There is a glaring gap between companies’ lofty words on the topic of racial equity and the resulting actions and results, experts say, demonstrating time and time again that organizations don’t actually value the statements they make. make.
During a panel discussion focusing on the social impact revolution, and in particular racial equity, James Andrus, interim managing director of investments, board governance and sustainability, at CalPERS, said that lofty public statements can actually harm the process when they mask a lack of real action. .
Speaking at Conexus Financial’s Sustainability in Practice Forum held at Harvard University, Andrus said that major funds, including CalSTRS and CalPERS, have long been involved in many initiatives – dating back more than 20 years – to give more money to various fund managers, but they were forgotten in the chaos following the dot-com bubble and the GFC.
“Nothing has happened yet,” Andrus said. “I mean the amount of money given by people in this room to various managers is about one percent. The problem with that is that it doesn’t match the policies and what people are saying.
When the Institutional Limited Partners Association’s DEI committee created the Diversity in Action initiative, general partners rushed to join, but only 5% of ILPA’s sponsor members joined, he said. .
“Diversity is not embraced in entire organizations,” Andrus said. “When it’s brought up there are people in the organization who have the leaders’ tails, who pull the tails and say they don’t like it, that’s wrong, it doesn’t pay off. ‘money doesn’t pay. We shouldn’t do it.
Panel chair David Wood, director of the Responsible Investing Initiative at Harvard Kennedy School, asked what steps asset owners can take to address the discrepancy between claims and results.
Andrus said that in addition to operating “as you say you are”, asset owners need to overcome resistance. “Anytime you talk, especially about race, there will be resistance,” Andrus said. “If you are truly in favor of racial equity, you have to overcome this resistance.”
Renaye Manley, deputy director of the strategic initiatives department of the Service Employees International Union, which has about 2 million members in the United States and Canada, mostly in public service, health care and real estate services, was also part of the panel.
With SEIU members’ group retirement savings estimated at more than $1 trillion, Manley’s job with the Strategic Initiatives department is to lead a team that works with trustees and pension plans to brainstorm the best practices and how they can be more effective and fiduciary advocates for the funds for which they are responsible.
Manley was involved in highly successful shareholder activism calling for racial equity audits at public companies. She said the civil unrest following the killing of George Floyd by Minneapolis police officers led to a wave of corporate commitments to racial equity and inclusion.
“Hundreds of millions of dollars, from the same companies that couldn’t find a black person or a woman on their board for the past three years,” Manley said. “There was a clear misalignment here.”
These companies were either lying or grossly misinformed, she said, so she started tracking the commitments these companies were making. Other organizations like Color of Change had engaged companies like Facebook, Starbucks, and Airbnb to conduct racial equity audits, and SEIU took that concept and incorporated it into shareholder resolutions.
Investors such as CalSTRS and CalPERS have done extensive work supporting shareholder resolutions calling for board diversity, and previous work on gender diversity has helped set the stage, she said. .
Racial equity audit proposals ask companies to conduct an independent third-party review of policies and practices and stakeholder impact, including interviews or third-party stakeholder engagement.
“So people outside the company need to be engaged as well,” Manley said. “That means community groups, civil rights groups, those types of groups need to be engaged. Having civil rights groups and activist groups, community groups as part of the dialogue with the company creates a different level of accountability.
Manley admitted that she doesn’t have all the answers to questions posed by organizations, such as which parts of the business will be audited or standardizing the audit.
“I say, ‘Have you looked at any of these audits that have been done? The Facebook audit is not like a Starbucks audit. Why? Because they are individualized to the company and its operations. No two companies will be the same.'”
The SEIU has a document listing some best practices and standardization around what audit items should be, but “you can’t dictate that audits are going to look the same,” Manley said. “It’s not a financial audit, it’s an audit around policies and processes.”
With 48% of Gen Z identifying as BIPOC, public sector pension plans must represent the communities in which they hire and serve, she said.
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