Answers to Venture Capital interview questions regarding gender-racial diversity/political correctness in judging portfolio companies?

I have been working in VC for a few years (primarily fintech/environmental) and recently interviewed for a new position at a Gen-Z/Millenial cusp VC firm.

One of the questions was "which one of our current portfolio companies would you have not invested in initially?". My answer was a company that had the weakest financials at the time of investment as well as currently. I did some quick due diligence and it's struggling to gain market share because the brand focus is on aesthetics, not the quality of the item (which may fly temporarily for beauty/skincare but this was an industrial brand). The product also had horrible reviews on Reddit/Amazon. There were also other issues with the company, but I won't post them as it might narrow the field. 

To preface the next portion, I am an LGBTQ+ Asian woman and actively involved in all three spheres, but my firm is largely traditional. 

It turns out, my application was rejected because I had selected the one portfolio company that was all women and POC (heard from a friend who works with someone at the firm). I did not know that it was the only brand of that demographic, but again, the performance of that company was so poor that it jumped out to me. My portfolio array in my previous firm had many diverse executive boards, but they were also strong performers. There are many high-performing all-women/POC brands that investment management firms love (think Spanx and Blackstone), I didn't mean to come across as politically incorrect. It was also supposedly "sustainable" and I had failed to mention that as a plus factor. It's obvious greenwashing aside, I had no idea that sustainability was a positive screen factor (which is a completely separate conversation altogether). 

So my question is, other than market research and financials, how else would you answer this question? What are they looking for if not performance? Is this a common issue in the industry now, where you can't criticize companies that are diverse?