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Financial Advice

Investing for Social Justice From the Bottom Up

Advisor Rachel Robasciotti listens to groups on the ground to make an impact.

- source: Morningstar

Editor's note: Charles Keenan is a freelance financial journalist.

As she watched the video of George Floyd calling out for his mother as Minneapolis police killed him, Rachel Robasciotti wondered if her cousin did the same before he died in police custody in 1990s. She knows for a fact that another cousin did before police shot him to death two years ago. If those traumas weren’t enough, her mentally ill father was hospitalized and died after police tased him in 2010.

“Deadly police brutality in the Black community is the story of my family, the backdrop of my life, and I’m coming out about it now,” Robasciotti tweeted in the aftermath of Floyd’s killing.

Amid the protests for the Black Lives Matter movement, much of corporate America has issued statements condemning police violence and supporting the rights of people of color. As a financial advisor, Robasciotti is pursuing a different way to change racial and social justice in this country: the power of money. Through her practice, Robasciotti is taking a three-prong approach: Invest in companies that operate for the well-being of society and the planet; divest from companies that prop up the systemic oppression; and pressure companies to end unjust practices.

Robasciotti, 41, is founder and chief executive officer of Robasciotti & Philipson, a wealth-management firm in San Francisco. More than 80% of the firm’s clients are women, and more than 70% are LGBTQ+. The firm, with eight employees, is staffed entirely by women, people of color, and members of the LGBTQ+ community.

“We are impact investors,” says Robasciotti. “I believe that we are coming to the end of an era, in which finance sees itself as a neutral actor in the social space simply because people are being passive investors. “If you invest via indexes, you’re likely providing capital to industries that are doing harm.”

An Outlier Among the Forgotten

Robasciotti has a deep-seated desire to help others like her—those who feel like an outsider in a white, male-dominated world. Robasciotti is Black and female, and identifies as queer.

She grew up poor in Oroville, California, a rural, racially segregated town about 70 miles north of Sacramento. Both of her parents had mental illnesses, and her father was institutionalized. For much of her early childhood, she lived with her godmother, Clyme, who would leave an indelible influence on her. “Being truly loved that way gives you a sense of value, possibility, and hope,” Robasciotti says.

Once, she was listening to a radio program and asked her mother why they put content on the radio. Her mother said, “They have commercials. People want you to buy their things, so they need you to be listening to the radio.”

“I was like, ‘Oh, money seems to be very important,’” Robasciotti says. “And I knew there was something better than where I grew up.”

Her household was tense. Domestic violence occurred, and she noticed that when her stepfather had less money, the situation worsened. “We were more likely to have a bad episode when our lights got turned off, when our water got turned off, when we were homeless,” she says. “I knew it was all related to money.”

She was also a gifted child, graduating high school at age 15. After earning her bachelor’s degree at the University of California, Berkeley, she resolved that she would work with money to help people.

She worked at a few financial firms but felt out of place as a queer woman of color. She wanted to serve people like her, groups that had traditionally been left out of the kind of education she had.

At age 25 in 2004, she left to form her own advisory firm to seek social justice and has never looked back.

“My co-workers just figured there’s no way I could be successful in doing that,” she says. “That turned out not to be true.”

Impact Screens Yield a Select List

From gender equity to racial justice, social justice fully informs Robasciotti’s investing process. She developed a series of impact screens based on what she calls a bottom-up approach. Instead of imposing typical social screens, such as board composition or management diversity, she relies on feedback from community organizations to determine social impacts and how they should be measured. “They are constantly informing our strategy,” she says. “We are taking their message into the investment world and organizing investors to focus on what they say matters.”

Her screens fall under two broad categories: people and

. Systemic sexism, for example, is under the umbrella of gender equity on the people side. Human rights includes racial justice, fair labor, and LGBTQ+ equality screens. There is a human safety screen, which eliminates firms like tobacco companies, weapons makers, and fast-food restaurants. Screens in the planet category include environmental sustainability, clean air and water, and animal welfare. Corporate governance is also a screen.

