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US investors demand data in fight against racial discrimination

The police killing of George Floyd in Minneapolis in May provoked weeks of protests about racial injustice around the world and electrified the political landscape in the US.

The outcry, along with the disproportionate suffering of people of colour in the coronavirus pandemic, has refocused attention on how the US investment sector has failed to challenge systemic racial inequality. This in turn has highlighted how some in the industry are looking for ways to tackle the problem.

Leading bankers have been among dozens of chief executives of blue-chip US businesses who have vowed to address inequalities in their companies.

Larry Fink, chief executive of BlackRock, last month promised concrete action over his company’s admitted shortcomings in racial diversity. The world’s biggest asset manager committed itself to increasing its number of black employees by 30 per cent over the next four years.

Meanwhile a range of businesses including Goldman Sachs, Amazon and Nike have signalled their support for action by donating millions of dollars to anti-racism groups.

These gesture have helped to build momentum among US investors who had already begun engaging with companies to push for improvements tackling underrepresentation on boards and discrimination across the workforce.

Liqian Ma, head of impact investing research at Cambridge Associates, which advises large institutions, says that more endowment funds and foundations are turning their focus to the problem.

“The primary lens that we are viewing this [through] is: it’s the right thing to do,” says Mr Ma. “But it’s also an economic opportunity because there are underserved communities that are held back by barriers to education, healthcare access or clean water and air quality.”

Yet responsible investors attempting to exert a positive influence face a difficult task. Shaping investment portfolios to achieve racial justice “is incredibly difficult, primarily because of the lack of data”, says Mona Shah, director at Stonehage Fleming, a family office.

Simply gauging something as basic as board diversity can be hard.

“We had to look through 150 companies, and we would literally go photograph by photograph looking at the names and Googling the names, because hardly any of the companies will self-disclose,” says Sudhir Roc-Sennett, head of ESG at Vontobel Quality Growth, part of the Swiss investment bank’s asset management division.

Ms Shah believes that new across-the-board obligations, akin to the UK’s requirements for organisations to reveal gender pay gap data, will be necessary to force meaningful disclosure of US corporate performance on racial balance and remuneration.

But some large shareholders are trying to compel companies to provide diversity data of their own volition. The New York City pension fund earlier this month put out a call for companies that made public declarations of support for the Black Lives Matter movement to do a better job of disclosing their diversity data.

“It is not enough to condemn racism in words,” said Scott Stringer, New York City’s comptroller who controls public spending for the city. “This information is crucial for shareowners to better understand diversity and workforce practices and identify areas for growth.”

Public statements in support of racial