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June 23, 2020 at 02:37 PM
What role should investors play in the struggle against systemic racism?
It’s a question that advisors may want to consider especially if their clients are concerned about owning assets that don’t perpetuate the status quo.
“Investors have the means to drive change,” writes Jon Hale, head of sustainability research at Morningstar, in a recent blog. “An all-out attack on systemic racism requires every tool in the box.”
Among those tools: investing in sustainable investments, including ESG- and impact-focused mutual funds and ETFs, and investing with asset managers who engage with companies on diversity and inclusion issues by either sponsoring or supporting shareholder proxy resolutions that address those issues.
“Fund investors need to take a close look at their funds’ voting records around discrimination and inequality and call for stronger alignment between recent statements and proxy votes,” writes Jackie Cook, Morningstar’s director of sustainability stewardship research, director of sustainability stewardship research, in another blog.
Her research of 34 shareholder resolutions on diversity and racial and gender discrimination this year shows that corporate boards, which tend to heavily influence votes by asset managers, opposed all the resolutions, and few votes garnered 30% or more of approval — the minimum that typically catches the attention of management, according to Cook. The votes that did receive 30% or more approval involved gender pay equity rather than pay equity based on race or other racial diversity issues.
