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ESG investors are confronting a race problem of their own

White people make up about 80% of employees in socially responsible investment firms – study.
Image: Shutterstock

Matt Patsky confronts corporations on everything from their carbon footprints to the diversity of their workforces. But now, in the wake of racial unrest sweeping America, Patsky is having a reckoning of his own.

“I get a ‘D’ on diversity,” says Patsky, whose $3 billion Trillium Asset Management pressed investors to divest from South Africa during its anti-apartheid struggles. Just 10% of his 44 employees come from minority backgrounds — a number that he said warrants a “C” relative to the broader financial industry. “We have to start walking the talk and make the same changes we’re asking companies to make.”

White people make up about 80% of employees in socially responsible investment firms, according to a January 2019 study published by industry consultants and financial advisers about racial disparities in the workforce. Black people account for just 7% of employees among the firms that were surveyed.

Even the largest groups that represent socially responsible investors are behind the curve. A cursory look at the website of the United Nations-backed Principles for Responsible Investment, the world’s biggest industry body for social investing, shows few Black employees. The website for the Forum for Sustainable and Responsible Investment shows a staff that’s comprised mainly of White people. Its board has four people from minority backgrounds.

The lack of Black people and other minorities may explain why the world of ESG has fallen short on pushing corporations on race.

“I am the first to admit that we aren’t where we want to be,” says Fiona Reynolds, chief executive officer of the London-based PRI, which represents about 3 000 firms that together oversee more than $100 trillion for clients. About 22% of PRI’s staff is comprised of minorities, including Black and Asian people. “We’re urging the global financial-services community to join us at the PRI in recommitting to make these issues our top priority.”

In PRI’s network of ESG investors — those who consider environmental, social and governance issues alongside financial metrics — few have a track record of pushing companies to do better on race. Before George Floyd, an unarmed Black man, was killed on May 25 by a White Minneapolis police officer, racial equality was largely absent from the discussion.

BlackRock Inc., the world’s largest asset manager, committed Monday to increase its Black workforce by 30% by 2024. The New York-based firm also will double the proportion of senior leaders who are Black from the current 3% level, CEO Larry Fink wrote in a blog post.

“We need to do better,” Fink wrote.

Calvert Research and Management, another of America’s biggest socially responsible investment firms, plans to put racial equality at the top of the list for shareholder resolutions in 2021, as this year’s proxy season is already concluding.

ESG has shown it can be a force for good. Through a mixture of carrot and stick tactics, involving everything from lobbying to voting against directors and even divestment, ESG investors have helped persuade a growing number of companies to disclose their carbon footprints, with some even pledging to dramatically reduce their emissions.

Responsible investors also have helped advance gender equality in the workplace by pressing companies to add women to their boards and senior management teams, says Mirza Baig, global head of governance at Aviva Investors in London.

“We have made considerable progress on gender equality, but I think that has to some extent been at the detriment of the same level of razor focus on issues to do with ethnicity and class,” Baig says.

Kimberley Lewis, who works for Federated Hermes’s stewardship and engagement unit EOS in London, agrees, saying the view among ESG investors that tackling obstacles to gender diversity will naturally pave the way for greater racial equality has yet to be proven.

A UK report published earlier this year by businessman Sir John Parker, EY and the government found that at least 31 companies in the FTSE 100 have zero board members from ethnic minorities. The report concluded that it “will be challenging” to meet a goal of having at least one director from an ethnic minority background on the boards of all FTSE 100 companies by 2021.

Patsky says Trillium, which was bought earlier this year by Australia’s Perpetual Ltd., is rarely asked about its own diversity and inclusion policies even as it continuously questions publicly listed corporations. To make up for lost ground, Patsky says his firm will be more aggressive in hiring minorities. Trillium recently recruited Lisa Hayles, who is Black, from Boston Common Asset Management to work with institutional clients.

Patsky said he plans to convey, both internally and externally, how Trillium recruits using the so-called Rooney rule, which requires the inclusion of a diverse slate of candidates for a given role.

According to the study by financial advisers and consultants, Black people account for 22% of firms’ workforce and boards that are run by people of colour, and just 4% for the firms that are led by Whites, said the study, which looked at almost 700 employees, including board members, at 15 US-based mutual fund groups.

Sonya Dreizler, one of the report’s authors, said she doesn’t buy the argument that the lack of diversity in corporate America is down to a “pipeline problem” — a line often espoused by executives to explain why their workforces are mainly White.

“It’s a network problem,” said Dreizler, who runs the Solutions with Sonya consulting firm in San Francisco. “People mainly hire through their networks, and if your network is made up of white guys who you golf with, then you’re highly restricted.”

