Vetting fund managers on DEI: Why it matters

investmentnews.com:

The financial services industry has a history of furthering inequality — both within the business and the wider public — and that’s something that consumers want it to address.

That’s according to a report Thursday from Veris Wealth Partners that highlighted ways for advisors to evaluate asset managers on theirdiversity, equity and inclusion practices.

That, the firm said, may be more important than ever, given the recent Supreme Court ruling against the use of affirmative action at colleges — a development that may already be affecting hiring practices in the private sector.

“Advisors should care because consumers care. Consumers are noticing that the industry is limited in its scope and depth of thought,” said Jane Swan, senior wealth manager and partner at Veris. “I’m hearing from clients that they’re interested in investments that incorporate broader perspectives in how risk is assessed and how opportunity is examined … Having more viewpoints at the table can improve outcomes as we consider a diverse consumer base.”

The firm selects asset managers with teams composed of more than 30% women and people of color, those that have DEI commitments and plans, include DEI factors in their investment processes, invest in diverse portfolio companies and engage with companies on DEI.

Veris reassesses asset managers annually, evaluating the engagement those firms have had on promoting DEI, according to the report.

The company points to case studies on a handful of funds and managers it selects, including Impact America Fund, The 22 Fund and Adasina Social Capital.

“If you look at the more traditional due diligence and risk management frameworks, that has perpetuated a system where almost 99% of assets under management in the