In an effort to foster racial equity in financial services and the wider economy, some of the largest wealth and asset managers are promising to go beyond their substantial donations.
Bank of America, BlackRock, UBS, Morgan Stanley, Citi, Goldman Sachs, Invesco, TIAA and State Street Global Advisors are part of a group joining the Connecticut state treasurer’s Corporate Call to Action to disclose more data, foster career opportunities for 10,000 Black and Latino students each year and boost their contracts with minority-owned businesses.
In collaboration with the nonprofit Ford Foundation and Treasurer Shawn Wooden, a Democrat who is trustee of the state’s $37 billion pension plans and the only Black elected state treasurer in the country, the 18 firms agreed last month to a four-pronged program. The group is rolling it out amid criticism that corporations are going too far in taking political stances after nationwide Black Lives Matter protests last year; others question whether tens of billions of dollars in donations and initiatives will prove effective in forging lasting changes to systemic inequality.
“We’ve reached a point where we have the commitments, now we’re doing the work to drill down on the framework for measuring those commitments,” Wooden said in an interview. “We wanted real commitments. You don’t get real commitments by saying, ‘Sign a pledge.’ You get it by having CEOs and corporations deeply invested in the work.”
The group came together in September, and, in February, they agreed to publicly share the numbers on workforce demographics that they submit each year to the U.S. Equal Employment Opportunity Commission. The members span $27 trillion in assets and 750,000 employees. The additional companies in the Corporate Call include Aberdeen Standard Investments, AllianceBernstein, Bridgewater Associates, Franklin Templeton, Schroders, The Hartford, T. Rowe Price, Vista Equity Partners and Wellington Management.
Besides sharing the data, the firms plan to steer $10 billion in supplier contracts and partnerships to Black, Latino and other minority business owners in the next five years. They’ll offer students and mid-career professionals internships and other kinds of career development. Working groups from the firms convening throughout the summer will decide more specifics about the implementation, and Wooden anticipates the data will be public next year.
This time contrasts with earlier periods marked by pledges targeting racial inequality, such as the years following the police beating of Rodney King in 1991, according to Roy Swan, the director of mission investments with the Ford Foundation. He cites research from McKinsey and Citiabout the potential economic impact of closing the wide and persistent racial wealth gap.
“I’ve never been more excited about the future of American capitalism and business,” Swan says. “Today we have a large assembly of credible research data on the topic of race and economics that says that fairness actually pays…Systemic racism is costly to American society, and they found that tearing down the walls would be profitable to American society.”
Some express reservations about the intentional approach favored by advocates. While Connecticut state Rep. Kimberly Fiorello, a Republican who is Asian American, condemns violations of civil rights and discrimination based on race or ethnicity, she says that programs like the Corporate Call could also carry negative consequences.
“I wholeheartedly applaud any corporation’s desire to diversify its ranks, but there should be some recognition that race-based thinking and race-based collecting of data can, if not careful, morph into actions that violate rights,” Fiorello, who represents the districts of Greenwich and Stamford, said in a statement. “Where there is racial disparity, the reasons are more complex than racism. We do not want to become a culture that sees race first and foremost, which puts individuals into groups.”
Such arguments and increasingly prevalent criticism among Republicans of “woke capitalism” ignore the economic benefits coming from greater diversity of backgrounds and views in boards and workforces, as well as the use of ESG data, Treasurer Wooden says. The firms wouldn’t be part of the Corporate Call “without them thinking about shareholder value and corporate enterprise value,” he says.
“They are engaged in this not merely because it’s the right thing to do morally,” Wooden says. “It is in their firm’s economic self-interest, and it’s in the interest of our economy.”