The past few years have offered us the rare opportunity to not only reimagine our existing business practices and policies, but also redouble our efforts to continually revisit and revise our investment strategies.

Many of our private wealth clients have told us that they want to know whether their portfolios contain stocks of companies that are harmful to racial justice, like private prisons. Others want to know whether Ellevest is investing to help address racial and social inequities.

Investing with intention

In the fall of 2019, we launched the Ellevest Intentional Impact portfolios for our private wealth clients — a way to redirect your investment money away from companies with products, policies, and practices that may harm women, and invest in companies that meet our criteria for doing the right things by women instead.

This was something brand-new. While other investment advisors offered “gender lens” options that focused on workplace equality, we wanted to account for the greater risk and bias women face in their everyday lives. When companies have harmful business practices around things like fraud, poor working conditions, and pollution, it affects all of us — but it affects women more.

After much research, we drilled down into 12 original focus areas, each one correlated to disproportionate harm to women. Within the Ellevest Intentional Impact portfolios, we were able to evaluate companies’ products, policies, and practices against these criteria.

Since launching that strategy, we’ve expanded our Intentional Impact portfolios to include new ways of supporting Black lives — as well as people of color more broadly — twice.

An expanded lens of social justice...

We know that we can’t fully support women’s equality without also being anti-racist. So our lens expands past gender-specific data correlations to practices that have been shown to harm or exclude Black and brown people — and therefore Black and brown women.

Many of the issues that harm women are intersectionally harmful: they also impact Black, Latinx, and Indigenous people, as well as other people of color, who are not women. For example, while we originally chose to review portfolios for investment exposure to firearms because guns exacerbate domestic violence, it is also true that Black people are disproportionately victims of gun violence in the United States — they’re ten times more likely to be murdered with a gun — so we now also consider that data in filtering for exposure to firearms.

Another example is the environment. We were already focusing on investment exposure to things like greenhouse gases, water, and waste, because across the planet, 80% of people displaced by climate change are women. Environmental racism is also very real. Air pollution disproportionately affects Black, Latinx, and Indigenous communities, and exposure to it is linked to higher mortality rates from COVID-19 and clusters like “Cancer Alley” in Louisiana. There are racial and gender disparities in access to clean water globally and in the United States, as in Flint, Michigan, where the water crisis has been exacerbated by systemic racism.

We also added a few new criteria in our expansion of the Ellevest Intentional Impact portfolios. First, we took a deep dive into the data around private prisons. Despite representing just 32% of the US population, Black and Latinx Americans make up 56% of the nation’s prisoners. While we hadn't previously had any exposure in our Ellevest Intentional Impact Portfolios to US private prison companies specifically, we began to think about the rest of the supply chain. The Ellevest Intentional Impact portfolios are reviewed for investment exposure to private prisons themselves, just to be sure, but they’re also reviewed for exposure to companies that engage in predatory practices within the private prison “ecosystem” through goods and services like transport, logistics, telecommunications, and catering.

Another new focus was pay equity. The salary gap between the highest-paid executives and the average worker is directly associated with a country’s overall income inequality, which in turn exacerbates wealth inequality globally. This intracorporate pay gap is widest for Black and Latinx Americans, and the difference is overwhelming: The median Black family in the US has only about one-tenth the wealth of the median white family. And the racial wealth gap hits women hardest of all: The average Black woman owns one single penny for every dollar the average white man owns. We measure companies’ compensation ratios and policies when evaluating them for possible inclusion in the Ellevest Intentional Impact portfolios.

... that continues to shape how we combat complex inequality.

Because racial inequality is so deeply ingrained in the fabric of our society, racial justice will always be a complex, ever-evolving fight. For that reason, we continually review and reevaluate how our investment strategies impact that fight. Most recently, we’ve expanded our filtering criteria even further to include more screens to our existing focus areas, such as:

• Exploitative Education: American for-profit colleges, which disproportionately target and enroll students of color, have been shown to engage in predatory debt practices, resulting in nearly half of their students defaulting on their loans. Going forward, we’ll be considering this data when evaluating for Exploitative Products.

• Unhealthy Food and Beverage: Companies that market unhealthy foods and beverages (like fast food, soft drinks, etc.) are far more likely to advertise in Black and low-income communities, particularly to children. This data, too, will be added to our existing evaluations around Exploitative Products.

• Financing of Fossil Fuel Operations: Latinx and Black Americans are far more vulnerable than white Americans to illnesses and death caused by climate-change-related conditions like increased temperatures and poor air quality. Major commercial and investment banks routinely bankroll practices that contribute to these conditions, including fossil fuel exploration, drilling, processing, and shipping. We’re adding a new filter for these types of institutions to our existing Racial Justice and Climate Change evaluations.

• Cash Bail Lenders: Pretrial detainees — people who have not been convicted of a crime but are unable to post bail — make up two-thirds of the jail population and a quarter of the entire incarcerated population in the US. Black defendants are more likely to be subjected to the bail system, and pretrial detention is associated with worse economic outcomes and increased recidivism among people subjected to it. Cash bail companies are a major contributor to the American prison system’s disproportionate impact on people of color. This category will be added to our existing criteria filtering against Private Prisons and Border Detention.

How it works

At Ellevest, we’re always looking to improve how we serve our clients, and our relationship with social justice is a major part of that. But as fiduciaries, our investment strategy doesn’t change. We’re always here to help you achieve your goals through diversified investments designed to achieve market returns.

That means we built the Ellevest Intentional Impact portfolios with an investments-first approach. As we update them, we work hard to minimize the tracking error to the market benchmark.

We also know that, when you're looking to update your current investment portfolio for social justice, it can be difficult to spot those opportunities at a glance. So it works like this: You send us statements from your current portfolio. We analyze your holdings and let you know which companies don’t align with our Intentional Impact values for gender equality and racial justice — and why we exclude them. If you’re interested, we’ll work with you to make a transition plan that balances your financial goals, tax considerations, and the impact you want to make. Speak with your Ellevest financial advisor if you’d like to learn more.

After you’ve transitioned to an Ellevest Intentional Impact portfolio, we report back on your impact, so you can see the difference you’re making over time. We also monitor your investments, so that if a company stops meeting our standards, your portfolio will be adjusted.

We’re not done

Moving forward, we’re going to keep looking for new ways to broaden our view of impact investing to address systemic racism, such as seeking alternative investments that direct capital to private businesses in the US that are owned or led by women, people of color, and members of the LGBTQ community. Getting more capital directly into the hands of these businesses and supporting underrepresented leaders will help grow those businesses, create jobs, and strengthen our economy.

Beyond the private wealth offering, we’re also doing the work of evaluating the mutual funds and exchange-traded funds (ETFs) we offer with our online investing platform for Ellevest clients. So far, we haven’t found suitable replacements with racial justice mandates. But we’re committed to continuing the search — and to pressing fund companies to create them.

You may have heard us say it at Ellevest before: Money is power. Together, we can help create the change we want to see in our country, using the power of our capital to invest with intention. It’s been a long time coming.

Disclosures