How can wealth managers help their clients make an impact on racial justice?

For many, this year has elevated awareness of racial injustices. As we witnessed the disproportionately adverse economic impacts of COVID-19 on BIPOC communities, protests and demonstrations drew renewed attention to patterns of police brutality towards communities of color. This has led to many investors to ask, “how can I invest in racial justice?” Here are 5 tips for wealth managers seeking to answer these questions for their clients:

1. Sign on to Confluence’s Belonging Pledge: This pledge asks investment firms to take the first step and commit to talking about racial equity at their next investment committee meeting. Signing onto the pledge does not require disclosures, reporting, or fees — it is merely a promise to start the conversation.
2. Build racial justice into your investment policy: The Intentional Endowment Network published an excellent Primer on the subject. It all starts with education and conversations, which feed into strategies to commit. These strategies range from engagement with managers, allocating funds to projects focused on racial justice, and developing DEI internally at your business. The cycle strengthens and continues through disclosure.
3. Engage with fund managers on racial justice issues: Many ESG fund managers are prioritizing shareholder engagement efforts along anti-racist lines. For example, Calvert has prioritized racial justice issues extensively across its corporate engagement efforts. They are expecting companies to disclose workforce breakdown by race and gender at each professional level, report on pay equity, set diversity goals, describe efforts to support a pipeline of talent for underserved populations, and formalize board diversity requirements. Just Capital’s ETF, managed by Goldman Sachs, invests in companies that invest in their employees, support their communities, and treat their customers well. Find out the level of exposure to prison and border industries using As You Sow’s Prison Free Funds tool. Let fund managers know that these issues matter to your clients, and that you expect to see information about how they are contributing to solutions in our economy.
4. Explore diverse managers: The ABFE (formerly known as A Philanthropic Partnership for Black Communities) put together a diverse managers list. A 2019 Harvard study explores the status quo of women-owned and diverse-owned asset managers. The Diverse Asset Managers Initiative publishes information on how to track and report such metrics.
5. Learn about impact investments in projects targeting racial justice: The Reinvestment Fund promissory notes are available to investors in 17 jurisdictions. Calvert Impact Capital Notes are recognized nationally and even have a CUSIP! Many credit unions and CDFIs (community development financial institutions) have opportunities for investing in highly-local, highly-impactful lending opportunities. Consider investing in the next generation by donating or investing in Historically Black Colleges and Universities.

In addition to advising clients, there are a number of actions that your firm can take to make an impact:

Walk the talk: Take a close look at your own firm’s impact. What are your policies and procedures around protecting your team from discrimination and racism? Are there inequities in your compensation packages? Who do you hire and where do you recruit them? Use this same lens to analyze your client base as well as your suppliers. Establish a baseline, goals, and initiatives to reach those goals. There are many excellent tools or frameworks you can use to guide this process, such as the B Lab Impact Assessment.

Stay informed: Join a working group exploring racial justice issues in your community, home office, or industry. Attend workshops or conferences to learn about the subject. Read about racial justice issues from authors with diverse backgrounds. One of my favorite must-reads is this Bloomberg article about how racial bias in the muni bond market is costly for HBCUs.

Sponsor organizations doing the work: Considering sponsoring events hosted by industry groups or nonprofits that are exploring issues of racial justice in the investment industry. Donate to local organizations that are raising awareness and making an impact on racial justice in your community. Where appropriate, advise clients on their philanthropic giving or assist them in conducting due diligence on potential charities. For example, the Equal Justice Initiative of Bryan Stevenson accepts stock donations.

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Are there other ways you are elevating racial justice priorities in your work? Let us know in the comments below!