Addressing
diversity
issues
through
the
financial
markets
is
challenging,
but
not
impossible,
so
long
as
you
use
the
power
of
the
proxy.

That
makes
Nia
Impact
Capital
a
particularly
qualified
practitioner.
Under
founder
Kristin
Hull,
Nia
has
proposed
shareholder
resolutions
that
advance
gender
and
racial
equity
efforts,
including
prodding
companies
to
abandon
the
use
of
non-disclosure
agreements
in
employee
contracts.
That’s
led
to
successes
with
Fortinet
(FTNT),
IBM
(IBM),
and
Apple
(AAPL).
Then
there’s
her ongoing
conversation with
Elon
Musk
.

During
Black
History
Month,
we
checked
in
with
Hull
about
how
Nia
is
practicing
racial
equity
investing.
She
told
us
about
it –
as
well
as
the
charms
of
Flowers
Foods
(FLO),
Xylem
(XYL),
and
Amalgamated
Financial
(AMAL).
Keep
reading
for
more.


Read:
How
to
Find
Funds
That
Address
Systemic
Racism
and
the
Wealth
Gap


Leslie
Norton:
 Why
has
it
been
difficult
to
address
diversity
issues
using
the
public
equity
markets?


Kristin
Hull:
 Because
the
status
quo
is
so
entrenched.
Most
of
our
economy
is
made
up
of
corporations.
They’re
large
actors
with
huge
influence
over
our
society
as
well
as
our
economy.
Investors
have
a
right
and
responsibility
to
engage
with
large
corporations.


LN:
 Still,
there
are
improvements
made
in
diversity
reporting
and
human
capital
management
in
the
past
few
years.
Why
keep
pushing
on
these
issues?


KH:
 A
lot
of
our
larger
corporations
weren’t
founded
on
the
alignment
of
diversity
as
part
of
their
structure
and
ethos.
It
wasn’t
and
isn’t
necessarily
on
most
people’s
radar,
and
companies
are
out
of
alignment
as
understanding
the
benefits
and
using
incentives.
Yet
the
research
really
does
show
that
diverse
teams
produce stronger financial
returns, make
better
decisions
.

Why
Proxy
Voting
is
Important
For
Racial
Equity


LN:

You
and
your
firm
are
also
known
for
your
proxy
initiatives.


KH:
 I
came
to
public
markets
as
an
angel
investor
and
venture
early-stage
investor.
It’s
very
common
in
our
ethos
to
have
a
conversation
with
the
initial
founders,
with
the
entrepreneurs,
of
the
company.
I
brought
that
VC
lens
to
public
markets—we’re
going
to
get
to
know
these
people,
why
they’re
doing
what
they’re
doing,
whether
they’re
competent
and
sitting
in
the
right
seats.
We
understand
the
power
and
privilege
of
being
an
investor,
and
the
right
and
the
responsibility
to
have
tough
conversations
with
management.
We
want
to
make
sure
that
these
companies
are
doing
the
very
best
and
positioning
themselves
for
return
on
investment.
For
example,
Nia
has
asked
companies
for
scope
1,
2,
and
3
carbon
emissions
prior
to
that
emission
data
being
a
standard
disclosure,
to
report
on
the
use
of
nondisclosure
agreements,
or
NDAs,
in
employee
contracts,
to
examine
the
use
of
forced
arbitration
and
its
effects
on
company
culture
and
racial
equity
efforts.

Many
of
these
efforts
are
not
being
taken
on
by
other
investors.
We
are
willing
to
go
first
and
lead
in
some
of
these
discussions
with
companies.
We
are
honestly
really
happy
when
we
can
have
constructive,
win-win
conversations
with
management
behind
the
scenes
because
it
means
we’re
growing
our
relationship
and
making
change
happen.
Absolutely
we
know
that
filing
resolutions
is
a
tool
in
our
toolbox
in
the
U.S.


LN:
 What
are
some
of
your
successes
in proxy
voting
?


KH:
 Fortinet,
the
cybersecurity
company,
in
2020.
We
saw
a
lot
of
men
in
a
leadership
and
not
a
lot
of
attention
to
this
area.
We
believe
in
the
company
and
wanted
to
see
them
setting
best
practices
as
early
as
possible
so
it
gets
baked
in
the
culture.
Our
resolution
asking
the
company
to
report
quantitative
diversity
data
won
70%
of
the
vote.