Parnassus Investments, which manages some of the US’s biggest ESG-focused funds, is working on plans to “support topics related to racial diversity and inclusion,” Chief Marketing Officer Joe Sinha wrote in an email, adding that the head of the firm’s ESG group, Iyassu Essayas, is Black.

At Domini Impact Investments, whose founder Amy Domini is a pioneer of responsible investing, the company said it’s seeking to boost the diversity of its personnel. About 4% of Domini’s 26 employees are Black and about one-fifth are non-White.

© 2020 Bloomberg

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COMMENTS   36

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Why is everything always about race? If there are no suitable candidates that are not white for posts then so be it.

One of the reasons the left hate debating is that it exposes their contraindications. It is very easy to debate a leftist in this way. Ben Shapiro is a master at this and one can learn a lot from his speeches. This is why the left prefer to shut down debate than hold a debate. One just has to look at how universities, social media giants or the MSM “deplatform” (sic) those with whom they disagree. Free speech is dead. Ask Katie Hopkins, Nigel Farage and Milo.

What egregious lie can we now expose? Well the left has been proclaiming, from the rooftops, that there is no such thing as race beyond it being a social construct. In the next breath they are telling us that gender is “fluid”. Sex is passe, gender is reality. The next thing the MSM left is doing is driving a wedge through society using group identity politics. In this case black versus white, male versus female. Diversity is a way of pitting society against itself by dividing us and weakening us. When we turn on ourselves it is easy to rule us. All the while, Lenin’s useful idiots run riot in the streets causing mayhem calling for the defunding of the police. If you cannot see the grand plan in this, you must be blind.

BEE has gone global.

Some critical questions need to be asked about some of these local asset managers and finance institutions in general. If they are unwilling to change then the global agenda should assist in enforcing diversity.

“Enforce diversity.”

As opposed to having the best people managing my money?

No thanks.

No one is forcing you to have specific people manage your money, your money ain’t that much anyway (people manage their own money these days anyway).

There is a reason why institutional investors consider ESG and diversity in their decision making processes, you should try to find and understand that reason and if you don’t want to, step aside it ain’t your issue.

There’s a reason this article from Bloomberg was created and reason for all changes in the world happening to address diversity including inclusion of women of all color, you missed that reason.

Diversity is a nice thing to have at a braai or even at a communal gathering. When it comes to money, I don’t need diversity. I simply want competence and performance. Wheter that performance is delivered by a black lady or a crossdressing transvestite is irrelevant. I will gladly pay my management fees to that brilliant and beautiful individual.

“Ain’t your issue”. Ha-ha. Let me guess: Lagos…

Forget ESG. When Berkshire Hathaway announces some benefit in doing something; then I may listen, not before.

Given that more than half of the US territory used to Latino (Mexico and Spain – Latinx) and 100% of the land used to be First Peoples’ territory, I think that the groups most underrepresented as employees in businesses in the USA are First Peoples (Native Indian American ) and Latino.

Also, by Black is the study referring to Black American peoples (American by birth) or African people (African by birth)?

There is a massive racist international travel control regime in place against people from African origin (by birth – not colour).

The travel restrictions in the USA are so onerous and lopsided on the movement of people from Africa (Black or White or First Nations) that it is virtually impossible for the vast majority of any Africans to travel to the USA.

Also the (mainstream) news comming out of the USA is so biased against Africa, drowning out of all news from Africa in preference for only Black American Lives. This leaves me wondering whether the slogan #BlackLivesMatter really carries any legitimacy when Americans of all colors are either ignorant of or just do not care about African lives, or Latino, or First Peoples lives for that matter.

One of the biggest ironies of #BlackLivesMatter, is that it is going to force Americans of all races to wake up to the ‘systemic’ marginalization of the developing countries in general and that is embedded in the USA’s economic and foreign policy systems.

So, while it is ironic that in a study that is based on racial classification in employment, as was the basis for the developers of Apartheid South Africa, the attention can be placed on injustices of the world’s marginalized peoples in terms of movement, access to funding and employment and not just Black American Lives, which matter.

Yes, according to this logic, every white person outside of prison is an exploiting racist abuser, while all black people in prisons are innocent victims who are exploited by an unjust system. Strange that even in a country where the majority of judges are black, the majority of prisoners are also black.

Maybe there is a corellation between the extent to which some people are scrutinised, and the level of criminal behaviour of those people. Maybe there is some method in this madness. Maybe societies actively create their own reality. Maybe their situation, their environment, their reality, is a reflection of their mindset. Maybe this is the just consequence of particuar thought patterns. Maybe this is how karma plays out. Maybe this is divine justice.

Not quite sure how you made that inference.

No. What I am noting is that ESG issues are more often fads or fashion, not true investor will to have sustainability, be it environment, society or governance. Also, to be truly sustainable, you have to change the world’s monetary and economic system, away from a fractional banking system to something more democratic and less exclusionary.

