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Racism? What’s that all about?

Anti-apartheid protests taught the responsible investment community lessons about reputational risk that are just as important now, says Tony Hay

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No, this isn’t the start of the worst comedy sketch you’ve ever heard. It’s a serious question with an answer which in many ways is even more depressing than assuming it’s all about skin colour. It’s the economy, stupid.

As a twenty-year-old, I recall being told that Apartheid wasn’t about racism, it was about economics. Racism is just misdirection; something to distract the white working-classes while rich men make themselves richer. Having lived and worked in South Africa for a short period, I was struck by the depressing reality of this statement. Inequality, in all its forms, is about power and money.

Which is why the world is about to change in response to the rage being expressed at the killing of George Floyd. Money is at risk. How you think about this coming change likely depends on whether you have any sympathy with the opinion expressed by Senator Tom Cotton in The New York Times Send In the Troops or you find his words utterly abhorrent.

It’s more than 250 years since the Wesley brothers, John and Charles, urged their Methodist followers not to profit from human suffering. For a long time, very little changed. Sure, the Wesleys were amongst those whose moral rectitude led to the abolition of slavery in the developed world, but why bother with all the cost of enslaving someone when you can set them free and re-employ them for less?

Recent societal changes are set to trigger a significant readjustment.

The Boomers are bust. Maybe not today, but we’ll be gone soon – most of us are already retired or close to it. Meanwhile, the Millennials are moving into the key positions of power. Born 1981-1996, they’re at their peak and will be the engine room of the global economy for the next 25 years. They don’t share the Boomers’ values. And they’re being followed into the workplace by all the little snowflakes. How the world loves to laugh at their hear-no-evil, multi-cultural, gender-fluid attitudes. But stick enough snowflakes together and you end up with an avalanche, not a puddle. And snowflakes have very different values.

Who gives a shit? People with money: Blackrock, JPMorgan, Bank of America, Goldman Sachs to name just a few. They’re no longer concentrating on what they’ve heard on the street. Top of mind is what they can, quite literally, see written on the street in downtown Washington DC: BLACK LIVES MATTER.

As the WSJ commented, “In the past two weeks, Black Lives Matter has essentially converged with the entire modern establishment, from academia, to the media, to corporate leaderships.” It’s not hard to figure which side of history Wall Street needs to be on if it wants to continue running all the money.

What “matters” to them is that the majority of their largest clients – pension funds – think that protestors being confronted by riot police is bad for business. And unlike the 1960s, 1980s and 1990s, when most shareholders might have naturally sided with Senator Cotton, they now empathise with the protestors. 

The fallout from a video of a white woman telephoning the police and falsely claiming her life was being threatened by an African American is deeply informative of current attitudes. Would Amy Cooper have lost her job at a leading investment firm 30 years ago? In 2020, it took just 24 hours for Franklin Templeton to calculate the reputational risk (the financial risk) and jettison Cooper.

As Barclays Bank commented when pulling out of South Africa in 1986, “Our customer base was beginning to be adversely affected [by the Boycott Barclays Bank campaign].” The end of Apartheid is a case study in how politics will give way to money. The pressure from unhappy financial institutions was too much for the white South African regime and it collapsed.

Many of the Boomers in the responsible investment industry cut their teeth on the anti-apartheid protests back in the 70s and 80s (we’re not all bad). They learned that if you create reputational risk for financial institutions, those institutions will act decisively to protect their revenues.

Now is no different.

Tony Hay is Co-Founder and Joint Managing Director of Responsible Investor.