Social Justice Investing seems to have sprung up as a meme in the last couple of years as a result of the Black Lives Matter mobilization following the murder of George Floyd. I was intrigued and a bit skeptical.
Finance and investing have of course had a very troublesome history when it comes to social justice, in fact they could be viewed as the very antithesis of it.
Suffice it to mention the role finance and investment capital played, via the innovation of the limited liability joint-stock company, in the European colonial enterprise and slave trade starting in the mid-17th century. This is well documented in the brilliant book Blood and Money – War, Slavery, Finance and Empire by David McNally (2020).
Therefore, the concept of social justice investing felt at first blush, like an oxymoron. Yet it got enough traction to compel even Investopedia to include an entry for social justice in its investment dictionary, and a pretty decent one at that.
A commonly accepted definition is that social justice refers to a fair and equitable division of resources, opportunities, and privileges in society.
The racial wealth inequality in the US, to take just one metric, is a clear indication that we have a very long way to go to achieve social justice in the US.
Our history of institutional racism has been well documented in the book The Color of Law: A Forgotten History of How Our Government Segregated America by Richard Rothstein (2017). For those who just want a short summary, this article by Terry Gross, host of Fresh Air on NPR, should do.
Broadly speaking, there have been a number of efforts to reverse the effects of such racial policies. For example, the 1977 Community Reinvestment Act (CRA), or the work of CDFIs (Community Development Finance Institutions) providing capital and technical assistance to mostly minority and economically disadvantaged communities. I am also aware of a number of private equity funds and impact investments trying to address the racial wealth gap by focusing on Black and minority entrepreneurs and workers.
While addressing issues of social equity and therefore social justice, the initiatives mentioned above have not explicitly organized themselves around the concept of social justice investing.
Rachel Robasciotti is the person who most likely came up with the term social justice investing and who certainly popularized it and put into practice.
She grew up in Oroville, CA in an economically disadvantaged Black community ravaged by systemic disinvestment. She experienced homelessness, and her family, as many others in her community, was not spared the scourge of fatal police brutality.
Despite these early challenges, her brilliance shown through and allowed her to graduate from high school at 15, and start a financial advisory firm at age 25. A deeply compassionate individual and a queer Black woman, she set out to use finance to promote social justice.
She founded Adasina Social Capital which began in 2018 as a social justice investing strategy.
Rachel recognized that, as asset manager, she could use the power of stock ownership in collaboration with social justice movements to change corporate behavior by organizing investors so that they would stop giving their dollars to companies that exacerbated racial, gender, economic, and climate inequities.
This approach is much more impactful than just relying on ESG metrics. The traditional ESG practice, for example to address gender equity issues, is to look at the number of women on the board of publicly traded companies, as if having a few women on the board was sufficient to address gender issues in the workplace.
Adasina’s approach was rather to consult social justice movements organizing around gender issues in the labor force to find out how it could use its power of stock ownership to advance their cause. Through this engagement it became clear that one of the most relevant problems for their constituency was the practice of forced arbitration for sexual harassment claims, very common among publicly traded companies.
In 2019 Adasina launched the Force the Issue Campaign.
According to their website, forced arbitration has been shown to favor employers over harassment survivors and silence the victims, creating a culture of acceptance of sexual harassment in the workplace.
So far, this coalition has effectively persuaded 300 publicly traded companies to publicly disavow the use of forced arbitration policies for sexual harassment claims. Over 10 million workers now know that they can take a workplace harasser/abuser to court.
Adasina maintains and makes publicly available the list of all publicly traded companies in the US and their stance on the issue of forced arbitration for sexual harassment.
A similar effort was launched to address racial equity issues. In June 2020 Adasina publicly released its entire dataset of Racial Justice Exclusion List organized by topics, such as money bail involvement, occupied territories, prison funding, immigrant detention, prison labor involvement among others.
In late 2020, Adasina Capital introduced the Adasina Social Justice All Cap Global ETF (JSTC), a highly diversified, global, all-cap portfolio. Beginning with a global universe of 9,000 stocks, Adasina screened out companies whose policies, products or services exacerbate social injustice.
While I have a deep appreciation for the impact Adasina Capital has had in raising specific issues like the use of prison labor or the policy of forced arbitration for sexual harassment, and organizing other institutional asset holders and getting a number of publicly traded companies to change their behavior to reduce their harm to society, the environment and their workers, I firmly believe that if we are to achieve social justice, we must do more than invest in publicly traded companies, no matter how may screens they may have passed. Nevertheless, I would consider JSTC a “reduced harm” investment option for those who wish to continue investing in publicly traded companies.
Another interesting initiative I want to highlight is Just Futures, an effort to promote social justice investing and to offer more value-aligned retirement investment products and services to non-profit organizations. Just Futures recently organized a very interesting series of webinars on the topic of social justice investing – a good primer on the topic.
One more good resource on the topic is this Crowdsourced Guide to Social Justice Investing by Laura Oldanie whom I met through NextEgg – a community of practice learning new ways to invest retirement assets for a better future.
This disconnect between personal values and traditional investment choices is becoming even more glaring due to an increased awareness of the role our investments play in shaping the world we live in. Media attention and a number of movements (i.e., Slow Money, Occupy, 350.org, and re-localization movement) are all adding fuel to the fire of discontent with business as usual on Wall Street. However, an honest evaluation of a majority of the stocks and bonds that comprise a typical socially- or environmentally-responsible portfolio would also fail to make a direct link to the issues and causes that your clients care about most. In addition, even the sincerest and most well-intentioned values-based financial planning process often falls short in the implementation phase. This course is designed for financial professionals who are ready to engage in out-of-the-box thinking regarding options for clients who want to a) know their investments are doing no harm; and/or b) actively engage in making the world a better place via their investments.