A report from Confluence Philanthropy — a network of foundations, family offices, high-net worth donors, and values-aligned investment advisors — calls on investors to address the lack of racial and gender diversity in the global impact investing market.
Based on a yearlong study supported by the W.K. Kellogg Foundation, the report, It's About Time: A Call to Advance Racial Equity in the Investment Industry (19 pages, PDF), found that only a small percentage of funds are managed by firms owned by women or people of color, and that investment professionals at foundations and leading advisory firms are anything but racially diverse. According to the study, investors and their advisors recruit managers through peer networks that are not diverse and rarely try to access networks that include people of color, perpetuating the industry's racial and cultural homogeneity. Based on interviews and convenings with investment professionals of color and people of color who own their firms, the report also found that foundations are less transparent and more decentralized than other institutional investors, which makes it difficult to know when they are hiring managers or to understand the hiring process, and that managers of color often are wary of entering the impact investing field because they do not have sufficient capital or professional contacts to sustain the effort.
To advance racial equity in the investment industry, the report calls on impact investors to make a clear commitment to institutional education and reform, starting with CEOs and senior management; use clear baseline data and mandates to increase transparency; open their doors to managers of color and be more intentional about forging new connections; and be more aware of the challenges faced by investment managers of color and the importance of solidarity on the part of their white colleagues.
"This report is a call to action for the impact investing community," said Confluence Philanthropy president and CEO Dana Lanza. "The economy is shaped not just by how capital is allocated, but by who allocates capital. In order to build a truly equitable society, capital stewards must reflect the demographics of a democratic society."