Amid the protests for the Black Lives Matter movement, much of corporate America has issued statements condemning police violence and supporting the rights of people of colour.
As the chief executive officer of Robasciotti & Philipson, a wealth-management firm in the U.S. Rachel Robasciotti is pursuing a different way to change racial and social justice in this country: the power of money.
In the white, male-dominated world of finance, Robasciotti is Black and female, and identifies as queer. She grew up poor, both of her parents had mental illnesses, her father was institutionalized, and domestic violence occurred.
She was also a gifted child, graduating high school at age 15, moving on to obtain her bachelor’s degree at the University of California, Berkeley.
At age 25, she left her job to form her own advisory firm to seek social justice. That was in 2004 when impact investing was yet to make a significant mark.
Through her practice, Robasciotti is taking a 3-prong approach:
- Invest in companies that operate for the well-being of society and the planet
- Divest from companies that prop up the systemic oppression
- Pressure companies to end unjust practices.
From gender equity to racial justice, social justice fully informs Robasciotti’s investing process. She developed a series of impact screens based on what she calls a bottom-up approach.
Instead of imposing typical social screens, such as board composition or management diversity, she relies on feedback from community organizations to determine social impacts and how they should be measured.
“They are constantly informing our strategy. We are taking their message into the investment world and organizing investors to focus on what they say matters.”
Her screens fall under two broad categories: people and planet.
Systemic sexism is under the umbrella of gender equity on the people side. Human rights includes racial justice, fair labour, and LGBTQ+ equality screens. There is a human safety screen, which eliminates firms like tobacco companies, weapons makers, and fast-food restaurants.
Screens in the planet category include environmental sustainability, clean air and water, and animal welfare.
Corporate governance is also a screen.
The effort whittles down a universe of thousands of companies to about 800, with the final cull done by a portfolio-optimization algorithm and reduction of any over weightings, which tend to be in technology and growth companies. That gives Robasciotti an impact list of about 400 names from which she constructs an index.
Her portfolios for clients, which she calls RISE portfolios (an acronym for return on investment and social equity), are built from the index. She also employs standard investing-strategy tactics such as diversification, rebalancing, and managing expenses and taxes.
“Stop [using] your investment dollars to [buy] companies that exacerbate racial inequities. When publicly traded companies employ these practices, the repercussions extend throughout the financial system.”
Robasciotti not only wants investors to use their investing dollars to buy companies making an impact; she also urges them to divest from companies that condone or perpetuate oppression of people.
She believes that persuading shareholders to divest is far more effective than traditional shareholder activism, where proxy votes are typically nonbinding. Boardrooms, she says, generally aren’t held accountable to this form of dissent.
In June, her firm published a list of more than 100 publicly traded companies that don’t meet its racial justice screens.
She recommends investors divest themselves of companies that are negatively involved with issues such as:
- Prison involvement: 18 companies, includes for-profit prison companies GEO Group and CoreCivic and food-service purveyors such as Aramark and Sodexo.
- Surveillance: 10 companies including Amazon.com and Accenture.
- For-profit colleges: 9 on this list.
- The Israeli-Palestinian conflict: 59 companies make the list because Robasciotti’s research indicates that their work negatively affects Palestinians in the occupied territory of the West Bank, including General Electric, Motorola Solutions, Northrop Grumman, and Raytheon Technologies.
The list also includes investment companies such as BlackRock, State Street, Charles Schwab, Invesco, and Northern Trust because they own more than 1 million shares of for-profit prison companies (as of their latest reported portfolio holdings).
“We are impact investors. I believe that we are coming to the end of an era, in which finance sees itself as a neutral actor in the social space simply because people are being passive investors. If you invest via indexes, you’re likely providing capital to industries that are doing harm.”
The firm filed an application in July with the SEC to form an exchange-traded fund of its social justice index and expects it to debut in September.
The above is an extract from a more detailed article that appeared on Morningstar.com
