Goldman Sachs has a message right now to the companies they invest in: drive diversity throughout the organization, or we may just drive away from your stock.
“In the near-term, markets have been able to look through that [social unrest]. In the long-term as a business community and as a nation, if we don’t do something to address the cumulative effects of 400-plus years of systemic racism in this country, we’ll be facing some pretty significant challenges to the economy and to the markets. I think rightfully leaders are being asked what they’re doing specifically to address that,” Goldman Sachs Asset Management co-head of fundamental equity Katie Koch told Yahoo Finance’s The First Trade.
Koch’s team oversees the stewardship of $300 billion in direct equity.
Koch and her team have been pushing corporate leadership teams for better disclosures around diversity efforts in the C-suite and broadly within in a company. The challenges, Koch stresses, is the lack of data by companies on diversity performance internally. If Koch doesn’t start getting the data on this front soon from companies, she didn’t rule out Goldman selling shares in that entity as a way to hold leaders accountable.
“That’s one of the reasons active management is so important because unlike passive indexes, if people are not adhering to best in class policies across diversity but also a variety of issues — we have, and we would, divest from their shares,” Koch explained.
Under new Goldman Sachs CEO David Solomon, improving diversity has been a key focus.
The investment bank made waves in January by saying it won’t take a company public if it doesn’t have at least one diverse board member. That initiative kicks off on July 1 in both the U.S. and Europe. For its part, seven members of Goldman’s 12-person board would qualify as diverse.