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What a confusing time to be a values-aligned investor, amirite?
It feels like the financial and corporate world is moving so fast that it is hard to make an investing decision right now while the news keeps reminding us of the daunting challenges we face as a country and world.
ESG? As FWIW readers know, Elon Musk stepped up his bashing of the sector last week (and some politicians were quick to jump on the bandwagon). Then, last Friday, HSBC’s head of responsible investment criticized the finance industry for worrying too much about climate change.
Sustainability? The stock prices of oil and gas companies continue to go up while the rest of the market goes up and down like a yo-yo. Ok, mostly down. Whether it’s sustainability, diversity, inclusion, faith, gun manufacturers, nuclear energy, gender equity… we all bring our own set of values to our investing, but the volatility of the markets and the headlines can shake one to the core.
Before your anxiety levels reach Charlie Brown proportions, keep this in mind: In recent days, some industry insiders have said the ESG detractors could be doing investors a favor and the SEC is now holding some companies that have misused terms like ESG to account.
And speaking of holding companies accountable… Yesterday marked two years since George Floyd’s murder sparked widespread protests for racial justice, which in turn led many companies to make bold pledges to fight inequality. Below, we take a look at whether companies have lived up to their commitments.
Spoiler alert: Some companies are making significant inroads, but most are taking small but measurable steps in the right direction. We have a very long way to go: Black Americans continue to face significant gaps in opportunities across a wide range of areas, including in corporate America. But we’ll be watching to see how companies continue to follow through on their pledges, and have included some resources below to help you do the same.
Stick with us, and we’ll get through this labyrinth together.
News you can use
- Despite continuing criticism, consumers trust businesses more than NGOs, the government, or the media, according to the latest Edelman Trust Barometer. The survey also found that 77% of consumers believe improving societal issues is a primary business function.
- Fair warning: economists say we may see persistent worldwide inflation through the rest of 2022. More than 90% of the economists surveyed by the World Economic Forum expect "high" or "very high" inflation in Europe and the U.S. to continue throughout this year.
- A new report finds that paying employees a living wage is good for society and business. According to researchers from the University of Cambridge and Harvard Kennedy School, being paid a living wage can reduce stress levels and sick days. For employers, that translates into lower staff turnover, increased productivity, and (possibly) increased revenue.
Special May referral bonus: FWIW mug
‼️ Promotion Alert ‼️ For the month of May we’re adding a bonus to our referral program! Now, when you receive your first reward (two people subscribe to FWIW using your personal referral link), you’ll not only receive a copy of the FWIW Guide to Starting Your Socially Responsible Investing Journey, you will also earn a limited-edition FWIW Mug. This special offer is only available in May, so it may be a while until this opportunity comes back around. It’s super easy — here is your personal link to share: [link to sign up page]
Racial justice pledges, two years later
Following the racial justice protests of 2020, our LinkedIn feeds flooded with pledges from CEOs. Executives vowed to improve racial equity at their companies, boost supplier diversity, and spend millions to fight injustice. For many, it was the first time the term Diversity, Equity and Inclusion (DEI) rose to prominence.
Two years later, it’s fair to ask: Is corporate America walking the walk?
The answer isn’t a resounding “yes,” but many companies are taking steps in the right direction.
3 cheat sheets for racial equity impact
Want to know which companies are making a true impact on racial equity, and which ones are just engaging in “social washing”? These sites are a great starting point:
- JUST Capital’s Corporate Racial Equity Tracker offers details on pay equity, community investments, and more for the 100 largest U.S. employers.
- As You Sow, a leading shareholder advocacy nonprofit, scores each company in the Russell 1000 in its Racial Justice Scorecard.
- The Black Dollar Index rates top consumer-facing corporations on critical racial equity factors.
But we’ve also done a little homework to unearth how public companies are following through on racial equity and DEI promises — and where progress is lacking.
Show me the money
The math is fuzzy on exactly how much dough corporations have pledged to racial equity since George Floyd’s murder.
One tally by Creative Investment Research (CIR) indicates it’s around $67 billion. However, CIR found that only $652 million of those funds had actually been disbursed by the start of 2022. There are exceptions, of course; CIR cited Microsoft as one company that’s close to reaching its goals.
What’s encouraging is that many companies are continuing to invest in Black communities. Corporations like Microsoft, Netflix, Yelp, and many others collectively deposited around $1.5 billion in Black-owned banks following George Floyd’s death — a movement that seems to have staying power. Earlier this month, Apple began deploying $25 million of deposits at minority-owned banks, community development financial institutions and other mission-focused lenders.
Also this month, BlackRock announced it has raised over $800 million for a fund that invests in businesses and projects run by or serving people of color. And Goldman Sachs continues to fund its One Million Black Women initiative, which committed $10 billion in direct investment capital and $100 million in philanthropic capital to impact the lives of at least one million Black women by 2030.
New windows into workforce diversity
In addition to investing in Black communities, many CEOs have pledged to improve diversity, taking a more intentional approach to the way they hire and promote. This is good news for investors on multiple fronts. McKinsey research shows that companies with ethnically and culturally diverse executive teams are 33% more likely to have industry-leading profitability.
More companies today are sharing workforce diversity data with the public through annual DEI reports and dashboards. But greater transparency means we are also reminded that progress is… a process. And that process may not always go in a straight line. For example, while Goldman Sachs has poured billions into organizations and projects to lift up Black women and girls, the firm reported last week that the number of Black women executives in its own U.S. workforce fell from 25 to 19 in 2021 — though its overall percentage of Black employees increased slightly during the same period.
The tech industry has seen similar small gains in overall workforce representation. At Google, the number of Black employees increased from 4.4% in 2021 to just over 5% this year.
While it may seem that most of corporate America is taking baby steps — and it is clear to FWIW subscribers that prioritize these issues how far we still have to go — it’s important to celebrate the wins. For example, board diversity is on the rise: at S&P 500 companies, 33% of all new independent directors in 2021 were Black, three times higher than in 2020, according to Spencer Stuart. Also, six Fortune 500 companies are now headed by Black CEOs, up from four last year.
Shareholders vote for change
One more encouraging development: investors are putting pressure on companies to step up their racial equity game as they understand that this is not only the right thing to do for society, it provides companies with an economic advantage. Facing shareholder pressure, Apple, Citigroup, Johnson & Johnson, and MAXIMUS have all launched racial equity or civil rights audits, which help companies measure DEI-related performance.
Shareholder resolutions calling for such audits reached a record number (34) this proxy season, according to Interfaith Center on Corporate Responsibility.
The bottom line: vocal investors make a difference. Change takes time, but as investors and consumers, you can all play a role in pushing companies to live up to their commitments to build the future you want to see.
Before you go -
23-year-old Brooke Seay seems to embody the term “student” and “athlete” pretty well…
** FWIW team members own shares of Apple, Citigroup, and Microsoft.