Open Letter to the Asset Management Community
The horrific ongoing cases of police brutality and the inequalities leading to higher Covid-19 death rates for Black people have accentuated the structural racism in society that continually traumatises the Black community. Racial inequality impacts everyone, no matter race or ethnicity. It holds our entire society back by creating unrest, instability, unjust systems, and unsustainable markets.
As Black women professionals in the asset management industry, we call on investment firms and institutional investors in our industry to go beyond solidarity statements and instead commit to action, activism, and accountability to dismantle the racial inequities plaguing society. It is the responsibility of all of us to drive change.
The right thing to do
Our industry must come together and put purpose and values into action. We all know it makes good business sense. Closing the racial wealth gap in the US alone would create an additional $1 trillion in earnings and add $8 trillion to GDP[1]. In the UK, equal participation and progression across ethnicities would add £24 billion per year to the British economy[2]. The impacts of bias and systemic racism in the private and public sector continues to leave money on the table.
But more important than commercial gain, dismantling racism is quite simply the right thing to do. More justice means stronger communities; more diversity and opportunity mean greater innovation; more equity means better flow of capital to marginalised populations.
As the stewards of trillions of pounds of investment capital, investment firms and capital allocators have an outsized impact on society and are in a unique and powerful position to be effective change agents. Many of the firms in our industry already recognise that it is short-sighted and unsustainable to focus solely on return without considering the cost and impact of investment activity in society. Managers are now increasingly incorporating ESG factors into investment processes. It is widely accepted that applying ESG principles are part of a manager’s fiduciary duty.
While innovation continues to be made to reduce risks in E and G areas, social investment risks, especially those related to racial injustice, are rarely considered. But prejudice and racism are a destructive pollutant with effects not dissimilar to the destructive effects of carbon emissions on the environment. Systemic racism is the type of contaminant that can only be stemmed with continued, unyielding, and effective anti-racism principles.
Action within our industry to promote equity has primarily focused on gender alone. This agenda, however, has largely excluded Black women. Racial issues are often perceived as too abstract, polarising, or political. The asset management industry cannot let these perceptions be a deterrent to incorporating racial equity into investment activities, policies, and practices. It is time for racial justice to take front stage in ESG activity and strategy.
Five Actions to Spur Progress
We recommend a five-prong approach to promoting racial equity within our organisations and the companies and issuers we invest in.
1. Build an anti-racist Portfolio
Commit to developing a robust investment approach which integrates racial justice principles to ensure that the harmful effects of structural racism are well-considered within the investment portfolio.
Set metrics to examine a company’s or issuer’s demonstrated commitment to racial diversity during the research, diligence, and assessment process.
Evaluate both positive and negative impacts of the company’s impact on Black populations to expose material risks and opportunities.
Innovate or divest from companies/issuers that benefit from business models that perpetuate racial inequities or target vulnerable communities such as prison labour, immigration detention, and surveillance software.
Communicate clear expectations to portfolio boards about the importance of considering racial implications in strategic decisions (just as we do on issues such as environmental sustainability and good governance).
2. Expand the Pipeline
Commit to devoting resources into programmes that support the upward mobility of Black communities and the entry of young Black women into finance careers.
Invest and participate in initiatives that introduce Black female students to careers in financial services. It is critical that they are given access to the social capital required to enter investment careers. By providing continued mentorship and guidance to young Black women at critical inflexion points in their secondary, sixth form and university education, our industry can lay the groundwork that sprouts strong, viable candidates for future employment opportunities.
Recruit based on more than just the traditional markers of success which are often biased. This will require evaluating the context in which an applicant achieved his or her grades, university acceptance or work experiences. Also, recruit from schools beyond the Oxbridge and redbrick universities and consider the promising students at other schools.
Create apprenticeships and non-traditional paths to employment as the rising costs of university education can be a deterrent for students from diverse backgrounds.
3. Promote Black women
Commit to building a diverse investment management team by creating a fertile ground in our organisations that nurtures and develops Black women professionals.
Provide tailored progression plans for Black women that consist of coaching, mentorship, sponsorship and stretch assignments. These strategies will give Black women an equitable opportunity to advance to senior leadership and add diverse voices to the people who shape investment strategy and make investment decisions.
4. Partner with Black women
Commit to amplifying the expertise and perspectives of Black women in the investment ecosystem by diversifying partnerships which support investment activities.
Seek out new networks and partner with organisations like Black Women in Asset Management to find Black women advisors to lead on diligence, lawyers to structure deals, or executives to serve on portfolio boards.
5. Advocate for Policy Change
Commit to using your corporate voice to advocate for public policies and implement internal policies that tackle racial injustice.
Through collective action, make it clear to the government that you will not stand for systemic failures in education, healthcare, criminal justice, and law enforcement that lead to negative outcomes and limited opportunities for Black people.
Put in place internal policies designed to embed a firm culture that consciously and consistently challenges racism at an individual and systemic level. This should include linking performance reviews and incentive rewards to diversity and equity outcomes.
By using the tools and resources at their disposal, investment firms and institutional investors have the power to spur progress.
[1] “The Business Case for Racial Equity” by Ani Turner, W.K. Kellogg Foundation and Altarum Institute