Investment manager Xponance and As You Sow, a nonprofit promoting environmental and social corporate responsibility, have formed a new partnership to build investment strategies around diversity data.
The two announced Tuesday that diverse-owned Xponance, which manages $15 billion, will be using As You Sow’s racial justice and diversity, equity, and inclusion data to create investment products. This is an exclusive deal.
“There are quite a few ESG data providers in the marketplace,” said Sumali Sanyal, managing director and senior portfolio manager at Xponance. “Most of them collect some data related to diversity, equity, and inclusion issues. [Investors] are looking for strategies with a greater focus on the core issues of DEI.”
Enter As You Sow, a 30-year-old nonprofit that in 2020 launched the Racial Justice scorecard. Between the scorecard and As You Sow’s workplace equity data, the non-profit analyzes every company in the Russell 1000 and S&P 500 to see how 56 criteria are incorporated into each company’s practices.
“It relates not only to disclosure, which is what a lot of ESG providers focus on, but also to action related to those issues,” Sanyal said. “That kind of focused data is unique and hard to get ahold of.”
This difficulty is what brought Xponance and As You Sow together — with the help of consulting firm NEPC.
According to Krissy Pelletier, co-head of NEPC’s impact investing committee and a partner at the firm, an NEPC client was looking for ways to creatively push diversity and inclusion efforts forward. This led the investment consulting firm to Xponance and As You Sow, which partnered to create an investment strategy for NEPC’s client.
After this initial collaboration, the two organizations worked together to form the larger partnership announced today.
“Historically, the data was much more centered around ownership structure,” Pelletier said. “I think in the last several years there’s been a focus on digging deeper, going beyond that number... What I think As You Sow is offering here is a little bit more focus and they have really stepped up into those benchmarks to dig deep into those companies. That’s the transparency that investors want more of.”
The nonprofit’s Racial Justice Scorecard evaluates the alignment between public statements and actions on racial and environmental justice, racial justice-related donations, and the chief executive officer’s actions, among other things. Meanwhile, its workplace equity data measures recruitment, retention, and promotions of diverse talent and corporate transparency around workforce composition, pay equity, and other inclusion metrics.
“We take a really detailed look at what these companies are doing and saying,” said Olivia Knight, racial justice initiative manager at As You Sow. “So many companies made statements after George Floyd’s murder. We wanted to look at what companies are actually doing.”
The data can be used for both actively managed portfolios and developed into custom indexes for passive strategies, according to Xponance.
The Denver Foundation is already using the manager’s diversity lens, Daniel Lee, chief financial officer, said via email.
“Racial equity guides and connects all of our work at the Denver Foundation, and our board of trustees felt it was time to explicitly apply that DEI lens on our investment portfolios,” he said via email. “We selected NEPC and Xponance based on their deep understanding of impact investing and experience in the DEI space. We are equally considering alignment with our mission and financial return — both are essential to our work.”
Xponance is no stranger to diversity-focused partnerships. In September, Institutional Investor reported that Hartford HealthCare anchored a GP stakes-style fund for diverse managers raised by Xponance, which had also partnered with Investcorp to deploy the capital.
“My experience working with Xponance has been them showing a real willingness to collaborate after they’ve had the chance to look at the data themselves to see if that makes sense for them,” Pelletier said. “They are thoughtful collaborators.”
