The white face of responsible investing

Stark statistics emerge from a new survey of the SRI sector

White people represent 79% of the employees of US SRI/ESG funds, compared to 59% of the wider population.
This stark statistic is from the new survey: Racial Disparities in the Workforces of Sustainable, Responsible, and Impact (SRI) Investing Mutual Funds by Danielle Burns, Sonya Dreizler, Hannah Lucal and Renee Morgan, four SRI professionals. The figures are not mitigated when a gender analysis is added in. White male employees make up 52% of all surveyed funds, and 55% of white led funds, compared to 30% of the US population. Though for female employees, the figures are a little more representative of the population at large: white women employees make up 27% of surveyed funds. The figures are even worse when confined to a board level analysis.
As the authors state the “SRI community has the tools and opportunity to create positive changes in corporate behavior. As calls for Diverse, Equitable, and Inclusive (DEI) workplaces continue to increase, the SRI community is the group of investment professionals best positioned to address these issues.” And yet it is failing woefully to do so in its own industry: “our data shows that most of our firms are maintaining exclusionary, predominantly white environments that are failing to employ people of color [POC].” Until the industry is committed to reforming its own house, it could be said that it is unfit to reform corporate America.
While the authors admit that the dataset and the racial analysis are not perfect, they maintain that this analysis has to start somewhere. The data is based on 15 US-based mutual fund families exclusively focused on SRI/ESG investing, comprising 85 mutual funds, covering 699 people, including board directors and company employees.
The survey also found that two firms employ such an unusually high number of POC that they distort the picture of the industry as a whole, making it look more diverse than it actually is. Taken out, the remaining firms present an even less representative racial mix compared to the US population as a whole, using 2015 US Census data. POC-led firms are also generally more likely to employ women and non-white employees.
“Black people make up 14% of the US population, and only 7% of the surveyed funds,” says the survey. “Most of that representation can be attributed to just one Black led firm.” In detail, POC-led firms are 22% Black across workforce and board. For Latinas/Latinos, the numbers are even more divergent. This group comprises nearly 18% of the US population, but only 3% of the firms surveyed.
In contrast, there is a higher proportion of Asian American employees in firms than there is in the US population, but proportions are similar for South Asians, and Arab/Middle Eastern. There were no Native American employees in the firms surveyed.
The survey describes one firm that initially agreed to participate, but then pulled out saying that the information was “proprietary” and directed the authors to check the photographs on their website to determine racial demographics, a suggestion that is about as useful as using names to determine gender.“We believe the root cause of the lack of racial diversity in our industry,” says the study, “is a deeply entrenched system of racial bias that impacts each of our firms, every company we engage, and our society broadly.”

I spoke with authors Renee Morgan of First Affirmative and Sonya Dreizler of consultancy Solutions about what they thought the next most important steps should be and what other conclusions might be drawn. “Our primary request,” replied Dreizler, “is that all SRI firms and companies collect, then publicly disclose the racial and gender makeup of their workforces and boards. It’s a good first step at the corporate level. For individuals, particularly white folks, I’d ask that they commit to a year of learning about systemic racism, with an emphasis on listening to and believing the perspectives of people of color. We provide a few resources in the paper as suggestions, and there are many other materials and resources available for learning.”
Morgan said: “I don’t believe we can solve environmental or governance issues unless we have all the voices at the table. How do you even talk about environmental issues if you have no indigenous voices at the table? We need to shift the conversation so people in the industry can understand that. If you have only white voices in the room you can pretend it’s not an issue. We need to push this to the front of the line, it’s central to everything we do. Transparency and training are important but only if the end result is us taking this seriously. We have cohesive language around carbon and climate change, we should equally have cohesive conversation around race.”
I asked about what might be the best processes to improve the current situation. Should you start with the board, so you’re setting example at the top? Or is it not going to be possible to do that, and will you have to start with the workforce? “Yes, leadership should start at the top,” she replied, “and then that could become a cohesive policy for the whole company. But, I think we would have more success if we started with a broader stroke and … you should start with workers, admin professionals, and work your way up.”
The survey covered just SRI funds, but is the situation better in non-SRI firms? “My guess is that it’s worse. Anecdotally, for example, we do better with gender. We definitely employ more women at every level than the industry at large, and so I would guess that we are better on race, but I don’t know that for sure. And clearly we aren’t doing that well.”
And the survey also covered just US firms, so I asked whether she thought it was worse in the US? “I had a broader range for my sample but it gets complicated when you are dealing with multinationals,” cautioned Morgan. “If you are a huge fund like UBS, then you have centres based all over the world, for example in Taiwan and the Middle East, where they would obviously be employing local nationals, so the race question gets more complex and the data more muddy.” When asked whether she thought the situation was better in Europe, Morgan noted that some countries avoided the issue altogether by appealing to a concept called implied diversity, a diversity of viewpoints.

“I had a woman from Spain say that she didn’t care if the board was all men as long as they had a diversity of experience. For example, if they had a pig farmer on the board that counted as diversity as opposed to having all college-educated people. I don’t like this concept, and I would fear that it’s just the kind of concept that the US would embrace so that it could ignore the real problem of racial representation and systemic racism.”
In theory, more diverse firms should have better performance, and I suggested that this would be an interesting study, though it would have to be based on a larger sample.“The only way to do that would be to figure out if the POC-led firms’ performance was better than the rest of the firms.

But more importantly we need to figure out what we are missing, what screens were missing as a result of having low levels of diversity. There are more things that we could be doing to better the world, for example around employment, that we don’t even know because we haven’t gone there yet.”