Derrick Johnson, president and CEO of the NAACP, has been "hearing a lot about this green economy. I’m looking for it but not sure where it is."
During a few days of "getting it done" last week in New York, I attended an event hosted by the Intentional Endowments Network, where I joined endowment trustees, chief investment officers and asset managers to discuss the most timely topics in mission-aligned investing — especially those that will best spur the finance space to, of course, get it done.
I was fortunate to sit down with Johnson, the event’s keynote speaker, to learn more about how his organization is making sense of the intersection of capital markets and equity.
The NAACP has been a leading institution advancing human rights in American society for over 100 years. In the 21st century, the organization sees corporate America as the grounds of the "third act" for the equity movement, with racial and ethnic equity, empowerment and inclusion as the next frontiers for the private sector.
We need to make sure that as this industry continues to grow, that with all the wealth being created out of it that more people participate, so it's not concentrated in 1 or 2 people.
In that vein, the NAACP, in partnership with Impact Shares, a firm that supports organizations in capital deployment that aligns with their mission, runs a nonprofit ETF called the NAACP Minority Empowerment ETF (NACP). The fund is designed to provide exposure to American companies that fit the NAACP’s vision of good corporate citizens, and it provides an opportunity for investors to allocate their capital in a way that is consistent with their values.
I’ve shared some of what Johnson and I discussed here. If you want to hear more of our conversation, you can find us on the GreenBiz 350 podcast here (or wherever you choose to do your podcasting) on the Sept. 30 episode.
This interview has been edited for clarity and length.
Grant Harrison: What do you see as the traits that make up a firm’s DEI program done well, and, alternatively, one that is not?
Derrick Johnson: One thing that I have noticed is that when the person who runs diversity and inclusion reports directly to the CEO, that says to me that, throughout the whole organization, this is being taken seriously as a priority. Secondly, if that person actually has a profit and loss sheet, where they're actually a part of a business unit and driving profit, that also shows that not only is it a value statement, it is actually in the DNA of the company.
And thirdly, when their counterparts sitting around the C-suite table also have measurable goals to meet on matters of diversity and inclusion, that shows that the entire institution really is firmly behind it — that they understand the value of moving the needle and also the opportunity to have a more diverse decision-making structure from the ground to the top.
Harrison: There are a number of investment funds focused on companies ranked highly on inclusion and diversity performance. The NAACP runs an ETF — the NAACP Minority Empowerment ETF (NACP). What makes NACP stand out from its peers, and how does the fund fit into the NAACP’s theory of change?
Johnson: We got into this space because we wanted a fund that zeroed in on inclusion for African-Americans, and that's what makes us unique. We also had to have our own internal self-check on how we could not have a fund with fossil fuels; we had to restart because we had made that mistake. So, part of any ESG fund like this is to be really clear about which communities you're trying to impact for the broader good and also learn from mistakes.
This is a new venture for the NAACP, so we didn't know what we didn't know. But we are agile enough to say, "Well, let's pause, let's recalibrate." And that's what we did. I think any ETF that seeks to do social good needs to be willing to be agile enough to pause and reset.
Harrison: NACP is one market-driven effort to further racial equity, but I know you’ve also been focused on how ESG investment options in retirement funds can help. Can you share more about what you’re focused on in that space?
Johnson: The individuals who pay into, say, a pension fund, are very diverse. Our push is that your investment should reflect a community of health, of the members who are paying into the fund — not the members who paid in 20, 30 or 40 years ago, but the members who are paying in it now to keep it going and moving forward.
If you’re doing that, much will be reconsidered in how we invest as it relates to climate. We need to reconsider how we invest when it relates to diversity, whether it's racialized diversity or gender diversity. Investors should really be looking at how to maximize return but also how to improve a higher quality of life for the individuals who are paying into the fund so the fund can really serve its beneficiaries.
Harrison: Startups with at least one Black founder have received only 1.9 percent of deal counts and 1.2 percent of overall venture funding in the United States as of summer 2022. What are your thoughts on the intersection of the VC world and equity?
Johnson: There are several changes I’d like to see. Put more diverse VC fund managers into the space because they have led with some of the highest returns, despite being hard-pressed to raise funds. They're closer to the ground to identify innovators who may otherwise be looked over or who simply don't even know this world exists.
We need to make sure that as this industry continues to grow, that with all the wealth being created out of it that more people participate, so it's not concentrated in one or two people. Like the Facebook [CEO] Mark Zuckerberg example — one person controlling 60 percent of the shares of what has become a public utility. That's a dangerous proposition for the American public at large.
Investors should really be looking at how to maximize return but also how to improve a higher quality of life for the individuals who are paying into the fund so the fund can really serve its beneficiaries.
It’s a space where there's such a massive amount of wealth being created but no accountability — one person owning 60 percent of the shares, and no accountability. We have to figure out a different model. So, yes, people can do well and make money, that's great, but also do good and put up proper guardrails so that people in different communities can feel OK about being their unique self. We have such a unique diversity in this country that should be celebrated, not otherized.
Harrison: What type of financial policies would you hope to see that would best address the wealth chasm between Black and white families in the United States?
Johnson: Starting from the middle down, then [moving] up, making sure that the policy has been implemented with a racialized lens so that we're not doing good policy that's having a disparate impact on African-American or other communities. More importantly, helping people to understand that it's not a zero-sum game — that there's room at the table for all. In fact, when you put more folks at the table, the table actually grows.
A great example can be seen through New Deal policies. Many people say it was horrible, but in fact, it was maybe the best thing that happened to this country. It created a middle class and created a safety net. It created the opportunity for homeownership. But what it did not do is have a racialized lens. So, even though we ended up with a Social Security program, we had southern white supremacists able to make an exception for agricultural and domestic workers: 80 percent of African-Americans at the time were agricultural and domestic workers.
Again with federally backed home mortgages. A great concept, and we saw homeownership skyrocket. But what happened is that the decisions were left to local bankers and developers, who then created discriminatory home and loan policies.
If we implement policies with DEI in mind, we have to do so with a racialized lens so the barriers and hurdles of the past don’t get in the way, and we don’t create the same mistakes in the future.