Environmental, social and corporate governance (ESG) and impact investment have been prominent buzzwords within the investment sphere over the past few decades, driven by a growing social consciousness across a number of issues including sexism, sustainability, corruption and race.
With the rise of prominent movements such as Black Lives Matter and Me Too, the pressure to play a role in fixing broad social issues through impactful investment has significantly increased – but how much of the conversation around ESG investment could be accused of ‘virtue signalling’ and what impact is this having, if any, on these deeply rooted social issues?
Furthermore, how have talent pools developed alongside the growing awareness of social inequality and do they reflect a collective desire to nurture equality and inclusivity in workforces? Are investors and governments doing enough to push the agenda on racial equality specifically or does the issue of race get lost under the general umbrella of pushing equality?
Investment Monitor investigates whether investors really care about solving race equality or if they care more about keeping up appearances.
Global talent and tracking race
To evaluate global workforces and diversity, it is useful to first look at where the most educated workforces are.
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Generally, the results are fairly unsurprising with the majority of the world being educated to primary level and results becoming more sporadic in secondary and tertiary levels. The results are not broken down by any demographic – including age, sex, race or religion – making it difficult to glean any insight on diversity levels in global education.
When it comes to measuring the ratios between education and racial equality, data collection becomes challenging. The European Commission’s Data Collection in the Field of Ethnicity report highlights the varied approach to documenting race across metrics.
In France, for example, the French Constitutional Council forbids revealing directly or indirectly the racial or ethnic origin of people when processing or measuring personal data. This is as well as the introduction of variables on race or religion within administrative files.
This is a nuanced problem for diversity tracking; the morality of tracking race alongside metrics for investment such as education and employment could be considered problematic and discriminatory in and of itself. However, without robust global data, it is difficult to evaluate on a granular level how big a problem diversity is and where the most diverse talent pools are.
The US highlights inequality in the workforce
The availability of granular detail on racial metrics varies from country to country, but one location that does have robust data on inequalities is the US.
This map of the US illustrates the reality of racial inequality and the disparity between white and black median incomes. For every $1 of white income – in the worst-affected states – black workers in Wisconsin earned just $0.48. Likewise, in Louisiana, Minnesota and New Mexico earnings for black people were $0.50 for every white $1.
The data also highlights the impact the pandemic has had on poverty among race groups, with black Americans scoring highest for the part of the population living below the poverty rate.
With complexities around gaining robust data when it comes to measuring diversity and equality across global workforces, is it possible to adequately evaluate how solutions to these issues are progressing and can investors and companies touting mandates and objectives ever truly be held accountable to them?
How much do investors care?
Jay Garner, past chair and member of the Site Selectors Guild, and Ross Patten, Kentucky’s assistant director of economic development, are co-authors of the book Economic Development is [STILL] not for Amateurs and believe the topic of equality should be a priority for both companies and governments. “This topic may be extremely frustrating for some, triggering for others, and overwhelming for all," they say. "Yet, as community leaders dedicated to wealth-building, we must push this conversation forward to help our communities.”
Patten says that while meeting with a steering committee he was asked for advice on boosting economic development, to which he responded: “Right now it looks like a bunch of old white dudes asking for recommendations from a younger white dude, so let’s start there.”
Indeed, all of the investment, economic and site-selection experts spoken to for this article agreed that the general topics of diversity, equality and inclusion have become more significant objectives for clients.
Elias van Herwaarden, head of location strategy for Europe, the Middle East and Africa (EMEA) at professional services company Colliers, tells the story of a chief financial officer (CFO) confiding that addressing problems with equality and talent in his company was keeping him up at night. Herwaarden continues: “That caught my attention because it is not the standard answer. But [the CFO] said, if we miss the boat in connecting with the values of talent and the values of society today, our future is going to be grim.”
So, if the wider issue of diversity and inclusion is indeed a key objective for decision makers and policymakers, is there tangible evidence in the investor community that a drive towards inclusion is affecting investment decisions?
No diversity, no investment?
Guy Douetil, managing director for EMEA at site-selection consultancy Hickey & Associates, says that despite not being asked to report on race when advising in site selection, it is still a priority for many clients.
“We are looking at lots of different measures on equality but not specifically race," he says. "Not only just to evaluate locations, but also where they will be going [regarding diversity and inclusion] in the future – but would a client close an operation down because of a lack of racial diversity? I haven't seen that yet.”
The open conversation on racial inequality has become increasingly prominent in recent years and the nature of supply chains and manufacturing investments are long term. This could mean that it may take a long time for ESG-based, equality-driven investments to come to fruition.
The next decade will illuminate just how successfully the problem is being addressed, although without robust data collection the importance of race equality to investments will remain a difficult thing to prove and track.