We
asked
IBM
for
diversity
reporting.
They
weren’t
moving
at
a
pace
where
we
saw
momentum.
We
need
to
see
all
our
companies
moving
at
a
pace
where
there’s
momentum
and
authenticity.
We
began
engaging
with
management
in
2020
after
[former
CEO]
Ginni
Rometty
stepped
down.
In
2020,
Nia
requested
the
release
of
IBM’s
consolidated
EEO-1
form,
which
catalogs
company
workforce
diversity
and
is
required
by
all
publicly
traded
companies
in
the
U.S.
to
be
submitted
to
the
Equal
Employment
Opportunity
Commission
(EEOC).
Nia
considers
the
public
release
of
EEO-1
to
be
the
best
practice
for
disclosures
of
workforce
diversity
data.
IBM
was
reluctant,
but
the
SEC
forced
IBM
to
place
Nia’s
resolution
on
its
proxy
ballot.
In
2021,
IBM
said
it
would
support
Nia’s
shareholder
resolution
to
increase
its
own
diversity
and
inclusion
reporting.
So
Nia won this
resolution

with
94.31%
of
the
vote.

We
asked
Apple,
on
the
ballot,
for
them
to
conduct
a
report
on
the
use
of
nondisclosure
agreements
in
contracts
that
Apple
asks
employees
or
contractors
to
sign
which
would
limit
their
ability
to
discuss
unlawful
acts
in
the
workplace,
including
harassment
and
discrimination,
or
their
personal
experience
at
the
company.
We
won
with
more
than
50%
of
the
vote.
While
proxy
votes
are
generally
nonbinding,
any
vote
over
20%
or
so
sends
a
really
strong
message
to
management
and
the
board
that
investors
are
very
concerned
about
this
issue.

We
were
thrilled
when
Apple
announced
last
December
that
they
were
removing
NDAs
from
employee
contracts.
They
credited
our
work
for
making
that
change.

Most
people
see
arbitration
in
corporations
as
providing
a
relatively
fast,
cost-effective
alternative
to
litigation.
Its
potential
to
entrench
preexisting
power
imbalances
is
the
issue.
This
plays
out
for
sexual
harassment,
which
is
now
illegal
federally,
and
racial
discrimination.
The
arbiters
are
generally
retired
judges,
whose
bills
the
companies
pay,
and
who
often
side
with
the
company.
So
racial
discrimination
is
hidden
from
other
managers,
employees,
the
media,
potentially
exacerbating
systemic
racism
and
other
issues.

Taking
on
Tesla


LN:
 Let’s
talk
about
Tesla
(TSLA).


KH:
 We
invested
because
of
the
battery
play
and
because
we
saw
the
capacity
to
move
and
innovate.
Tesla
and
Elon
Musk
have
completely
disrupted
automobiles
and
manufacturing
as
we
know
it,
but
without
a
lot
of
concern
or
adequate
respect
for
employees
and
humans.
The
last
earnings
call
discussed
the
move
toward
robotics
and
AI,
possibly
at
the
expense
of
workers.
As
soon
as
he
took
over
at
Twitter,
which
is
now
called
X,
there
were
widespread
layoffs
of
coders
and
other
employees,
and
then
they
realised
they
actually
needed
these
people
and
tried
to
hire
them
back.

We’re
working
with
Whistle
Stop
Capital
and
a
group
of
investors
to
discuss
possible
actions.
We
wrote
a
letter
to
the
Tesla
board
sharing
our
concern
about
the
board
not
doing
their
job,
being
beholden
to
the
CEO,
and
asked
the
board
to
step
up
as
far
as
mitigating
risks
for
the
company
and
investors.
One
of
the
main
issues
we
raised
was
Tesla’s
lack
of
regard
for
human
capital
management,
the
ability
to
attract
and
retain
top
talent.

I’ve
written open
letters to
Elon
,
and
Nia
also
wrote
the
first
investor
statement
condemning
Musk
for
his
antisemitic
tweet.

We
may
also
have
played
a
role
in
the
California
suit.
[Tesla
is
currently
being
sued
by
the
state
of
California
and
by
the
US
Equal
Employment
Opportunity
Commission,
which
claim
that
workers
were
subjected
to
racial
harassment
at
the
company.]

During
the
pandemic,
Tesla
employees
saw
us
speaking
out
and
also
filing
our
shareholder
resolutions.
So
many
reached
out
to
us
that
I
got
a
bit
overwhelmed.
I
was
an
investor.
What
was
my
role?
Attorneys
were
also
coming
to
us
to
ask
about
forced
arbitration.
So
we
referred
quite
a
few
people
to
the
California
Civil
Rights
Department,
and
ultimately
the
state
brought
this
lawsuit.

How
to
Invest
With
Racial
Equity
in
Mind


LN:
 How
do
you
invest
around
racial
equity?


