Promoting Diversity in the Business of Law Is Good for Business

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Promoting Diversity in the Business of Law Is Good for Business

Promoting diversity in the business of law is good for business—and it’s the right thing to do. Increased diversity provides clear benefits to law firms and the businesses that hire them, just as in other areas of commerce; these benefits extend from decision-making and innovation to representation that aligns with the world we live and work in.

Numerous studies have shown a strong correlation for companies with diverse leadership and teams to superior financial performance and overall better business outcomes. As reported in the Harvard Business Review, a study of venture capital firms found that “diversity significantly improves financial performance on measures such as profitable investments… and overall fund returns…. The more similar the investment partners, the lower their investments’ performance.”  A study by the Boston Consulting Group shows that companies with diverse leadership teams are more innovative and have 19% higher total revenue from new products and services launched over the past three years—a phenomenon BCG calls “innovation revenue”. The broader range of perspectives and insights that diverse teams bring enhances problem-solving capabilities and enables companies to better understand and meet the needs of a diverse client base.

Beyond the business case correlating increased diversity to better outcomes, another significant incentive to promote diversity, particularly for law firms and the financial sector, is that the client base with whom they’re trying to do business is increasingly diverse. To name an obvious example of this, “the Great Wealth Transfer” from Baby Boomers will soon shift an estimated $30 trillion to young women in the US, and, according to a report by Bank of America, women’s global share of wealth is expected to rise (currently, they control a third of global wealth).

As women gain greater financial power and influence, they will increasingly seek legal services that reflect their values and experiences. McKinsey has argued that women are not only gaining wealth but are also influencing how it is managed and spent, particularly with a focus on impact investing and sustainable practices. The Boston Consulting Group’s Global Wealth Report emphasizes the importance of adapting to this trend by offering more tailored and holistic services that speak to the specific needs of clients, including female ones.

Again, there is a clear business benefit for law firms to foster more diverse teams that reflect the diversity of their target clients; doing so will align firms with this new client base and position them competitively in a market where the demand for inclusive and representative legal services is growing.

Many clients of law firms expect their legal representation to mirror the diversity of their own customer base and the communities they serve. According to a study by Burford Capital, 57% of GCs consider the diversity of outside counsel a crucial factor when selecting law firms. This expectation extends beyond just meeting diversity quotas: clients are looking for law firms that genuinely integrate diverse perspectives into their legal strategies. As the litigation VP of a retail company noted, “The people who are representing companies in litigation should reflect the company’s customers and the communities in which they are litigating, especially since they are the spokespeople for the company.” For law firms, this means that fostering diversity within their ranks can enhance their competitive edge and strengthen client relationships.

Further, although data is limited, based on our experience, an equal if not bigger gap exists in the world of commercial litigation and arbitration. This gap serves no one well—not clients, not law firms, and certainly not talented female and racially diverse litigators—and it’s a gap that Burford has sought to help change.

In 2018, we launched The Equity Project to highlight the diversity gap in the leadership of commercial disputes. At the most basic level, we have sought to promote the availability of our legal finance capital to fund litigation and arbitration matters led by historically underrepresented lawyers. Since launch, Burford has committed $169 million to commercial litigation and arbitration matters led by female and racially diverse attorneys, exceeding our $150 million target. Since 2021, Burford has also committed to donate a portion of proceeds from successful Equity Project funded matters once certain investment criteria are met to charitable organizations that advance diversity in the business of law.

Like any legal finance capital, Equity Project funding shifts the cost and risk of pursuing high-stakes claims to a third party. In addition, Equity Project funding promotes diversity in several ways. It empowers talented female or racially diverse litigators to approach clients with the prospect of attractive financing terms. It provides law firms that wish to promote talented lawyers who are diverse with more means to do so. And, perhaps most importantly, it encourages clients to have conversations with the law firms that represent them about their commitment to supporting outstanding female and racially diverse litigators and arbitration lawyers and providing a reason to confirm that diverse lawyers on their teams receive all-important origination credit.

The value of promoting diversity is clear—both as a catalyst for business success and as a vital component of ethical corporate governance. The business case is clear: stronger performance, improved decision-making, enhanced innovation and better alignment with clients.

At Burford we feel that it is also simply the right thing to do. We feel good about the $169 million we have committed to date. We are proud to have recently announced an additional $150 million to fund Equity Project matters that meet our investment criteria, and we look forward to working with our clients—in-house and law firm lawyers, CFOs and other business leaders—to move the needle on diversity in the business of law.

Aviva Will is President of Burford Capital, and a member of Burford’s Management and Commitments Committees. In her role at Burford, Ms. Will has overseen the continuing innovation of its offerings to law firms and companies and has been instrumental in building the industry’s most respected legal finance team and investment function.

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