BlackRock breaks Wall Street ranks with planned racial audit The SEC considered the arguments described above to exclude the shareholder proposals on Racial Equity Audits, and, in each case, the SEC did not concur with the company that the shareholder proposal should be excluded. In this case, failure to have a Racial Equity Audit policy or refusal to implement such a policy after shareholders have approved a proposal to implement one may become a criteria an advisory firm would consider in making a recommendation for or against the re-election of a companys chairperson of the governance committee and/or the re-election of other directors at the companys annual meeting. [136] As the general publics views evolve on ESG issues, public pressure for certain actionsin this case, increased diversity in public boardroomsoften influence not just shareholder advocacy but legislative action. Dismissal and neglect of these concerns led to Engine No. [76] To demonstrate that they had substantially implemented the audit proposals, companies argued they had (i) made pledges and commitments towards racial justice initiatives and made such information publicly available; [77] (ii) issued ESG and/or diversity focused reports; [78] (iii) issued press releases and public disclosures addressing racial inequality; [79] (iv) implemented initiatives to advance racial equity; [80] or (v) financially committed to racial justice initiatives and causes. Citigroup agrees to audit of investments in minority communities Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. In light of the anticipated increase in the number of Racial Equity Audit proposals in the coming proxy seasons, we may see a corresponding rise in the number of companies that follow BlackRocks lead and voluntarily conduct their own Racial Equity Audits. S7-11-19, available at https://www.sec.gov/rules/final/2020/33-10825.pdf; New Human Capital Disclosure Requirements, Harvard Law School Forum on Corporate Governance, Margaret Engel, February 6, 2021, available at https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. (go back), 116See How Amazons Emissions are Hurting Communities of Color, Amazon Employees for Climate Justice, May 26, 2020, available at https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138; Amazon workers demand end to pollution hitting people of color hardest, NBC News, April Gleiser and Leticia Miranda, May 24, 2021, available at https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413. [53] Advocates believe it is critical that the audit be conducted by an independent third party in order to ensure integrity and credibility throughout the process. Racial Justice Audits: Holding Companies Accountable for Their Role in Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM [2] Thirdcorporate governance, which considers how a company governs itself and holds itself accountable taking into account the structure and diversity of a companys board of directors, the separation between management and the board of directors, executive compensation, equal and fair pay amongst employees, and the extent to which a company or its management or board of directors are undertaking lobbying efforts, making political and charitable donations, or engaging in corruption or bribery. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . Underpinning all that we do are five core values. (go back), 137Supra, Goldberg-Zelizer, note 96. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. [24] However, many advocates believe that without objective means to identify areas of improvement and monitor companies progress, these commitments may be illusory and confirmation that these companies have in fact met their commitments could be difficult. As a global financial services firm, Morgan Stanley is committed to technological innovation. 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. The big Wall Street banks have all talked a good line about supporting the Black Lives Matter movement. The America First Legal Foundation is accusing the IRS of using "racial equity" for audits targeting White and Asian taxpayers. These funds have explicit mandates to make ESG-focused investments, from mutual funds whose portfolio companies must score a high grade on ESG metrics to investment firms dedicated to ESG impact investing. (go back), 5ESG Matters (Part II), ISS EVA, Dr. G. Kevin Spellman and David O. Nicholas, May 18, 2021, available at https://www.issgovernance.com/library/esg-matters-part-ii/. According to Forbes Magazine, the past proxy season set new records with at least 467 shareholder resolutions on environmental, social and governance (ESG) issues. [64]. Measurement and transparency are important components of the work Citi is doing to advance diversity, equity and inclusion, both at our bank and through our contributions to our communities and society more generally. New York. Published Mon, Apr 18 2022 4:50 PM EDT Updated Mon, Apr 18 2022 6:22 PM EDT. While Professing BLM Support, Wall Street Banks Reject Racial Equity Audits Recently, Morgan Stanley MS +0.1% and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review, and to meet shareholders on next steps before its 2022. [10] On the other hand, it has been found that companies that affirmatively adopt meaningful approaches to these issues may not only help progress environmental and societal goals, but may also potentially see improved financial performance. (go back), 90See e.g., Citigroup No-Action Letter, supra note 78; J&J No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77; Amazon No-Action Letter, supra note 83. According to public policy analysts, racial violence and the COVID-19 pandemic sparked an increase in Rule 14a-8 shareholder proposals focused on racial justice. Every company has a different mix of products, operations and services; therefore, according to practitioners in the area, it is important for participants in a Racial Equity Audit to identify the scope of the audit and benchmarks prior to conducting the audit. Discover who we are and the right opportunity for you. The banks are fighting back., Markets Insider, Marguerite Ward, April 7, 2021, available at https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4 (We believe our progress on the issue of racial equality, and our regular reporting of that progress, make the proposals requested audit unnecessary, a Bank of America spokesperson told Insider.). Kellogg Foundation has found that [b]y 2050, our country stands to realize an $8 trillion gain in GDP by closing the U.S. racial equity gap. [28]. A Racial Equity Audit is, at its core, an independent, objective and holistic analysis of a company's policies, practices, products, services and efforts to combat systemic racism in order to end discrimination within or exhibited by the company with respect to its customers, suppliers or other stakeholders. Rather, as argued by Trillium Asset Management (Trillium), a strong proponent of such audits, the point of an audit is to embrace the notion that if management is truly committed to make racial justice a critical element of its operations then in practice it can and should treat it like any other operations issue and audit it as such. [29] These proponents further argue that Racial Equity Audits should not be viewed as the end of a process for companies and/or shareholders looking to make a change; instead, they can be a stepping stone to assist companies in developing and identifying a strategic plan to advance their goals. New York, November 22, 2022 - JPMorgan Chase & Co. (NYSE: JPM) released today a comprehensive report outlining the results of an independent attestation examination of its reported progress of $18.2 billion toward its $30 billion Racial Equity Commitment ("REC").. JPMorgan Chase retained PricewaterhouseCoopers (PwC) to perform the examination. Corp. Code 301.3, 301.4. %PDF-1.6 % IRS accused of using 'racial equity' for audits targeting White, Asian Shareholders at JPMorgan Chase and State Street hold their meetings this week. Beyond the moral case and business case for conducting Racial Equity Audits, and fighting systemic racism in general, is the democracy case espoused by social justice advocates [37] and that corporations can at times act more swiftly and have a more profound effect on current social issues than the government; therefore, these advocates argue that corporations have a responsibility to address issues affecting our democracy. At Morgan Stanley, youll find trusted colleagues, committed mentors and a culture that values diverse perspectives, individual intellect and cross-collaboration. CK%@q)4rK!u\r94 !5@@yb#8u(:uI&UsRmndt>&. [44] Advocates of Racial Equity Audits believe that they are essentially intended to be implemented in furtherance of risk management and risk tolerance, criteria that fiduciaries may choose to measure in order to protect their investments. ;Lxqh;gxFK wEYem-()f-Nf7z/!+{)[`J9Ng cZ|4pv>jw~&?wq ?NpJ>V7{b[tgsllQ.SjT-hN0 `cU [20] State governments have also codified ESG initiatives into lawCalifornia leading the charge with the passage of Senate Bill 826 and Assembly Bill 979, which require a certain percentage of directors on the boards of public companies headquartered in the state be composed of females and individuals from underrepresented communities. [30], The impact a Racial Equity Audit may have on a company may be felt in many ways. Our insightful research, advisory and investing capabilities give us unique and broad perspective on sustainability topics. (go back), 96See e.g., Goldman Sachs Proxy Statement, supra note 35 (We share the proponents focus on advancing racial equity.); Citigroup Proxy Statement, supra note 69 (While we disagree with the overall approach in this Proposal, we are completely aligned with its stated goal of addressing racial inequity in the financial sector.); see also Lawmakers debate bill mandating racial equity audits at firms, The Hill, Abigail Goldberg-Zelizer, June 30, 2021, available at https://thehill.com/policy/finance/561026-lawmakers-debate-bill-mandating-racial-equity-audits-at-firms; Shareholders want to hold corporate giants accountable for their commitments to racial equity and justice. A racial equity audit is an evaluationusually conducted by an external law firmof an employer's policies, procedures and practices to identify and address systemic bias and discrimination. