This is because issues relating to climate change and the environment, racial justice and diversity, human capital and governance may influence companies at large and shareholder investment flows. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. [139] The draft legislation would also require banks to investigate what ties they may have to slavery and disclose steps such institution would take to reconcile profits it may have received from slavery. (go back), 28The Business Case for Racial Equity, a Strategy for Growth, Ani Turner, W.K. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . In 2020 and 2021, at least 12 public companies received shareholder proposals to conduct a racial equity audit from pension funds and other shareholder proponents. Annie Palmer @annierpalmer. (citing Exchange Act Release No. Beyond fund managers typical fiduciary duties to minimize risk and achieve positive returns, these fiduciaries are explicitly mandated with making investments into companies that aim to have a sustainable and societal impact in the world [46] based on ESG criteria or that meet stringent environmental, social and governance standards. [47] As the usefulness of Racial Equity Audits as a tool for ESG-conscious shareholders to measure a companys adherence to ESG prerogatives becomes more mainstream, it would be no surprise to see support for these audits grow. [109], Amazon argued the proposals call to review its impact on civil rights, equity, diversity and inclusion is a broad survey on the impact of the Companys policies, practices, products and services on societal issues, which implicates routine business issues, such as the products and services that the Company offers to its customers, the Companys business practices and operations, the Companys strategic decisions, and the Companys choice of technologies. [110] Similarly, according to Amazon, such an audit would necessarily implicate[] a multitude of ordinary business matters relating to the Companys day-to-day operations, which Amazon argued included decisions relating to, among other things, its charitable donations, hiring decisions, diversity and recruitment initiatives, customer relations, advertising, public relations and communications with its shareholders and the kinds of products it sold. [22]. [104] The proposal was submitted by Comptroller DiNapoli, as trustee of New York States Common Retirement Fund for public employees, which owns shares in Amazon. David Friedman - Vice President - Morgan Stanley | LinkedIn [18] Concurrently with shareholder activists nominating an increasing number of diverse director candidates, the voting policies of many institutional investors, such as BlackRock, Inc. (BlackRock), have been updated to reflect a desire to enhance boardroom diversity, [19] as have the voting guidelines of many prominent proxy advisory firms, such as ISS. [49], Practitioners also stress the importance of auditors using the right methodology, including both quantitative and qualitative methods, and for such auditors to review not only information provided by the company but to gather its own information. Morgan Stanley is differentiated by the caliber of our diverse team. Professional development and peer engagement are crucial building blocks to a careers strong foundation. (go back), 75Goldman, Citi Stave Off Investor Calls for Racial Audits (1), Bloomberg Law, Saijel Kishan and Jeff Green, April 29, 2021, available at https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1. A career at Morgan Stanley means belonging to an ideas-driven culture that embraces new perspectives to solve complex problems. JPMorgan's racial-equity audit falls short for some shareholders SOC Investment accused the bank and its auditor of approaching the process with a "narrow perspective," and said the report fails to look at any internal diversity, equity and inclusion issues. As . That movement, together with the disproportionate impacts of the COVID-19 pandemic have focused the attention of the media, the public and policy makers on systemic racism, racialized violence and inequities in employment, health care, and the criminal justice system. 5 Sustainable Investing Trends for Companies and Investors, 7 Investment Ideas That Could Drive Markets in 2023, Yes, You Can Be a Tech Innovator at Morgan Stanley, Learn more about Diversity and Inclusion at Morgan Stanley. Underpinning all that we do are five core values. It received the backing of 38.6 percent of votes cast during the company's AGM in April. As a global financial services firm, Morgan Stanley is committed to technological innovation. [17], Improved ESG criteria is not a new area for activist investors. Morgan Stanley CtW Morgan Stanley Racial Equity Audit Proposal Julia Khan November 20, 2020 Morgan Stanley Click Here to Read the Letter in PDF Format. We all want to do something to try to change the course we find ourselves on. Racial Equity Audits are the practice of independently reviewing an organisation's policies and ascertaining how well they encourage and promote inclusion, diversity, and racial equality. Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rock, https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/, https://investor.vanguard.com/investing/esg/, https://www.issgovernance.com/library/esg-matters-part-ii/, https://www.sec.gov/rules/final/2020/33-10825.pdf, https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. Racial Equity Audits: A New ESG Initiative - The Harvard Law School Shareholder activist Engine No. Corp. Code 301.3, 301.4. With this process, leaders can assess the extent to which equity is present in such areas as teacher . Opinion | Wall Street Banks Reject Racial Equity Audits, While However, not all companies have been as eager and willing to comply with these requests. Firstenvironmental criteria, which considers a companys actions as a steward of the environment, such as what steps a company is taking to address the depletion of the planets resources, pollution and greenhouse gas emissions, or the effects of climate change. [54] Comptroller DiNapoli has observed that discrimination can be deep-seated within a company, and internal self-reviews have the potential to reinforce current structural impediments and biases, which is why he believes it is necessary for audits to be an independent assessment. [108] Amazon argued that, regardless of the proposal being framed in the form of a request for a report, this did not change the fact that the subject matter of the proposed report is within [Amazons] ordinary business and thus excludable under Rule 14a-8(i)(7). PDF Venture Capital and Racial Equality - Morgan Stanley Citigroup agrees to audit of investments in minority communities 1, Reuters, Svea Herbst-Bayliss, Gary McWilliams, December 7, 2020, available at https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO. We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. What Are Racial Equity Audits? - nhforge.org (go back), 18BlackRock Investment Stewardship, Proxy voting guidelines for U.S. securities, BlackRock, effective January 2021, available at https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf. (go back), 98Wells Fargo & Company, Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 16, 2021, available at https://www.sec.gov/Archives/edgar/data/72971/000119312521082907/d71313ddef14a.htm [hereinafter Wells Fargo Proxy Statement]. Governance teams and boards have been warned to stay alert to the prospect of facing shareholder proposals in 2022 urging them to commission racial equity audits. Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. Intentional investing approaches can allow you to have an impact on racial equity, while pursuing your financial goals. As the ESG movement gains momentum, and as the new wave of investors who factor ESG concerns into their investment decisions gain a larger share of the market, companies are being advised to revisit their current policies and practices under the ESG lens. 20091 (August 16, 1983)). Racial Equity Audit SOC Investment Group In November, SEIU's Capital Stewardship Program and. Morgan Stanley and its former chief diversity officer, Marilyn Booker, reached a deal Friday to end the lawsuit Booker brought last year against the bank and two of its executives, alleging "race and gender discrimination, retaliation and unequal pay." 16, 1992)). These votes follow a 2021 season in which eight racial equity audit proposals were proposed . The firm reached its decision following successful engagement with and withdrawal of a racial equity audit shareholder proposal by SOC Investment Group and SHARE. News, John Biers, May 22, 2011, available at https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR In 2007, the firm's co-founder, a former Goldman Sachs and Morgan Stanley banker named Divesh Makan, told a wealth management magazine that he'd even organized clients' parties and helped . [127], According to SEIU, BlackRock decided that the SEIU proposal is too important to wait until they are voted on at their shareholder meetings [128] and announced its plans to voluntarily conduct an independent racial audit of its operations. [123], While the financial institutions that have received Racial Equity Audit proposals have recently made philanthropic and strategic investments, along with other commitments to racial equity, CtW has stated that the only way to effectively address racial injustice and economic inequality is careful study of how the industrys products and services have contributed to this imbalance, [124] which includes analyzing mortgage issuances, the number of bank branches in minority neighborhoods or banking deserts and whether charitable contributions are fully aligned with . Why did nearly all of the banks urge "no" votes on the audit proposals? We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues.