Black History Month: How Investors Can Help Drive Change

Black History Month was created to honor the contributions of Black people throughout US history. It’s an opportune time not just to celebrate, but also to reflect on the challenges that still beset Black communities. Addressing these challenges is a herculean task, and the financial markets and impact-minded investors have a role to play. For Black History Month, Morningstar has assembled research and commentary about related investment themes.

Lately, corporate Diversity, Equity, and Inclusion programs are being censured as examples of so-called “Woke Capitalism.” Yet in many ways, these programs are attempting to grapple with the problems of corporate human capital risk in a changing society. Companies often say their inclusion efforts are an important part of how they secure competitive advantages.

Nothing can change that the US workforce is as diverse as it has ever been and will be even more so in the future, according to consultant Jon Hale, formerly a longtime sustainable investing analyst at Morningstar. “Employment policies that reflect and respect diversity are just a fact of life for corporate America as companies compete for talent.” To see the dimensions of racial inequality in the US through the lens of economic inequality, explore this rich assemblage of charts and analysis by Francis Aufderheide. You’ll see data about income, savings, debt, and homeownership.

By supporting shareholder proposals to tackle racial inequality, investors can vote their values and reduce material risks to companies. However, Morningstar Sustainalytics director of stewardship research and policy Lindsey Stewart observes that average shareholder support for key proposals is down by more than half between 2022 and 2024. He finds evidence that support is much higher than it seems, and describes pockets of relative success for some shareholder proponents.

Five US funds invest specifically with an eye on racial and ethnic diversity. Morningstar associate director of parent research Alyssa Stankiewicz dived into these funds.

Meanwhile, investors looking for companies that demonstrate a strong commitment to racial and ethnic equality can check the 200-constituent Morningstar Minority Empowerment Index. Frances Aufderheide looks at five stocks trading at the largest discounts among the index’s constituents, incorporating insight from Morningstar analysts.

For financial advisors, building wealth for those who don’t come from money is hard work, and keeping that wealth can be even more difficult. In Morningstar Magazine, wealth planning advisor Lawrence Smith shows the way.

Finally, for Morningstar Magazine, Charles Keenan talked to advisor Martin A. Smith, who’s looking to get young Black professionals to invest their earnings while giving to historically Black colleges and universities.

As always, Morningstar is ready to educate and suggest portfolio solutions. Happy Black History Month.