed that once leading companies began publishing their reports, others followed suit to avoid being perceived as lagging behind industry standards.
Today, many investment firms incorporate EEO-1 disclosure requests into their proxy voting guidelines. For instance, BlackRock encourages companies to be transparent about their DE&I strategies, while firms like State Street and Vanguard have also integrated similar expectations into their voting policies.
The Growing DE&I Backlash
Despite progress in DE&I transparency and workforce inclusion efforts, some companies are scaling back their commitments. Hyewon Han, Director of Shareholder Advocacy at Trillium Asset Management, pointed out that while EEO-1 disclosures and diversity targets have gained traction over the past three years, certain companies are now reconsidering their approach.
The Supreme Court’s recent decision to eliminate race-based affirmative action in university admissions has intensified concerns around DE&I initiatives. Han noted that some companies, wary of potential legal repercussions, are stepping away from quantifiable diversity goals. While most continue to meet federal reporting obligations, a few have quietly ceased making their workforce data public.
Maria Elena Drew, Director of Responsible Investing Research at T. Rowe Price, believes that some companies are revisiting their DE&I strategies rather than abandoning them entirely.
“In the wake of George Floyd’s death, companies were eager to discuss their DE&I efforts,” Drew explained. “While many initiatives were well thought out, some were introduced hastily. Now, some firms are taking a more measured approach, revising their targets rather than eliminating them.”
She acknowledged, however, that a smaller subset of companies is scaling back significantly, ceasing public disclosure of diversity metrics and even withdrawing reporting on areas such as greenhouse gas emissions. This shift, Drew noted, is concerning, as transparency plays a crucial role in assessing corporate culture.
Balancing Commitments Amid Changing Pressures
Mastagni of CalSTRS noted that while DE&I discussions have faced political resistance, human capital reporting remains relatively uncontroversial. Most companies continue to disclose workforce metrics, though the extent of public reporting may vary.
Wilson from Calvert Research and Management pointed out that companies face a delicate balancing act. While some are less vocal about DE&I to avoid public scrutiny, few have completely abandoned their efforts.
“There’s a clear pushback against DE&I, but at the same time, we’re seeing a counter-response,” Wilson explained. “Despite vocal opposition, support for DE&I remains the dominant perspective. Companies recognize its value but must navigate the risks associated with it.”
So far this year, approximately 46% of Calvert’s portfolio companies have released their EEO-1 reports. While some firms have retreated from their commitments, Wilson remains optimistic that awareness and engagement around DE&I will persist.
