Calling in the big banks on gender-smart investing and diversity

Last month, Goldman Sachs made headlines with One Million Black Women, its impressive $10B investment commitment and $100M philanthropic commitment to support the advancement of Black women in the United States. The commitment was significant for both its size, its clear impact focus, and its impressive group of advisors, including gender-smart investor Melissa Bradley of 1863 Ventures. 

This month, Goldman Sachs is making headlines for a very different reason: a resolution at its annual meeting on April 29, where shareholders will vote on whether the bank should do away with its mandatory arbitration policy. 

Mandatory arbitration is a controversial business practice that denies employees’ the right to take legal violations to court, forcing them instead to handle any disputes through an arbitration process chosen by their employer. From a gender perspective, it has come under criticism in recent years for its role in helping companies to bury allegations of sexual harassment, racial discrimination, and other misconduct. Some gender-smart investors such as Adasina Social Capital, use it as an exclusion criteria to assess a company’s commitment to gender equality. Goldman Sachs is urging shareholders to vote against the resolution, and to allow the company to maintain the policy.

It’s a reminder that being “good on gender and diversity” in some ways does not necessarily mean being good on gender and diversity in all ways. 

Former BlackRock employee Essma Bengabsia, for example, recently published a devastating account of the sexual, racist, and religious abuse that she endured at the company. 

These allegations sit alongside BlackRock’s recent acquisition of Aperio, a leader in creating high quality gender lens portfolios, and its leverage of its influence as a big investor to push companies to improve ethnic and gender diversity in their boards and workforces. Citibank’s promotion of Jane Fraser to CEO in March came after a multi-year reckoning over its pay inequities and gender imbalance, supported by gender lens experts such as Natasha Lamb of Arjuna Capital. Even now, women employees at Citibank earn an average of 73 cents for every $1 men earn. In Australia, QBE and NAB issued successful gender bonds with some of the largest issuances in the world, but both have have had internal issues around sexual misconduct and harassment.

For those of us who are trying to push the finance industry to greater gender equality, it raises the question of how we balance the need to celebrate what is good, with the need to hold institutions accountable for the work that still needs to be done.

Most of us are familiar with the dangers of pinkwashing - institutions that make small but highly visible concessions to gender equality for marketing purposes, while the institution itself remains fundamentally sexist. 

That probably isn’t a fair assessment of what is happening at Goldman Sachs, whose One Million Black Women initiative is both financially significant, and seemingly thoughtfully designed. The bank has appeared to go on a real journey when it comes to gender-smart investing over the past decade: starting with programmes from their philanthropy side, such as the Women Entrepreneurs Opportunity Facility partnership with the IFC in 2014 and their notable 10,000 Women initiative, and later by deploying investment capital through Launch with GS, a target $1B investment strategy designed to increase capital to underrepresented entrepreneurs. In 2020, Goldman announced that as a shareholder, it would vote against any nominating committee that didn’t have at least one woman on the board - the first bank to adopt this policy, later followed by BlackRock, Vanguard, and State Street.

Every one of these changes will have happened due to the work of tireless innovators and advocates inside these organisations - both men and women - who will have had to fight inertia and institutional antibodies to get gender and diversity on the institutional agenda. Their work changing the culture deserves to be celebrated, as does Goldman’s adoption of these smart programmes.

Yet, it is also true that if you look at Goldman Sachs (or any other large bank) as an institution, in terms of gender equality at home, there is still a lot of work to do. As Courageous Capital’s Laurie Spengler points out, we also know that institutions that are bringing to market strong gender strategies can be even more effective when they advance their internal policies and culture with the same commitment.

So, what’s a gender-smart investor to do?

These contradictions can make us uncomfortable, but they shouldn’t. 

It’s not a question on whether Goldman Sachs should be celebrated for its good work on gender and diversity, or criticised for internal policies such as mandatory arbitration. We should both celebrate the good work they’re doing, and call them to do better. For starters, by voting in favour of the resolution to do away with mandatory arbitration this Thursday if you’re an investor in the bank.

This isn’t about letting things slide just because someone has a lot of capital to deploy. It’s true for us all. Many of us are doing good work. And we all have more work to do.

The secret to calling in with integrity is to do it with compassion and constructiveness. When I spoke with gender-smart investor Morgan Simon of the Candide Group on the phone recently, she said something that resonated with me: that she tries not to call people out, publicly or privately, unless she also has a reasonable and informed call to action to offer them. If we want to call institutions in with the purpose of effecting change, we have to offer a positive path forward - or focus our energy on building alternatives to them.

One powerful example of this is Seema Hingorani, who temporarily left her institutional finance roles to create Girls Who Invest after noticing the lack of diversity amongst asset managers in New York City. She kept hearing that there was no “pipeline” of women and people of colour investors, so she decided to solve the problem and create one. Hingorani is now a Managing Director at Morgan Stanley, while continuing to chair Girls Who Invest. Another example is the extraordinary work of Toigo Foundation, founded by Sue Toigo, which has brought forward hundreds of extraordinarily talented diverse candidates into mainstream finance roles. 

But you don’t have to create your own organisation to offer solutions. The gender-smart community has an increasingly rich array of case studies, frameworks, tools, and support to help investors make the changes they need. If you’re working within an organisation you can draw upon these to help pitch and build a solution that works for your institution; if you’re operating outside the institution you’re critiquing, you can offer your expertise as a consultant or advisor, or recommend someone else in the field who is well positioned to help.

Finally, as Goldman’s annual meeting this week reminds us, we can leverage our power as investors: either by divesting capital, or by using your voice as a shareholder or client. As You Sow publishes detailed information on which companies have upcoming shareholder resolutions that are relevant from a gender perspective. Larger investors such as DFIs, corporates, pension funds, endowments, and family offices can leverage even greater influence, threatening to walk away from investees or providers for competitors with a stronger track record if they don’t improve their performance on gender and diversity. Even something as simple as asking a question can highlight areas for further change and advancement.

Changing institutions is hard work, and it takes time. Often, it will be two steps forward, followed by one step back. But we have the tools, the resources, and the community support we need to do this.