Giving Compass' Take:

• Lata Reddy shares how Prudential's specific, integrated impact investing approach supports diversity and economic inclusion.

• How can impact investors learn from organizations that have specific, explicit strategies like this one? 

• Learn more about impact investing. 

The need for accelerated progress on race and gender is acute in financial services. A recent (unpublished) study by Fairview Capital, the largest private equity manager owned by a woman of color, of racial and ethnic representation in private equity found that 78 percent of senior management was white, 20 percent was Asian, and only 1 percent was Latinx or African-American. Under-representation in private equity is also more severe than in other well-compensated professional fields, such as law and medicine. This pattern also holds for gender; the field of asset management has a much lower participation rate by women than other professional fields.

To address these disparities, we’re developing a continuum of initiatives that draw on Prudential’s approach to shared value. One of our tactics is to invest directly in diversity by deploying capital with financial intermediaries founded and run by women and people of color. They include:

  • Committing to inclusive venture capital: Prudential’s impact investment program has an ongoing, $25 million commitment to support the growth of more-inclusive venture capital models that promote diverse investment teams, support underrepresented founders, and invest in business models that address large-scale social challenges. Through this program, we’ve placed capital with the Impact America Fund, Bronze Investments, and Urban Innovation Fund.
  • Supporting emerging managers: We commissioned a study in 2016 with the Association of Black Foundation Executives (ABFE) that found that, despite the array of programs foundations support to address inequality around the globe, very few foundations had implemented diverse manager programs within their investment portfolios. Prudential has developed a portfolio of emerging managers and has placed $905 million of our corporate account dollars with minority and woman-owned asset managers, sparking billions in asset growth at participating firms.
  • Placing assets with minority and veteran-owned depository institutions and money managers: Since 1987, three-quarters of the nation’s 91 African-American banks have disappeared, as the industry has consolidated in response to changing market conditions. Yet minority depository institutions address the persistent lack of capital and other financial services available to minority communities. Prudential actively places cash deposits and other liquid assets—totaling $47.8 million—with minority depositories, and minority and veteran-owned money managers across the United States.

Read the full article about supporting diversity and economic inclusion by Lata Reddy at Stanford Social Innovation Review.