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Racial Justice Audits: Holding Companies Accountable for Their Role in System Racism

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In a set of new engagements, investors want companies in multiple industries to conduct racial justice audits to evaluate how institutionalized racism impacts their policies and business practices. In the wake of the Black Lives Matter marches, the shareholder proposals warn that the outpouring of public commitments to racial equity will be seen as empty promises if they are not backed up with substance.

The Service Employees International Union (SEIU)’s Capital Stewardship Program, CtW Investment Group, Trillium Asset Management, and the New York State Comptroller’s Office have filed proposals at Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Johnson & Johnson, and Amazon. The proposals suggest a third party audit focused on racial justice, which Starbucks, Facebook, and Airbnb already have done.

Banks, health care companies, and the tech/retail sector all have historically harmed generations of people of color. It’s imperative that they now help fix what is broken.  A racial equity audit is the first step to safeguard against further harm and it’s also the smart thing to do.

Importantly, the proposals encourage an internal and external review, looking at human capital management but also the products and services companies offer, along with their philanthropic and political contributions. This review can show whether the companies’ sizable financial commitments on racial equity are working as intended.

A third party audit also encourages public and stakeholder trust.  While banks are quick to rely on philanthropic contributions or financial commitments to Community Development Financial Institutions as proof of a racial justice commitment, those actions do not address broader adverse impacts on communities of color. Discriminatory policies on mortgage lending, checking accounts, and small business funding have perpetuated racism for decades. An objective third party evaluation can address this systemic problem.

Another good example comes from the health care sector.  Black Women for Wellness is concerned with Johnson & Johnson’s May 2020 decision to end sales of talcum-based powder in North America but to continue them globally. Claims about aggressive marketing of these products to Black and brown women after a talc supplier included the World Health Organization’s “possibly carcinogenic” label on shipments are troubling – as are the more than 19,000 lawsuits pending about its use. In August, more than 200 health and environmental justice organizations from 50 countries called on the company to "walk its talk on racial equity and valuing Black lives” by ending global talc sales. 

Investors deserve to understand the long-term impact of how these companies’ policies and products continue to affect communities of color. While public statements committing to Black Lives Matter and racial equity are encouraging, companies must take a full accounting of how they could help dismantle systemic racism and its effects on investors.

This is not a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The specific securities were selected on an objective basis and do not represent all of the securities purchased, sold, or recommended for advisory clients.

Renaye Manley
Deputy Director of the Service Employees International Union, Strategic Initiatives

Tejal Patel
Corporate Governance Director, CtW Investment Group


Jonas Kron
Chief Advocacy Officer, Trillium Asset Management

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