Following the death of George Floyd in Minneapolis earlier this year, a wave of protests against racial inequality swept around the globe, shining a spotlight on deeply ingrained issues of systemic racism. The practices and ultimately the role of elected officials, businesses, and investors in addressing minority rights and race are now being called into question.
At the Principles for Responsible Investment, a UN-supported initiative of over 3,000 investors worldwide with more than $100 trillion in assets, we not only welcome this scrutiny—we encourage it.
That’s because racism and racial inequity are more than just public policy issues. They are deeply interconnected with the economic and financial systems and ingrained in societies. Those in the private sector have a moral responsibility to do the right thing not just by shareholders, but also by the stakeholders whose lives they impact—employees, consumers, and the communities in which they operate. It’s also in their financial interest to do so.
It is encouraging to see many American companies, large and small, speak out about issues of racial inequity, though not all have backed up their talk with action. For too long now, it has largely been sporadic cases of outrage from the general public that have led to some accountability for these companies.
Too little of the responsibility for holding companies accountable—and setting expectations for what role they should play in addressing racial injustice—has fallen on those who have arguably the most power to impact their behavior: their shareholders. It’s time for investors to step up and be a part of the solution.
Read this: The investment industry claims to support diversity, but the numbers don’t add up.
As long-term stewards of capital, investors have the agency to create change not only through words, but also through actions in leveraging the global financial system. That means more engagement on environmental, social, and governance (ESG) issues that directly and indirectly perpetuate inequality.
The first step investors should take is to look inward. The investment industry itself is notoriously homogenous. A Fundfire and Money Management Institute survey found that 88% of professionals at the executive committee level in the U.S. asset management industry are white. And the New York Times recently reported that Morgan Stanley’s diversity director of 16 years was fired and is now suing the firm for racial discrimination and retaliation after she tried to persuade executives to eliminate barriers to success for black financial advisers.
In order for investors to successfully engage the companies they invest in around issues of racial equity, investors must first seek to walk the walk themselves, which means promoting diversity and inclusion internally, especially at the executive level. I include my own organization on this list.
A priority for investors should be making sure the companies they invest in are more diverse and inclusive, specifically focusing on the corporate leadership level. Investors have a critical role to play in encouraging equitable hiring and advancement and driving more inclusive corporate culture by tracking relevant data through corporate disclosures and making clear to portfolio companies that …read more