Social justice refers to everyone in society having equal access to the social determinants of health including economic stability; education access and quality; health care access and quality; neighborhood and built environment; and social and community content. For investors, a widening income inequality gap can change risk and return expectations across investment opportunities and may negatively impact long-term investment performance.

According to the Principles of Responsible Investment (PRI), income inequality issues can potentially:

  • Negatively impact institutional investors’ portfolios.
  • Increase financial and social system-level instability.
  • Damage output.
  • Reduce economic growth.
  • Contribute to the rise of populism, extremism, isolationism, and protectionism.

Addressing Social Inequality

That said, OECD research found that a narrowing social inequality gap can boost economic growth. Increasing access to the social determinants of health can enhance upward social mobility and upskilling, and help people get out of poverty. What’s more, addressing social inequality will not only improve the quality of individual lives, but also society and the economy, ultimately raising productivity and boosting economic growth.

Given that this issue is systemic, there is no one way to approach it. Some people see social justice investing through the lens of business practices and workplace policies across asset classes. Others view social justice investing as products or services that drive an improved social outcome. Social justice investing also intersects with environmental issues and climate investing because those most impacted by climate change are those with the fewest resources.

When evaluating managers or investment strategies, social justice investing can gauge your investment program alignment within the following bands:

  • At minimum, does not exacerbate inequities across any of the social determinants; and
  • At best, supports or drives outcomes that create a more equitable society.

Why Social Justice Investing?

Here are some ways a social justice aligned portfolio can drive positive change:

  • A social justice-aligned portfolio can create leverage in activating the 95% investment corpus of a foundation’s portfolio to work towards enhancing a social justice mission.
  • Program related investments (PRI) can create a multiplier effect of each dollar put to work, potentially resulting in a higher ROI, than if you paid out that dollar as a one-time grant.
  • Impact investments can provide long-term patient capital for high-impact social ventures that are attempting to solve the most pressing social inequity challenges.
  • Shareholder engagement can give the foundation a voice to share its views with other like-minded investors. Multi-stakeholder engagement can drive positive corporate behavior, which can move the needle towards narrowing social inequality gaps.
  • Measuring outcomes is an ongoing challenge. The more asset owners ask for social justice investing, the more it incentivizes investee organizations to create it.
  • If like-minded investors come together, they might be able to influence policy. For example, we saw minimum wages rising across various jurisdictions in the United States in recent years.

In these particularly challenging times exacerbated by a prolonged pandemic, geopolitical crises, and economic worries, it is even more critical to actively address social inequality across all dimensions of society.

Read the full article about social justice investing by Manisha K. Ali at Exponent Philanthropy.