Race in Finance – Making Black Lives Matter in Financial Services

Installment 3: Looking Outside of Finance for Answers on Race

By: Rachel J. Robasciotti, Founder, Robasciotti & Philipson

This article is part three of a series about race and racism in financial services. The full series can be read here.

 

Impact investors focused on racial justice have a desire for real impact. There are finally sufficient dollars, collective will, and commitment to make much needed systemic change. However, the investment world is funneling those dollars to portfolios using the same data and processes that have perpetuated inequities 1, adding a “diversity” filter, and hoping that achieves a different result. In the case of investments for racial justice, adding “diversity” may make us feel good, but it is not enough to make an authentic change. Our trading terminals and market data do not contain the tools we need to eliminate or reduce systemic racism. Communities most impacted by racism have the answers; we can and should listen to them.

I know that may be hard to imagine since this type of community involvement is atypical in the investing world, where we are accustomed to deciding what is best based only on knowledge, opinions, and data from academics and colleagues in our own field. To illustrate, I want to share the process we use at Adasina. We focus on four social justice themes, which are all interconnected, and for the purposes of this article, I’ll focus on the racial justice screen.

Investing for racial justice requires understanding the scope of systemic racism, who it impacts, and what solutions those impacted communities would like to see realized. At Adasina Social Capital, we form meaningful relationships with impacted communities and social justice movements, asking them what type of impact they would have us make as investor-owners of publicly traded companies. Instead of relying on impact data exclusively from academic institutions and commercial ESG sources, Adasina sources additional data from social justice partners and reputable community organizations that are run by and for those most impacted by systemic racism. Instead of assuming we know the problem and that we have the answer, we ask impacted communities how we can advance their goals.

Until investment managers align the impact they seek with the needs of those most impacted, the investment solutions they offer are merely window-dressing designed to appeal to the tastes of socially conscious clients rather than delivering meaningful impact. So if we want to invest for racial justice, and have real, systemic impact, what can we do? We must step back, look outside our trading terminals, and ask the communities most impacted by racism, how they would like us to help. 

Related Article: 3 Questions Investors with Social Justice Values Should Ask Their Advisor 

Our Process

To illustrate how to integrate community engagement into an investment process, we included below an overview of our own impact process as it relates to racial justice. Investment professionals are welcome to use this framework for racial justice or other impact topics in their portfolios.

1.What systemic problem are we trying to solve?
Racial inequity and injustice; more specifically, we want to uproot systems that reinforce, perpetuate, and exacerbate racial inequities. 

2. Who are the people and communities most impacted by those systems?
Black communities, Indigenous communities, and other communities of color are disproportionately affected by racial injustice. Therefore people and movements from those communities are best suited to identify the solutions to the problems they face.

3. What organizations are run both by and for those impacted communities?
We look to organizations like Color of Change, Poor People’s Campaign, and The Movement for Black Lives, who are deeply embedded in impacted communities.

4. What are those organizations asking for?
Investor support in ending unjust policing, prison, and immigration systems; a focus in finance on investments that advance equal rights and create opportunities for Black communities and other communities of color.

5. How do we invest with those goals and guidelines in mind? This has two main components:

    • Stop funding companies that exacerbate systemic inequities for communities of color, that includes companies involved in: (We’ve made our screening process on this topic public.)
      • Prisons
      • Money Bail
      • Surveillance
      • Immigrant Detention
      • For-Profit Colleges
      • Occupied Territories
    • Invest in communities of color. We’ll be covering one way to do this in an upcoming installment of the Race In Finance series. We also made some broad suggestions about how to do this at the end of Installment 2 of this series.

Frequently Asked Questions

When we share the framework above for social justice investing, we frequently receive questions, like the ones below.

Question 1: How do you decide which organizations to work with?

Answer: We work with organizations that are from, and represent the interests of, impacted communities. It works best when these organizations also have the infrastructure to act as thought leaders, campaign collaborators, and bridge-builders between finance and social justice movements.

Question 2: How do you turn social justice requests into an investable portfolio?

Answer: We work closely with social justice organizations to identify which metrics support movement on the issues most directly affecting their communities. We use this data to “draw the line” so that public companies and governments choose which side of justice they stand on. Where each company stands relative to these criteria inform our decisions about inclusion and exclusion in our portfolios. 

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If we want our investments to combat systemic racism, we must rethink the idea that financial services professionals know best how to solve social justice issues. If we intend to impact a community via investments, we must first build relationships and learn directly from them about what would be most supportive. When advisors think critically about both what issues they choose to address, as well as who is determining the metrics of success, they can better serve their investor clients and the communities they hope to benefit. 

 

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  1. Danielle Burns, Sonya Dreizler, Hannah Lucal, Renee Morgan, Racial Disparities in the Workforces of Sustainable, Responsible, and Impact (SRI) Investing Mutual Funds, (Jan 22, 2019).
  2. Header Photo c/o Jopwell Collection Stock Imagery

 

Robasciotti & Philipson is not responsible for the content, services, or products of third parties. These organizations should not be construed as a recommendation, endorsement, or sponsorship by Robasciotti & Philipson, nor are they affiliated with or employed by Robasciotti & Philipson. They are provided for informational purposes only.