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. BlackRock pledges to conduct racial-equity audit The move comes in a year when several US financial institutions have faced requests for racial equity audits amid growing investor scrutiny of diversity, equity and inclusion (DE&I) issues at US companies. [17], Improved ESG criteria is not a new area for activist investors. (go back), 106Other shareholders joining the proposal were: (1) the Praxis Growth Index Fund; (2) CommonSpirit Health; (3) the Adrian Dominican Sisters; (4) Catherine Donnelly Foundation; (5) Monasterio Pan de Vida; (6) Reynders, McVeigh Capital Management, LLC; (7) the Congregation of the Sisters of St. Joseph of Peace; (8) the Sisters of the Holy Names of Jesus and Mary U.S.-Ontario Province Corporation; and (9) Newground Social Investment on behalf of the Robert H. and Elizabeth Fergus Foundation and Eric Menninga. Amundi Asset Management, Northern Trust Investments, and PIMCO were leaders in supporting racial equity audit proposals, voting in favor of 100 percent of proposals.Morgan Stanley, UBS, Legal & General . Proxy advisors split over racial equity requests at banking giants Assumed . The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic inequality. Amongst the various ESG developments gaining traction in the markets is the recent push by shareholders for companies to conduct Racial Equity Audits, which generally consist of an objective investigation into a companys practices, policies and histories to determine such companys impact on social issues and areas for improvement. CtW and US labour union SEIU filed racial equity audit proposals at eight US financial giants this year. In light of the protests sparked by the murder of George Floyd in June 2020, the CtW Investment Group requested systemically important financial institutions, like big Wall Street firms, to conduct a racial equity audits. 20091 (August 16, 1983)). Legislative or regulatory requirements are not without their own risks, and compliance with any such minimum standards would not be fool proof to insulate a company from potential ESG proposals and proxy campaigns. Whether it be modern day redlining techniques related to mortgage loans, to excessive checking account fees, to most recently, Payday [sic] Protection Program distribution, communities of color have faced decades of discrimination as a result of the financial industrys policies and practices. (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. We live that commitment through long-lasting partnerships, community-based delivery and engaging our best assetMorgan Stanley employees. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. Morgan Stanley is also donating $5 million . (go back), 22Supra note 10. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . 1s unprecedented victory, with three of its director nominees being elected to Exxons board at its 2021 annual meetingsending a clear message that environmental concerns and proactive planning are deeply important to Exxons shareholders. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. We have the experience and agility to partner with clients from individual investors to global CEOs. [68] Several of the supporting statements for Racial Equity Audit proposals stated that: High-profile police killings of black peoplemost recently George Floydhave galvanized the movement for racial justice. This is all while donating the greater of 1% of sales or 10% of profits to environmental activism, working to be 100% carbon neutral by 2025 and allowing employees to spend up to two fully-paid months of working time on supporting environmental conservation projects. (go back), 104Amazon.com, Inc., Notice of 2021 Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 15, 2021, available at https://www.sec.gov/Archives/edgar/data/1018724/000110465921050333/tm2035374-1_def14a.htm [hereinafter Amazon Proxy Statement]. BlackRock plans racial audit, in break with Wall Street peers 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. [15] As discussed in more detail below, a companys performance on ESG factors, such as investment into renewable energy, promotion of employee health and safety and contributions to the local community, are pressing issues that can either benefit or adversely affect a companys perception in the public eye, operational execution and bottom line. Votes on the Proposals at JP Morgan & Chase, Goldman Sachs and State Street will take place in the next few weeks. . Id. If this occurs, legislators and/or regulatory authorities may at some point in the future step in to close the gap between investor demand and practical implementation. (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. CtW Morgan Stanley Racial Equity Audit Proposal SOC Investment Group LinkedIn Andrew Santini : I am very proud to announce that I have This post is based on an Olshan memorandum by Mr. Berenblat, Ms. Gonzalez-Sussman,Claudia B. Dubn, Rebecca L. Van Derlaske, Ian A. Engoron, and Sarah R. Matchett. