Home Diversity Putting money into values: DEI investing shapes portfolio management

Putting money into values: DEI investing shapes portfolio management

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Diversity, equity and inclusion – or DEI – investing is a growing movement at investment management firms, foundations and among individual investors who shape investment portfolios to reflect their values.

Amy Seto and Beverly White-Seals. Courtesy photo.

Amy Seto, a senior advisor who serves as a resource for endowments and foundations at Brown Advisory, has been giving primers on DEI investing to her clients for several years.

As an Asian American woman partner of Brown Advisory, she believes she’s in a unique position to help other women and colleagues of color.

“I want to continue to create opportunities for other women and diverse individuals to  advance and succeed, speak for inclusion in the communities and support the firm’s general efforts overall,” she said. “Our experience has also demonstrated in our sustainable investment strategies that incorporating factors like DEI helps drive investment performance for our clients.”

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The DEI process at Brown began several years ago with educating executives and colleagues in how to take a new look at diversity, equity and inclusion efforts as an imperative to serving clients well.

“As an investment firm, delivering first-class performance is of utmost importance,” said Seto. But at Brown Advisory, there’s more to it: becoming better investors means having diverse thinking and perspectives on teams and making sure that all voices are heard in the room.

“We’re also a firm where all of our colleagues are equity owners and we have a responsibility to have equitable policies in place that support colleagues who are from traditionally underrepresented demographic groups,” said Seto.

It’s also more than words and much more than a “checked box” for diversity.

Brown Advisory attained a perfect score of 100 on the Human Rights Campaign’s Corporate Equality Index, with the firm designated as a “Best Place to Work for LGBTQ Equality.”

Brown›s board of directors also voted to reduce board terms to create new board seat opportunities – with diversity as a dominant factor in the selection process.

Last year, the firm appointed David Hodnett as the director of Diversity, Equity and Inclusion.

How Do We Begin?

Start by asking the right questions.

Seto said the DEI process began when the firm surveyed employees on topics around diversity, equity and inclusion.

“And, our executive team is committed to conducting this kind of survey every other year,” said Seto.

At the same time, Brown Advisory created an infrastructure and budget for colleague-led affinity groups, called Colleague Resource Groups, and all colleagues are encouraged to join. Today, Brown Advisory has five such groups: Asian and Pacific Islander, Black and Hispanic, LGBTQ+, Military and First Responders, and Women.

The groups, organized under the umbrella and guidance of a DEI Advisory Committee, have become, Seto said, “an embedded part of our culture and day-to-day life at the firm.”

What does this mean in practice?

Brown Advisory works with its clients to incorporate diversity priorities into their custom portfolio.

Seto thinks about DEI as a lens through which Brown Advisory views many of the investments it makes on behalf of interested clients, as well as investments it makes for the future of the firm.

What Do Donors Want?

One of those clients is the Community Foundation of Howard County, where president and CEO Beverly White-Seals has been increasingly thinking and communicating with donors about issues in Howard County related to DEI.

“At the board level, we decided we needed to heighten our commitment to DEI internally and externally,” White-Seals said. “We want every aspect of our work to reflect that commitment.”

After setting up a DEI Committee, the foundation invited Seto to talk to board members about how to proceed on the path to DEI investing – a path with many complex choices that aren’t as easy as simply exclaiming ‘We’re inclusive!’

“In fact, we are still studying how we bring DEI investing more fully into the foundation,” said White-Seals. “The focus of our Investment Committee has always been on investment returns, and we needed a more informed understanding of how we might incorporate a DEI focus without an adverse impact on asset growth.”

During their presentation, the Brown Advisory team explained that the road to a DEI investment portfolio needs to be carefully navigated with full knowledge that it’s a complex approach, not just a pretty-sounding phrase. For a foundation, adopting a DEI focus is likely to attract new donors, and that, White-Seals, said, “makes absolute sense to me.”

The foundation is still in the process of making decisions with regard to DEI investing. For White-Seals, it’s a matter of putting your money where your mouth is – or, in this case, putting donors “money to work in a way that matches the values they have vocalized with the financial returns they have come to expect.”

Who might be put off by the decisions the board of the Community Foundation of Howard County makes? Who might be attracted?

That remains to be seen, White-Seals, acknowledged, but she’s determined that this process will become more than just “checking a box.”

White-Seals is planning to hold a donor’s forum where Brown Advisory will be able to articulate the goals of DEI investing and answer donor questions.

If we keep doing things the way we’ve always done them, nothing is going to change,” she said. “And we’ll just whine and complain about it. It’s a conversation that we need to have.”

By Susan Kim | Staff Writer | The Business Monthly | July 2021 Issue

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