All of the filters aim to find companies for the “well-being for the people and the planet,” Robasciotti says. The effort whittles down a universe of thousands of companies to about 800, with the final cull done by a portfolio-optimization algorithm and reduction of any overweightings, which tend to be in technology and growth companies. That gives Robasciotti an impact list of about 400 names from which she constructs an index. Her portfolios for clients, which she calls RISE portfolios for “return on investment and social equity,” are built from the index. She also employs standard investing-strategy tactics such as diversification, rebalancing, and managing expenses and taxes.

The amount of assets under management is impressive, but Robasciotti wants to make a broader impact. She wants more people to be able to invest in the companies on her impact list, so she is expanding into investment management. The firm filed an application in July with the SEC to form an exchange-traded fund of its social justice index and expects it to debut in September.

“It's a cross between a passive and active strategy,” Robasciotti says. “We aren't trying to pick winners or time the market. So, if something comes up within the movement, it's important that we're able to put our assets—and also the assets of the other investors—toward making that change.”

Divesting Assets to Use Elsewhere

Robasciotti not only wants investors to use their investing dollars to buy

; she also urges them to divest from companies that condone or perpetuate oppression of people of color.

She believes that persuading shareholders to divest is far more effective than traditional

, where proxy votes are typically nonbinding. Boardrooms, she says, generally aren’t held accountable to this form of dissent.

In June, her firm published

that don’t meet its racial justice screens.

She recommends investors divest themselves of companies that are negatively involved with issues such as:

  • Prison involvement. This set of 18 companies includes for-profit prison companies GEO Group GEO and CoreCivic CXW and food-service purveyors such as Aramark ARMK and Sodexo SW.
  • Surveillance. These 10 companies include AMZN and Accenture ACN.
  • For-profit colleges. There are nine of these on the list.
  • The Israeli-Palestinian conflict. Fifty-nine companies make the list because Robasciotti's research indicates that their work negatively affects Palestinians in the occupied territory of the West Bank, including General Electric GE, Motorola Solutions MSI, Northrop Grumman NOC, and Raytheon Technologies RTX.

The list also includes investment companies such as BlackRock BLK, State Street STT, Charles Schwab SCHW, Invesco IVZ, and Northern Trust NTRS because they own more than 1 million shares of for-profit prison companies (as of their latest reported portfolio holdings).

“Stop [using] your investment dollars to [buy] companies that exacerbate racial inequities,” Robasciotti says. “When publicly traded companies employ these practices, the repercussions extend throughout the financial system.”

Robasciotti again uses a bottom-up approach to form the exclusion list, reflecting input from nonprofits such as the




, and


“In the United States, given the history of anti-Blackness, we really want to talk to those organizations that are by and for Black people and working on racial justice,” Robasciotti says. “We follow the lead of these organizations.”

Going After a System Supporting Sexual Harassment

This type of listening also helped Robasciotti develop a plan for another social issue important to her: sexual harassment in the workplace. Often, she says, companies try to show they care about the issue by nominating

or vowing to hire more women in management.

But those initiatives don’t get to the heart of the issue, she says. To get there, Robasciotti’s firm talked to organizations working with victims of sexual harassment, such as the


, which revealed a much more powerful way to change the workplace: Pressure companies to drop

Often a condition of employment, forced arbitration requires employees to waive their rights to sue their employer. Instead, employees must submit any dispute to outside private arbitrators. The system is set up to benefit companies, Robasciotti says, and because it operates outside of the courts, it helps companies avoid transparency. “Serial sexual harassment is underpinned by these policies,” she says.

Robasciotti's firm teamed up with other activists to launch a database in September 2019 that tracks companies' stance on forced arbitration. Several investment-management companies and institutional investors, representing about $54 billion in assets, signed on to support the effort. In June, the list totaled 500 companies. While most companies on the list still fall under the category of "probably requires arbitration for sexual harassment," many have recently eliminated the practice, Robasciotti says.

“More than 10 million workers can now take their harassment to court and don't have to be silenced by a private process that unfairly advantages the employer,” she says.

Burning Bright

It’s a positive sign that persistence, publicity, and organization can lead to

, something Robasciotti has been thinking about and acting on her entire career. Fiercely determined, in the wake of brutal police killings of Black Americans this year and with her own life experience underpinning everything she does, Robasciotti pushes on. “Changing racist systems and working to push back on white supremacy is why I do this work.”

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