KH:
 Over
the
past
15
years,
with
the
lack
of
diversity
in
leadership
and
with
so
many
white
male
teams,
building
a
product
based
on
racial
equity
didn’t
seem
possible.
Now,
that’s
changing,
with
our
activism,
the
ability
to
look
at
products
and
services
that
are
beneficial
to
Black
and
brown
people,
and
the
fact
that
George
Floyd’s
death
in
2020
put
this
issue
on
the
radar
of
corporations.
Of
course,
there’s
a
backlash
right
now
against
all
things
ESG
and
DEI,
but
it’s
part
of
the
conversation
we
can
have
with
companies.

A
growing
set
of
investors,
women,
millennials,
and
beyond,
want
to
see
their
investments
aligned
with
their
values.
We
get
the
economy
we
invest
into,
and
these
investors
want
to
be
a
part
of
an
equal
justice-led
economy.
Separately,
companies
want
to
be
the
best
they
can
be.

Our
previous
products
have
been
global.
But
when
it
comes
to
racial
discrimination,
focusing
on
US
companies
is
a
strategic
fit,
given
the
history
of
slavery
and
treatment
of
Indigenous
people.
We
use
tools
such
as
the
shareholder
resolution
and
proxy
voting.

We
start
off
with
companies
that
address
six
sustainable
themes
through
their
products
and
services.
These
include
sustainable
planet,
healthcare,
natural
and
organic
foods,
sustainable
transportation,
affordable
housing,
and
education,
communications
and
financial
services.
We
look
to
see
which
companies
are
benefiting
Black
or
brown
people
in
each
theme.
For
example,
we
look
in
healthcare.
The
top
ailments
for
African
American
Black
people
in
the
U.S.
include
sickle
cell,
heart
disease,
diabetes,
HIV.
We
look
at
which
companies
are
doing
the
best
job
to
address
these.
Sometimes
the
research
leads
us
to
a
privately
held
company.
We
may
start
a
dialogue
with
the
company,
knowing
there
will
be
a
merger,
acquisition,
IPO
in
the
future.

Another
important
piece
is
diversity
in
leadership.
We
track
all
the
Black
and
brown
CEOs
in
the
U.S.
We
track
teams
that
have
a
high
level
of
diversity
on
the
board
of
directors
and
the
executive
team.
To
the
extent
we
can
get
data,
we
look
at
hiring
processes,
recruitment.
Which
companies
are
going
into
local
high
schools,
working
with
the
previously
incarcerated,
thinking
about
employment
for
those
who
have
been
discriminated
against
and
underserved?

As
a
minimum
requirement,
we
look
to
see
BIPOC
[Black,
Indigenous,
and
people
of
color]
people
in
leadership
in
both
executive
management
and
on
the
board.
That
criteria
alone
eliminates
many
companies.


LN:
 Give
us
some
examples.


KH:
 Flowers
Foods
has
an
interesting
Black
CEO.
It’s
located
in
Georgia
so
we
can
see
that
they
employ
a
large
number
of
Black
and
brown
people.
They
are
building
relationships
with
historically
Black
colleges
and
universities
to
recruit
more
diverse
talent.
Meanwhile,
a
number
of
their
bakeries
recruit
formerly
incarcerated
individuals.
Their
Dave’s
Killer
Bread
unit
has
different
programs
for
working
with
the
previously
incarcerated.
We
find
Flowers
Foods’
shares
intriguing
at
their
current
price
points.
This
consumer
defensive
stock
is
growing
its
top
line
at
2%
and
offers
a
3.9%
dividend
yield.
Flowers,
which
historically
trades
at
a
premium
to
the
market,
is
trading
at
17.5
times
normalised
earnings,
offering
a
20%
discount
to
fair
value.

Another
is
Xylem,
a
prominent
player
in
the
global
smart
water
infrastructure
market.
It’s
aiming
to
recruit
formerly
incarcerated
individuals
to
the
talent
pool.
It’s
growing
the
top
line
at
an
8%
compound
annual
growth
rate,
making
it
an
appealing
investment
prospect.
The
stock
trades
at
24
times
its
normalised
earnings
per
share,
presenting
an
11%
discount
compared
to
where
the
stock
normally
trades.

Also,
Amalgamated
Financial,
which
offers
retail,
commercial
banking
and
investment
services.
It
has
a
strong
base
in
nonprofit
and
union
deposits.
It
has
been
a
vocal
supporter
of
BIPOC
rights
and
opportunities
including
shareholder
proposals
to
eliminate
slave
labour
in
supply
chains
and
contributing
to
affordable
housing
loan
products
to
increase
access
to
equitable
housing.
Amalgamated
Bank
has
a
three-year
compounded
annual
growth
rate
of
20%
and
is
trading
at
an
11%
discount
compared
to
five-year
average
P/E
ratio.


This
article
originally
appeared
on
our
US
homepage
and
has
been
re-edited
and
adapted
for
UK
audiences

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