Applying a racial equity lens to your investments is a multifaceted process and looks different in public and private markets. At the Belonging Town Hall on May 18, 2022, I sat down with Jennifer Leonard, Chief Investment Officer at Syntrinsic Investment Counsel, and Haley Hu, Investment Director at AiiM Partners, to explore the ways investors can consider racial equity drivers across their portfolios and throughout the due diligence process.
We discussed several strategies to more fully integrate the Belonging Pledge into investment processes—from investing in more BIPOC (Black, Indigenous, and people of color) fund managers, to incorporating racial equity data, to actively engaging portfolio companies to do better. The Belonging Pledge—a Confluence-led commitment to incorporate a racial equity lens in the investment process—is now supported by $1.86 trillion in assets under management. And while the latest Belonging Pledge Impact Report makes clear we can all do more, I’d like to offer a couple examples of how investors can think outside the box and scale our commitment to racial equity in the public markets through shareholder engagement.
In the lead up to the summer of 2020 and the Black Lives Matter protests, Arjuna Capital had already begun working on issues of racial equity with our portfolio companies through the lens of pay equity, fighting hate speech, and combatting profiling on social media. But it was the revelations following the murders of George Floyd and other Black Americans at the hands of police that strengthened our resolve and evolved our thinking. In response, we brought forward two new angles of approach: 1) addressing racist police brutality at the insurance companies that provide a backstop for municipal police departments, and 2) raising the bar on board diversity targets. These are both areas where greater investor involvement, support, and activism is welcome and warranted.
Preventing Racist Police Brutality: Insurance companies have a unique and powerful role to play preventing and/or enabling racist police brutality. As such, they deserve closer examination by investors as a potential leverage point for positive change. Insurers serve as a backstop for municipal police departments across the country and can encourage police departments to engage in better training, better use of force policies, better screening in the hiring process, and firing bad cops.
Since 2020, we have pressed to bring this issue to the attention of investors in Chubb Limited and Travelers Insurance. And this year, the Securities and Exchange Commission made that possible—ruling in favor of our shareholder proposal and allowing us to bring it to the ballot at Travelers’ annual meeting. Unfortunately, investors did not show up in the numbers we had hoped—with only 10% of investors voting in favor. This could be because the company changed the name of the proposal from “Racist Police Brutality” to “Insuring Law Enforcement,” or because it was an ‘emerging’ issue investors were not familiar with. But it is certainly a sign that there is more to do to engage investors on this critical and high-impact social justice topic.
Upping the Game on Board Diversity: Board diversity is another area where investors can raise the bar—by asking not for one, two, or three diverse board members, but by asking for boards whose compositions more fully reflect the diversity of companies’ employee base and/or the geographies in which they operate. As the US is 42% ethnically/racially diverse and 51% women, current board diversity efforts are simply not enough. This year, we asked Google and Wells Fargo to strive for more ambitious targets so that the boards’ composition is more reflective of the companies and society, and therefore better suited to meet their employees’ and stakeholders’ needs. We also have a proposal going to a vote at Tesla on August 4th, where racial discrimination allegations have been rife. At Tesla, 60% of the company’s employees are minorities, but only 25% of the board has diverse representation. Increasing investor expectations on board diversity is an approach that would benefit from greater investor involvement and support. And it’s an approach that could scale across multiple companies in investor portfolios.
Shareholder engagement takes persistence, resolve, increased involvement, and the support of institutional investors to drive support and evolve the corporate landscape toward greater equity. We hope that commitments like the Belonging Pledge will encourage more investors to speak up and engage in these emerging areas of practice and welcome collaboration on this critical racial equity work.
- Natasha Lamb, Managing Partner, Co-Founder, Arjuna Capital
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