To be seen as environmentally conscious in the 80’s and 90’s, you put a ‘save the whale’ sticker on your bumper but now we know that is not enough. To be seen as being racially conscious you wore a ‘Free Nelson Mandela’ T-shirt if you were in the UK or USA in the same period. Now, not even some factions of the corrupt ANC think that is racially appropriate.

But we live in a world where the ‘conscious-less capital’ owned by ‘conscious-less investors’ now want to be seen as been sustainable but then narrowly start defining that and yet if you had to do a forensic investigation, you would unearth the fact that they are far from sustainable (on many ESG metrics), and the capital won’t let them be as it undermines the status quo or the return certainty.

There is usually a myopic oversimplification of what race is (black and white) in employment, and may turn a blind eye to investing in the money creating process of say Sovereign Bonds where they inadvertently prop up unscrupulous leaders, or worse, criminals, (read the whole of the developed world during the cold-war era) and then prefer to say nothing of China, which has a horrific human rights record.

This, of course, does not mean that we should not try to be more sustainable.

Identity politics is an obfuscated insult to the group whose interests they are trying to isolate and benefit. Let’s take the issue of board representation at companies for instance. An observation is made in isolation, then a conclusion is drawn out of ignorance, leading to an accusation that is based on short-sighted self-interest.

The populist narrative is that blacks and women are not adequately represented on boards or management level. This leads the individual with his inferiority complex and constrained world view to conclude that businesses are racist and sexist. They base this accusation on superficial observation and a lack of knowledge of how the process actually works.

In reality, the shareholders select the board members. The board members employ the managers, who employ the staff. Therefore, in effect, the shareholders select everyone from the board members down to the tea lady.

This brings us to the essence of the issue. Who are the shareholders? Are women and black individuals not shareholders of businesses? What gives the leftist the moral authority to, by default, insult and belittle these groups like this? Right from the outset, they assume that women and black individuals are lazy, uneducated, poor, stupid and inferior, without a will of their own.

Black people own the majority of shares on the JSE through the pension industry. Women own at least 50% of the shares on the JSE. The largest share of listed companies in South Africa belongs to women and black investors. Since the shareholders appoint the board, why do black people and women prefer to appoint white men to the board and management? Their shares are their property. They can do with their property as they please. Who are the leftists to prescribe to black individuals and women how they should manage their property? Are women and black investors not allowed to issue instructions to white men? Are white men not allowed to work for women and black investors?

Women and black individuals appoint the best-qualified individuals to protect and manage their property. Dividends do not have a sex or a race. Those who bring sex and race into the debate about the process of dividend-generation are simply delusional.

We should always question the intentions of those who attempt to divide society along the lines of identity politics. Without failure, there are myopic self-interests behind it.

Well reasoned as always “teacher” :
I doubt that Zinger will challenge that or has the capability to do so :
Your Input appreciated as always .

edalsg I am glad I am always in your mind at every turn. Thanks for the recognition.

I didn’t even know you exist until this comment.

Well Zinger has responded with an insult rather than a challenge.

Incapable.

Well constructed Sensei.
Efforts in the name of Racial and gender diversity in the corporate field is necessary but this entitlement approach is the wrong implementation strategy.
The principle problem these politicians are trying to address is the exclusion of black people from being recipients of good education and equitable economic participants during post slavery. The fact is that such an exclusion is to be labeled a sequel of slavery and it is true.

Now we all know that every crime has a price attached to it and the perpetrators have to settle their debt one day. The gross racial injustices subjected to black people is a crime the oppressors have not fully settled. So i believe this kind of enforcement diversity is a measure of atonement. I however do agree with you that dividends has no sex or race. I also, would not want my interest to be in the hands of an individual simply because of race, no!

The number of shares really do not mean much until you factor in the price of the shares. We all know the majority of the most expensive shares in the country are in the hands of white people and not black. So the point of black people being owners of most shares in JSE does not hold much.

I believe it is too soon for such diversity. Past Principle problems need to be addressed first before we can talk about racial and sex diversity.

This comment is in no way an attack on anyone and Sensei, as a new moneyweb member, i have the utmost respect for you and appreciate your input in ever article i get to see you comment on. I appreciate your sharp mind.

Thank you!

King Khan, I appreciate end respect the way in which you express yourself. I understand and have sympathy for the issue of redress, compensation or retribution, but I do not agree with it.

The South African Indian community suffered under the same apartheid, but many Indians are wealthier than their previous oppressors. The Indians used the opportunities that the system presented to them. They overcame that system and to benefit from it. This is the prudence, accountability and hard work that allows entrepreneurs to benefit from a system.

