What do we mean by "antiracist investment"?

In September 2020 EIG members who responded to a survey noted that identifying antiracist investment opportunities was a priority for the group (see Self-reflection and next steps on Diversity, Equity and Inclusion). But what exactly do we mean by “antiracist investing” and how, concretely, does committing to it affect EIG’s investment philosophy? This was the question posed by members of EIG’s Executive Committee when they pointed out that the survey did not define “antiracism” in relation to investment, and that it likely meant myriad things to the different respondents.

First - Language

Language matters, but we don’t want to get lost in semantics. Words and catch phrases are easy to co-opt but hopefully our actions will speak for themselves. In past posts, I’ve used both “antiracism” and “diversity, equity and inclusion (DEI)” in expressing EIG’s aim to be more intentional in its investments, to the benefit of BIPOC communities.

“Antiracist” is a term popularised by Ibram X. Kendi, which describes actively opposing racism and promoting inclusion. Since the shooting of George Floyd in 2020 this term has gained traction in movements seeking to bring about racial equity.  “Diversity, equity, and inclusion” on the other hand is often used in the corporate world. 

Some EIG members favour “antiracist”, suggesting we should be intentional in our use of language. Others would prefer using more positive language, identifying what we stand for rather than what we stand against but, unlike the more general “DEI”, in a clear and unequivocal way. An example I prefer is “promoting racial equity” [1].

Second - Operationalizing Our Commitment

So how do we translate a commitment into action?

Firstly, it should be understood that, while we are committed to racial equity, we are also committed to other types of ethical investments, ones that promote environmental stewardship (for instance renewable energy) and that promote human rights, including labour rights. As such, I suggest that promoting racial equity in our investments gets folded into our ethical considerations for any new investment. 

I think antiracist investing for EIG can be broken down according to a few criteria:

• Who the investment serves: Does the organisation directly promote racial equity in its work?
• Who owns and directs the organisation: Is the organisation founded, owned or directed by members of Black, Indigenous and People of Colour (BIPOC) communities?
• How the organisation is run: Are there policies to ensure recruitment and promotion of policies supporting racial justice?

Or more positively framed:

1. We seek to invest in organisations that directly address the needs of BIPOC communities.
2. We seek to invest in organisations that are founded, owned and or directed by members of BIPOC communities.
3. We seek to invest in organisations that promote racial equity throughout their internal practices, including hiring and promotion, and that generally abide by principles of decent work, including sick leave, health insurance, maternity leave.

Digging down further, I think that for EIG we need to consider separately our two investment portfolios.

EIG has two types of investments, what we call “community investments” and “equities”. Our investment philosophy stipulates that approximately 60% of our portfolio is held in equities, i.e. securities traded on the stock market, while 40% is in the form of community investments, which provide both financial and business support for small-time entrepreneurs who are unable to obtain financing from major financial institutions.

Community Investments

As I noted in the first blog post on this subject, EIG’s community investments already have strong antiracist components. For example:

• Microcrédit Montréal and Fonds communautaire d'accès au micro-crédit specifically serve immigrant and more marginalised communities, who may have difficulty receiving loans from the traditional banking sector.
• Caisse d’économie solidaire Desjardins invests in initiatives such as social housing and development of an inclusive economy.
• Ecotrust Canada works with rural Indigenous communities in BC on projects such as housing, fisheries, clean energy.
• Mennonite Economic Development Associates (MEDA) works with low income and excluded populations in Africa and Asia to support their integration into mainstream markets.

I would argue that these investments are excellent examples of antiracist investments, falling squarely into the first category described above. They actively promote racial equity for immigrant and other marginalized communities with overrepresentation of BIPOC members, through access to loans, support or housing (including, for immigrants, support and financing in getting international credentials recognized).

A commitment to antiracism should lead EIG to continue to seek out these kinds of investments in its community portfolio.

Equities Investments

Including racial equity criteria in equities investment is more difficult because of:

• Limited opportunities for access to publicly traded companies that either directly and specifically serve, or are owned by, members of BIPOC communities (criteria 1 and 2 above).
• Lack of information necessary to evaluate a company’s workplace policies and practices as they relate to racial equity (criterion 3 above).·   

In terms of opportunities, I think the best EIG can hope to do in the current environment is to identify public companies that are moving towards partial ownership by BIPOC communities. This is a developing trend particularly with Indigenous communities, for example:

• Boralex, currently held by EIG, has partnered 50-50 with Innu communities in Quebec to build a sizeable wind farm.
• In January 2021, Clearwater Seafoods, became 50% owned by a Mi’kmaq First Nations Coalition in what is being called a historic transaction. While the EIG equities committee has not yet looked into proposing an investment, it is on the radar.

As to evaluating public companies’ policies and practices regarding racial justice, the unfortunate fact is that, to a very large extent, the necessary information is simply not out there. There are two aspects to this criterion:

          1. Composition of the Board of Directors and senior management

Here, there are some hopeful signs of improvement. In Canada, federally incorporated public companies (about 40% of the TSX S&P index) are now required to disclose the number and percentage of Board members and senior management who are women, Indigenous, members of visible minorities and persons with disabilities. More recently, Ontario’s Capital Markets Modernization Taskforce, while backing away from an initial proposal for regulation, is nevertheless urging both disclosure of diversity data and setting of diversity targets for boards of all public companies. Meanwhile detailed diversity studies are beginning to emerge, such as that of the Prosperity Project. In the US, the Nasdaq exchange recently filed a proposal for new rules requiring companies to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.

2. Workplace practices such as promotion, recruitment and retention rates.

 While little is currently being done in Canada, in the US the push for better disclosure of data on workplace practices is being spearheaded by As You Sow, a non-profit shareholder advocacy group, which has produced an Investor Statement on Workplace Equity Disclosure, signed by 125 large, institutional investors. It calls for companies to release meaningful data on policies, practices and outcomes related to workforce composition, promotion, recruitment, and retention rates, as well as pay practices. As You Sow has also produced a tool for rating companies on their disclosure of such data, as described in a recent webinar, Workplace Equity & Racial Justice. A similar initiative is needed in Canada.

All that being said, organisations that have diverse leadership and that are actively seeking to promote racial equity among employees often talk about it, increasing EIG’s chances of being able to identify good or poor performance. At the same time, racial equity investing involves being aware of new developments such as those related to disclosure described above.

It is our hope that, with increasing availability of diversity data, it will become more feasible to incorporate a racial equity criterion into evaluation by EIG of potential equities investments, and thereby add another lens through which to view our "ethical" equities portfolio. 

As always, identifying new investment opportunities come from members. If you have any ideas about new investments that promote racial equity, get in touch with the equities or community committees!

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[1] I acknowledge that members likely have different views on what “the best” way of framing our intention might be but I think focusing on delivering on the intent is more of a priority than debating the language used. However, if any member would like to discuss this, please don’t hesitate to get in touch.