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. In general, Racial Equity Audit proposals ask the board of directors of a company to oversee such audits analyzing the companys business modelsfrom policies to products and servicesto determine whether they cause, reinforce or perpetuate discrimination. [67]. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. [140] The legislation is sponsored by Rep. Joyce Beatty and co-sponsored by Reps. Nikema Williams and Jesus G. Garcia and is currently under committee review. Second, whether any changes to existing programs or new measures or initiatives, would help a company become more equitable and inclusive. See how we can help you work toward your goalseven as they evolve over years or generations. Some companies are turning to law firms like Covington to do the work. SEIU report slams BlackRock, Vanguard, Fidelity and State Street https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. [58] The audit produced three reports, which ultimately described how Facebook utilized the audit process to listen, plan and deliver on various consequential changes that will help advance the civil rights of its users in a number of categories and also recommended implementation of specific action items, including to (1) continue to onboard expertise, (2) build out the civil rights leaders team, (3) expand civil rights product review processes, (4) require civil rights perspectives in escalation of key content decisions and (5) prioritize civil rights. [59] The thoroughness of the audit and the response and subsequent actions taken by the company have led to the Facebook audit being heralded by many as a big success. However, on August 6, 2021, the SEC approved new listing rules proposed by The Nasdaq Stock Market LLC (Nasdaq) requiring each Nasdaq-listed company to disclose certain information about the diversity of its board of directors and generally include a minimum number of members of its board of directors who are Diverse (as defined within the new listing rules). Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. Even with an increase in the number of shareholder proposals requesting Racial Equity Audits, it is possible that companies may not adopt them as quickly or as widely as the public and/or certain legislative bodies would prefer. (go back), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Morgan Stanley Launches the Institute for Inclusion Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. Why did nearly all of the banks urge "no" votes on the audit proposals? [14], ISS and others have published a number of reports that have found that addressing social and environmental concerns correlates with companies either currently experiencing or having the potential to experience increased growth and profitability. [118] However, Comptroller DiNapoli noted a human rights assessment is not the same as an independent racial equity audit, and shareholders should be weary of equating the two. [119], On May 26, 2021, Amazon shareholders rejected eleven shareholder proposals at the annual meeting. (go back), 97Citigroup Proxy Statement, supra note 69. Our latest initiative combines the resources and reach of Morgan Stanley with the knowledge and experience of our distinguished nonprofit partner organizations to help deliver positive, tangible impact on the challenges of stress, anxiety, and depression in children, adolescents and young people. The California legislature recognized the public desire to move towards greater diversity on public boards and codified set requirements. Bank of America said last week that an audit is unnecessary given its progress on racial equality. Citi to conduct racial equity audit | IR Magazine Andrew Santini LinkedIn: I am very proud to announce that I have Black Rock, the world's largest asset manager, is launching a racial audit at a request of a shareholder. Why Are Goldman Sachs And JPMorgan Looking To Avoid Racial Equity Audits? Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. . 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. As . (go back), 17Supra note 5; see also What Is ESG? Citi to conduct racial equity audit | Corporate Secretary Multicultural and women entrepreneurs are the cutting-edge leaders of businesses that power markets. Most of the big banks have not been as interested in these types of transparent audits. We help people, businesses and institutions build, preserve and manage wealth so they can pursue their financial goals. Equity audits are a leadership tool used to collect the data that informs the process of removing programmatic barriers that impede full participation, access, and opportunity for all students to receive an equitable and excellent education. I am very proud to announce that I have been named in Morgan Stanley's prestigious 2023 Pacesetter's Club, a group of the Firm's successful Financial Advisors.
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