Day 2 of Confluence Philanthropy’s 11th Annual Practitioners Gathering provided a venue for an honest conversation about Access to Capital for Women and Underrepresented People of Color. We know that many values-oriented asset owners are focused on equity and inclusion and seek to align investment portfolios with that mission. We are so excited about this trend and hope it will continue, but the flow of capital to managers that represent true equity and inclusion is just starting. Our panel during the conference provided great insight as to the state of this effort.
I was joined by Mark Paley, Director of Administration and Finance at the Hyams Foundation; Dwayne Patterson, Chief Equity Impact Officer at the Mary Reynolds Babcock Foundation; and Jacki Zehner, President of the The Jacquelyn and Gregory Zehner Foundation, in this very honest conversation.
Our discussion focused not on the intent of asset owners, i.e., the fact that values-driven asset owners are beginning to evaluate investments in women and BIPOC (Black, Indigenous, and people of color), but on how to catalyze the blossoming of this effort. We know that the data on performance, risk management, and financial outcomes is not the issue, so what is the barrier? Dwayne noted that since the murder of George Floyd, there have been a lot of corporate statements paying lip service without a commensurate real effort at creating catalytic change and investing in gender and racial equity.
Jacki Zehner believes there is a sea change in the available resources and community to do this work, but notes that we need to be frank and honest about the barriers. While there are certain systemic barriers to capital flow to women and BIPOC managers, Mark noted that the success for the Hyams Foundation comes from the intentionality to achieve success in promoting equity and inclusion with all of their investing and philanthropic work. Mark indicated that they started to create change by looking at who is on their board: primarily people of color. Typically, the gatekeepers are the investment consultants and the board members, and having women and people of color on the board and on the consultant team allows them to bring more diverse life experience to the table, which makes a big difference.
Jacki noted that among foundation asset owners, there is a disconnect between philanthropic spending and investment capital. Philanthropic capital is directed to mission, but investment capital is often not invested with the same values in mind. The fear, lack of focus, or education of some philanthropic capital owners may be a barrier. Mark noted that measuring DEI impact for the investment portfolio matters, and getting regular reports helps the numbers go up. It is not only who you hire, but how and where the money is invested. Dwayne noted that when it comes to investing endowment assets, the analysis is changing. Asset owners have to pay attention to the pipeline and to the people they hire, and make sure that gatekeepers can serve as catalysts for change. Our entire panel noted that if you want to create real change, you have to take a “leap” and invest in first-time fund managers.
Conversations about investing in racial and gender equity are percolating around investment committees, but the actual capital allocated to women and BIPOC managers remains minimal. While data shows that financial performance of many funds led by women and BIPOC managers is not the issue, these same funds often have trouble breaking 50 million in AUM (at which point larger platforms would start to consider them for distribution). Despite the exciting leadership of some family offices and foundations, many investors are still reluctant to take a serious look at how racial and gender equity plays into their investments. Other large foundations and family offices with significant capacity are taking their own approaches to this type of investing, but in ways that fail to build access to catalytic follow-on capital. Scale matters when you are trying to create change. If you fly a private plane to get from point A to point B, that is great for you, but you have not built the commercial airliner that others need to be able to get from point A to point B.
As Dwayne noted in our discussion, since the murder of George Floyd, there have been a lot of statements paying lip service without a commensurate real effort to create catalytic change that truly drives investments in gender and racial equity. It’s time for philanthropic capital to diversify and invest in and with women and people of color.
- Darya Allen-Attar, Financial Advisor, Impact Director, Morgan Stanley
