My colleagues Liz and Lawrence have blogged about investors pushing public companies to conduct “racial equity audits.” These are reports companies commission on the racial impact of company policies, practices, products, and services. Investors and employees are not only pushing for this analysis to happen – they also want the results to be made public. Recently, as announced on its corporate blog and as reported by Bloomberg, Citigroup became the first wall street bank to agree to conduct and publish the results of a racial equity audit.
The audit, to be conducted by Covington & Burling lawyers with civil rights & racial equity audit expertise, will be a deep dive into Citi’s business to see if and how it contributes to racial discrimination. Here’s an excerpt from the company’s announcement:
The focus of the audit is to assess Citi’s efforts to help address the racial wealth gap in the United States through the design and implementation of our Action for Racial Equity (ARE) initiative. The ARE initiative, announced by Citi and the Citi Foundation in September 2020, is a $1 billion+ commitment to help close the racial wealth gap and increase economic mobility in the United States. This effort is designed to (1) provide greater access to banking and credit in communities of color, (2) increase investment in Black-owned businesses, (3) expand affordable housing and homeownership among Black Americans, and (4) advance anti-racist practices in our company and the financial services industry.
Interestingly, as Liz blogged on CompensationStandards.com in early 2019, Citi was also a trailblazer for “pay equity” & “pay gap” audits for women & US racial minorities in its workforce. Then and now, Citi’s announcements follow shareholder proposals and shareholder engagement on the topic. For its annual meeting last spring, Citi faced a proposal (pg. 131) from CtW (now called “SOC Investment Group”), pushing for a racial equity audit – and the dialogue with SOC is called out in the recent corporate announcement.
Although Citi is the first Wall Street bank to say it’s undertaking a racial equity audit, it isn’t the only big bank to be making racial equity commitments and reporting on progress. JPMorgan recently published this “fact sheet” to catalogue its progress on the $30 billion pledge that it made last year. The bulk of the $13 billion “deployed or committed” so far has gone toward affordable housing.
Meanwhile, other companies are preparing for similar audits. Starbucks has also hired Covington & Burling to audit its policies & practices, and BlackRock says that it will perform its audit next year. As Emily Sacks-Wilner blogged yesterday for members of TheCorporateCounsel.net, State Street also announced last week that it will be conducting a civil rights audit (which looks at issues beyond racial equity – e.g., treatment of people with disabilities). She noted that a whole slew of companies across various industries have received shareholder proposals on this topic for the upcoming proxy season – including at least one from a proponent that wants to stop “reverse discrimination.” We’ll be covering the topic of racial equity & civil rights audits in more detail on our PracticalESG.com membership site in the months to come.