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Derrick Johnson, president and CEO of the NAACP, has “heard a lot about this green economy. I’m looking for it, but I’m not sure where it is.”
During a few days of “winding up” last week in New York, I attended an event hosted by the Intentional Endowments Network, where I joined endowment trustees, chief investment officers, and asset managers to discuss the hottest topics in intentional to the mission of investing — especially those who will best stimulate the financial space, of course, to do it.
I was lucky enough to sit down with Johnson, the event’s keynote speaker, to learn more about how his organization makes sense of the intersection of capital markets and capital.
The NAACP has been a leading institution promoting human rights in American society for more than 100 years. In the 21st century, the organization sees corporate America as the bedrock of the “third act” for the justice movement, with racial and ethnic justice, empowerment, and inclusion being the next frontiers for the private sector.
We need to make sure that as this industry continues to grow, with all the wealth that is being created from it, more people are involved so that it is not concentrated in 1 or 2 people.
To that end, the NAACP, in partnership with Impact Shares, a firm that supports organizations in deploying capital that aligns with their mission, manages a nonprofit ETF called the NAACP Minority Empowerment ETF (NACP). The fund is designed to provide exposure to American companies that meet the NAACP’s vision of good corporate citizens and provides an opportunity for investors to allocate their capital in a manner that is consistent with their values.
I shared some of what Johnson and I discussed here. If you want to hear more of our conversation, you can find us on the GreenBiz 350 podcast here (or wherever you choose to do your podcast) on the September 30th episode.
This interview has been edited for clarity and length.
Grant Harrison: What do you see as the traits that make up a firm’s DEI program executed well and, alternatively, one that isn’t?
Derrick Johnson: One thing I’ve noticed is that when the person who leads diversity and inclusion reports directly to the CEO, that tells me that across the organization this is taken seriously as a priority. Second, if that person actually has a P&L where they’re actually part of a business unit and managing the profit, that also shows that it’s not just a value statement, it’s actually in the DNA of the company.
And third, when their peers sitting around the C-suite table also have measurable goals to meet on diversity and inclusion, it shows that the entire institution is really behind it—that they understand the value of the move of the needle, and also the possibility of a more diverse ground-to-top decision-making structure.
Harrison: There are a number of investment funds focused on companies that rank high on inclusion and diversity performance. The NAACP manages an ETF — the NAACP Minority Empowerment ETF (NACP). What sets NACP apart from its peers and how does the fund fit into NAACP’s theory of change?
Johnson: We got into this space because we wanted a fund that focused on African-American inclusion, and that’s what makes us unique. We also had to have our own internal introspection about how we can’t have a fossil fuel fund; we had to restart because we made this mistake. So part of any ESG fund like this is to be really clear about which communities you’re trying to impact for the greater good and also learn from mistakes.
This is a new venture for the NAACP, so we didn’t know what we didn’t know. But we’re flexible enough to say, “Well, let’s pause, let’s recalibrate.” And that’s what we did. I think any ETF that seeks to do social good should be willing to be flexible enough to pause and reset.
Harrison: NACP is a market-driven effort to promote racial equity, but I know you’ve also focused on how ESG investment options in pension funds can help. Can you share more about what you’ve been focusing on in this space?
Johnson: The people who pay into, say, a pension fund are very different. Our aspiration is that your investment reflects the community health of the members who pay into the fund – not the members who paid 20, 30 or 40 years ago, but the members who pay into it now to keep it running and moving forward .
If you do, a lot will be rethought in how we invest in climate. We need to rethink the way we invest when it comes to diversity, whether it’s racial diversity or gender diversity. Investors really need to look at how to maximize returns, but also how to improve a higher quality of life for the people who pay into the fund so that the fund can really serve its beneficiaries.
Harrison: Startups with at least one black founder received only 1.9 percent of deals and 1.2 percent of total venture funding in the United States as of summer 2022. What do you think about the intersection of the venture capital and equity worlds?
Johnson: There are a few changes I would like to see. Put more diverse VC fund managers in the space because they lead with some of the highest returns even though they have a hard time raising funds. They are closer to the ground to identify innovators who might otherwise be overlooked or who simply don’t even know this world exists.
We need to make sure that as this industry continues to grow, with all the wealth that is being created from it, more people are involved so that it is not concentrated in one or two people. Like Facebook [CEO] Example of Mark Zuckerberg – one man controlling 60 percent of the shares of what has become a public enterprise. This is a dangerous proposition for the American public as a whole.
Investors really need to look at how to maximize returns, but also how to improve a higher quality of life for the people who pay into the fund so that the fund can really serve its beneficiaries.
It’s a space where a huge amount of wealth is created but there’s no accountability – one person owns 60 percent of the stock and there’s no accountability. We have to come up with a different model. So yes, people can do well and make money, that’s great, but also do good and put up proper guardrails so that people in different communities can feel good about being their unique selves essence. We have such unique diversity in this country that should be celebrated, not segregated.
Harrison: What type of financial policy would you hope to see that would best address the wealth gap between black and white families in the United States?
Johnson: Then start from the middle down [moving] up, making sure that policy is implemented with a racial lens, so that we don’t make good policy that has a disparate impact on African-American or other communities. More importantly, help people understand that this is not a zero-sum game — that there is room at the table for everyone. In fact, when you put more people at the table, the table actually grows.
A great example can be seen through the policies of the New Deal. Many people say it was terrible, but in fact it was probably the best thing that ever happened to this country. It created a middle class and created a safety net. This created an opportunity for home ownership. But what it didn’t do was have a racial lens. So even though we ended up with a social security program, we had Southern white supremacists able to make an exception for farm and domestic workers: 80 percent of African Americans at the time were farm and domestic workers.
Again with federally backed home mortgages. Great concept and we’ve seen home ownership skyrocket. But what happened is that the decisions were left to local bankers and developers, who then created discriminatory housing and credit policies.
If we implement policies with DEI in mind, we must do so with a racial lens so that the barriers and obstacles of the past do not hinder us and create the same mistakes in the future.
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