With the increase in scrutiny against diversity, equity and inclusion, some corporate boards are reassessing what to do with their DEI programs, including asset management work, according to proponents of diverse managers.
Despite executive orders targeting such efforts and the Supreme Court’s 2023 decision to overturn race-based affirmative action, proponents in a Feb. 10 webinar hosted by the Diverse Asset Managers Initiative pointed to reasons companies shouldn’t back down.
“So much of what we’re seeing is bullying and intimidation. Very little of it thus far is legal change,” said Robert Raben, executive director and founder of the group, which aims to boost the number of diverse-owned asset managers and increase their assets under management.
This “doesn’t mean there isn’t going to be a lot of wrangling on the legal change that some of the administration and some conservatives want. But thus far, we’ve got exceptionally little legal change in contracting and a lot of rhetoric,” he added.
When President Donald Trump started his second term on Jan. 20, he signed several executive orders, including one that terminates DEI initiatives in the federal government “under whatever name they appear.” The following day, he signed another order that mandates federal agencies to determine which universities, foundations and public companies should be investigated for their DEI-related activities.
Legal experts have told Pensions & Investments that executive orders do not change existing laws pertaining to discrimination in employment or contracts, but instead signal increased investigations and enforcement activities.
The sentiments were echoed in the webinar by Jenny Yang, who served as the chair of the U.S. Equal Employment Opportunity Commission between 2014 and 2017, as well as the director of the Office of Federal Contract Compliance Programs at the Department of Labor between 2021 and 2023.
Among the practices that she noted aren’t prohibited that help in “accessing the full talent across America” include emerging manager programs, where selection criteria are tied to performance.
“They can recognize that they have many hurdles in place that often disadvantage smaller businesses,” Yang added. “They can continue programs that help those businesses understand how to apply and be competitive in its process, and it can have programs that may be targeted at businesses that have faced adversity uniformly — not based on race or gender.”
When it comes to collecting data on workforce diversity to identify barriers, Yang said many companies are “afraid somehow having it could suggest that they’re making race-based decisions.” She noted the major issue they would face in this area is considering such data for individual decision-making.
“But as long as companies are using the data in a way where people are making the decisions, they aren't analyzing the data, it can be presented to them in the aggregate,” Yang said.
Across the U.S., Raben said there will be states regulating diversity more explicitly by inquiring about tracking, reporting and transparency to “to make sure that people are complying with anti-discrimination laws — as you see other states trying to clamp down as they are at the federal level.”
Additionally, “you will see protests against asset managers who are aggressively anti-Black, various continuity and grassroots organizations will do what they do as part of a movement to what they think is inappropriate behavior,” he added.
While “it’s just really unpleasant to yet again have your very existence publicly — and obviously privately — challenged,” Raben said there has been progress in increasing diverse representation in asset management. But to keep the work going, he said it’s “not a good strategy to wring your hands and talk about how mean the other side is.”
The webinar coincides with — but is not held as a part of — Emerging Managers Week, in which several allocators, including the $279.7 billion New York City Retirement Systems and $274.6 billion New York State Common Retirement Fund, Albany, will host conferences aimed at promoting diverse and emerging managers.
