Inclusive Investment Ideas For Improving The Economy

O ver the years there has been a growing observation that the investment industry has been limited in the sense that it caters to only specific strata of society. Due to this, both the public and the private sectors have started shifting toward more inclusive investment ideas. The focus is now more on the holistic society instead of treating certain members as passive receipts of their policies and business models. 

We will be looking at some of these ideas which can help in increased innovation and will potentially result in increased inclusive growth. 

A Cultural Shift In Norms

The biggest contributing factor, which has resulted in a lack of inclusivity in the business world, particularly the investment sector, is the cultural norms. Norms dictate that men are supposed to know about the financial world and thus, own businesses and make investments. White men were preferred over people of color to be in trusted leadership positions. 

According to a study conducted by BNY MELLON (investment management), about 9 in 10 asset managers admitted that their default investment customer is a man. In order for the level of inclusive investment to increase, these cultural norms will have to change. Increasing the participation rate of marginalized groups such as women and ethnic minorities will shift the perspective. 

When conversations will take place more openly in terms of the investment industry not being limited to a specific group of society, it will empower a diverse crowd. This will act as a major tool for making investment more inclusive. Celebrities like Serena Williams and Pharell Williams have launched their business platforms which specifically cater to more inclusive participation of both women and people from the black community. 

Investing In Companies Working Towards The Needs Of Disadvantaged Communities

When making a decision pertaining to where one should invest, it is essential that the impact that your investment will have on the community or on the targeted area of the society. Some companies have solely been established to work towards causes such as, reducing the income disparity amongst members of society, improving healthcare technology, or working towards more accessible and affordable housing. 

Diverting your capital investments towards such inclusive businesses will not only create a favorable outcome for the targeted groups but will also result in personal satisfaction. You will be able to feel that the investments you have made, are having a positive impact on society. 

Venture Capital (VC) and Limited Partners (LP) Teams That Are Diverse

It is right at the first stage of the cycle that the opportunity of bringing a change comes. This is where the Limited Partners’ investors get to decide, which Venture Capital they want to invest their funds in. If the Limited Partners teams are inclusive, they are more likely to opt for venture capital which also meets the diversity criteria. This is a very crucial change that is required since the diversity data of LP and VC is infamous for being bad.

As of 2019, only about 1% of the total wealth management industry, which amounted to approximately $70 trillion, was managed by minority or women fund managers. This is why, investing in diverse and inclusive companies, where for example, the partner is a woman or the executive team consists of an ethnically diverse group of people, is so important. There is also sufficient evidence that proves that making such inclusive investment decisions are more likely to yield higher profits and better returns for investors. 

Supporting Asset Management Companies Run/Owned By Diverse People

According to research, only 1.3% of assets in the professional management of asset management companies are diverse-owned. One potential reason is the inherent bias that investors show when selecting managers to run these companies. Therefore, when deciding on where to invest your funds, there is a certain set of holistic requirements that one must look for which ensures inclusivity and diversity. 

These include racial-equity and gender-equity criteria that evaluate whether a company meets the required diverse representation needed to be considered inclusive. The investor must also ensure that they have researched the culture of the company, how diverse the workforce is, and how they are treated. This will also provide the investor with a positive outcome since research shows that having a more diverse workforce results in a higher financial turnover as well.

We hope that these inclusive investment ideas turned out to be helpful and although things have been progressing over time, reaching the optimum level of inclusivity will still take a while!