By Lesley Green-Rennis
- Goldman Sachs looks through social unrest to diversity investing
- Only 36% of African Americans participate in the stock market in some way
Wall street titan, Goldman Sachs (GS -1.08%) is laying its investment cards on the table when it comes to diversity. The company wants to infuse diversity throughout its organization and the ones they invest in. If diversity is not pulled to the forefront, Goldman may just divest from a company’s stock, in effort to address systematic racism head on. How challenging could things get for the economy and markets if the problem of racism isn’t solved?
Why This Matters: The net worth of a typical white family in America is $171,000, compared to the typical Black family’s net worth of only $17,150. This gap reflects a country that has historically and systematically withheld power and opportunity from people of color to even create businesses for Goldman to invest in. Goldman wants to receive data by companies on diversity performance internally, the company may sell shares in that entity as a way to hold leaders accountable.
If we don’t do something to address the cumulative effects of 400-plus years of systemic racism in this country, we’ll be facing some pretty significant challenges to the economy and to the markets
“If we don’t do something to address the cumulative effects of 400-plus years of systemic racism in this country, we’ll be facing some pretty significant challenges to the economy and to the markets,” Goldman Sachs Asset Management co-head of fundamental equity Katie Koch told Yahoo Finance. Her team oversees the distribution of $300 billion in direct equity.
The equity market’s capacity to help savers accumulate wealth through long-term, diversified investing is well documented. Unfortunately, the lack of stock ownership among Black Americans may be the most telling, with only 2.4% of the country’s equity market wealth being held in the portfolios of Black and Hispanic households. Barriers to education, homeownership, higher rates of incarceration, and lower incomes all lead to far less Black wage earners investing in the stock market. As a result of these accumulated inequalities, only 36% of African Americans participate in the stock market in some way, compared to 60% of white Americans.
What’s Next: Goldman won’t take a company public if it doesn’t have at least one diverse board member, and that initiative starts next week on July 1 across the U.S. and Europe. Only time will tell whether or not this actually moves the needle to stymie systematic racism and increase investing.
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