Of DE&I, ethics and politics

Wouldn’t it be nice if politicians just left businesses alone to get on with business? Alas, that doesn’t seem to be the case anymore in the US. At least not for an increasingly strident and polarising branch of right-wing politics, exemplified by the faceoff between Florida Governor Ron DeSantis and the Walt Disney Company. And this may directly impact the future ability of the asset management industry to pursue diversification, equity and inclusion or DEI policies. 

DeSantis represents around 4.6 million people who voted for him in the 2022 gubernatorial elections. As of the third quarter of last year, Disney Plus had over 152 million subscribers worldwide. In 2019, Disney World attracted 58.8 million visitors to Florida. If you’re a politician, these numbers may not matter when you’re focused only on a particular voter bracket. If you’re a business, you literally cannot afford to ignore them. How many asset management companies could afford to alienate one-sixth of the US population? 

But the numbers go much higher. Thanks to DeSantis and his policies against DEI and similar initiatives, the National Association for the Advancement of Coloured People has issued a travel advisory warning that Florida is “openly hostile toward African Americans, people of colour and LGBTQ+ individuals”. 

According to the 2020 US census, whites account for around 57.8% of the population of more than 330 million. Based on the travel advisory, this means Florida is now openly hostile towards at least 42.2% of the US population, including presumably the 42.3% of the state’s population who identify as non-white. If you’re an asset manager, can you afford to alienate almost half the entire population? Can you afford to upset them even slightly?

Some asset managers may think policies affecting schools, universities and other public organisations might not make their way to the asset management sector. Not so. Last December, Republican staff of the US Senate Banking Committee issued a report criticising BlackRock, State Street and Vanguard for using their proxy voting power to advance a “liberal” political agenda, specifically calling out DEI policies. Republicans have already advanced draft legislation to take such proxy voting power away from passive investors, purely because of differences over ESG and DEI. 

This is not just a domestic US matter. Policies of the major asset managers will inevitably influence their actions worldwide. Their positions, and their ability to act on their positions on DEI issues, will be swayed by the outcome of political tussles in the US. The rest of the asset management industry will likely be similarly swayed.

The lesson should be clear: you can’t afford to come down on the anti-DEI side because it will destroy your business. For asset management, it’s the other side, or suicide.