The local social group that is expected to fund the redress, created job opportunities, infrastructure and the biggest economy in Africa. This provides the social grant, the public sector wage bill, roads, hospitals and schools to the previously disadvantage. These individuals have been paying taxes at the highest rate in the world, to fund social projects. These taxpayers get nothing in return. Over the past 25 years, they have paid for their “sins” many times over. They owe nothing to anybody any more.

During this time, the wealth at the average citizen as deteriorated and unemployment has grown. This strategy of retribution will impoverish the very people it is supposed to support. No amount of restitution can turn a loser into a winner, a slave into a master or a worker into an entrepreneur, but if you keep on trying, it will turn everybody into beggars.

Sensei, again, thank you for the thoughts you have brought forward. Many may feel to continue to disagree with you but I am in full agreement with what you have just tabled. I welcome and appreciate the enlightenment. Many thanks!

The pot calling the kettle white?

The pot calling the kettle white?

Explanatory note to the Moneyweb moderator since it appears I am about to be blocked for a second time:

The pot calling the kettle black is an idiom used where one party’s criticism of another is considered hypocritical. See https://en.wikipedia.org/wiki/The_pot_calling_the_kettle_black

I am merely playing with words. It is clear from this article that the ‘white American’ SRI asset managers are hypocritical in their assessment of target investment ESG scores.

Is 80% really out of whack with the demographics in the USA?

Seems like a useless article.

What is the reason Zinger? Please educate us.

Rather Zinger didnt try : Ive read enough :

I am not an educator.

Clearly !!!

You mean you are not educated enough to debate rationally or meaningfully?

The liberal idiots out there punt for everything needs to match the demographic.

Will there be representatives for those with HIV? Those with Downs Symdrome? Those with Aspergers? Those with a leg amputated? Those with an arm amputated?

Where will it stop?

If you are going to for demographics to trump performance, you’re going to end up very mediocre.

I can assure you that the Chinese are not forcing any form of demographics. In China if you are stupid they call you out on it and you are trained for a menial job.

There’s no demographic representivity. If you can’t do it you can’t do it. Why do you have to stick someone in there that can’t do it?

All things being equal in the 21’st century the numbers should tend towards the demographic.

An amputee working from home also has a shot at being an investment manager. This does not mean that we should have legislation for this.

If people want to measure this then so be it. Maybe marketing people can turn it into something positive.

As it relates to South Africa, stop obsessing about Whites – we are not worthy of your obsession – and get on with the serious work of building this country.

Equality of opportunity, is a concept all sane people can agree on….equality of outcome, is a terrible/doomed concept

Playing with natural order to be politically correct. One wonders if these executives commenting would give up their job and remuneration for a minority/black candidate. This is only going to end one way, a way which we are all well acquainted with in Africa.

The hypocrisy of the left is comparable to the pall of smoke emanating from a fire on a municipal dump. Do they also care how many white people are represented on the boards of big corporations in India or how many Australians in China? The motive behind it seems that a wrong committed in the past by a generation of slave owners that is long gone to people who were slaves and are also departed must now be exacted from a generation who had nothing to do with it to a generation that grew up with the same opportunities but preferred to squander it with an irresponsible lifestyle.

The # Black lives matter, likewise, doesn’t seem to be bothered at all about black slavery in Libya only because Libya is not a white democratic country with a Christian outlook.

After ridding themselves violently of European colonialism black Africans once more are risking life and limb in large numbers crossing the Mediterranean to be under the yoke of Europe again to better their lives from the liberty they have at home but the irony seems lost on the lefty’s

I agree with your point. We need to try and explain this disturbing and destructive phenomenon. Nobody, except a politician, is inherently bad. People stand for a cause because they believe it will improve all of humanity, or so I like to believe.

When people from a particular upbringing cannot read, understand and interpret facts, they can’t form factually-based opinions. When people are incapable of factually based reasoning, they have no alternative but to base their opinion on emotions. People are either factual and scientific, or they are emotional and irrational. Either way, there is a place on earth for both these groups. The problems creep in when the latter attains the power to make laws, for then they can rule over, and override the rational group. This is the recipe for disaster, and this is modern-day politics.

Politics has morphed into the business of managing perceptions and emotions. It is the science of structured irrationality where the clueless lead the capable. It is a negative feedback loop that draws humankind into a death-spiral. A system that punishes virtue and rewards vice is doomed to fail. A system that infringes on property rights to reward the victim mentality leads to famine. Emotions do not feed the children, but it does provide the adults with enough excuses and reasons for their hunger.

Here we go again, just now we will have to have more black squares than white on a chess board.

To the snooker players, the white ball may not hit the black ball.

Oh dear, maybe JVR should have just got back onto his ship and sailed on, look at all the BS he has caused.

There are more Racist Laws now in South Africa than there ever were during Apartheid.

End of comments.

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