Do Diversity and Inclusion Pay Off? Evidence on Firms’ Financial Performance in Europe

The increased focus on corporate sustainability by regulators has intensified interest in the economic relevance of diversity and inclusion (D&I). Using LSEG Data and Analytics D&I Ratings for 567 listed European non-financial firms over 2014–2024, this study examines whether these aspects are associated with firms’ profitability, market valuation and financial stability. The results indicate that stronger D&I, captured through gender and cultural diversity, inclusion policies, people development and workforce controversies, are associated with higher financial performance. This relationship is primarily driven by people development, which reflects a company’s commitment and effectiveness in training and developing its workforce. In contrast, formal alignment with Sustainable Development Goal 10 (SDG 10) - Reduced Inequalities shows no significant association with financial outcomes, consistent with reporting commitments that are largely symbolic relative to substantive actions.