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Beyond the pale: Responsible investing firms failing to invest in people of colour

If SRI investors want to play a credible role in influencing corporate behaviour on diversity, they’ll have to look within

From Wall Street to Bay Street, racial inequities in the investment industry have been prevalent since stock exchanges were established. When a range of instances of systemic racism made headlines over the last year, SRI investors (who try to ensure their investments are sustainable, responsible and impactful) were head-down in meetings strategizing about what they could do to address racial disparities at the corporations they engage with.

SRI investment professionals, after all, collectively determine where to invest and divest trillions of dollars (US$40.5 trillion and counting), which positions them to move the dial on a variety of topics – including corporate performance on diversity, equity and inclusion (DEI). After a wave of CEOs pledged their solidarity with Black Lives Matter protesters in the spring, investors themselves started making broad industry commitments around DEI. In June, the Racial Justice Investing coalition of 128 institutional investors in the U.S., managing approximately US$2 trillion in assets, issued a statement of solidarity with anti-racism protesters and a call to action to address systemic racism. “We are seeking to use our wealth and class privilege to push toward racial justice and liberation, including pressing large employers to be more inclusive and to pay people equally regardless of race,” said Pat Miguel Tomaino from Zevin Asset Management, one of the endorsing institutional investors.

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How to fix corporate Canada’s trickle-down approach to diversity

To ensure an inclusive corporate culture, deeper work must be done

Conversations about the need for a more diverse and inclusive corporate Canada are not new. But recent anti-racism protests have placed the corporate realm under increased scrutiny. Companies face mounting pressure to address systemic racism by diversifying their boards, but does doing so ensure that representation filters down to the executive level, and ultimately create an inclusive corporate culture?

A significant body of research has made clear the correlation between a diverse senior management team and improved company performance. McKinsey’s latest diversity study, released this spring, found that companies in the top quartile for ethnic diversity were 36% more profitable than those in the bottom quartile. A 2018 Deloitte report found that inclusive companies also outperform on customer satisfaction (+39%), productivity (+22%) and turnover (-22%). Regardless of the evidence, however, moving the dial on corporate diversity, equity and inclusion is complicated and slow going.

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