AFR Applauds Rep. Pressley’s Efforts to Seek Accountability from Banks on their Racial Equity Pledges While Opponents Seek to Undermine Corporate Accountability Tools

By Natalia Renta, senior policy counsel for corporate governance and power

As we approach the 60th anniversary of the March on Washington for Jobs and Freedom, Representative Ayanna Pressley sent a letter to the CEOs of the five largest banks in the U.S. — Bank of America, JPMorgan Chase, Wells Fargo, U.S. Bank, and Citigroup — calling for a financial audit report detailing the status of the racial equity pledges they made in response to the summer 2020 uprisings following the murder of George Floyd.  The pledges ranged from $116 million committed by U.S. Bank to $30 billion committed by JPMorgan Chase.

In the letter, Pressley notes that throughout the history of the U.S., “the financial industry has benefited greatly from systemic racism and banks have been lead actors in the discrimination, exploitation, and degradation of Black communities in particular.”  She gives specific examples illustrating this, including racial inequalities in access to credit, mortgage interest rates, and access to everyday banking services.

Pressley’s important demand for accountability comes at a time when some legislators are attempting to stymie similar efforts to hold banks and public companies accountable.  On July 27, in the markup that was the culmination of what was dubbed “ESG Month” by Representative Barr, the House Financial Services Committee voted in favor of a suite of anti-ESG bills on party-line votes.  These bills would undermine shareholders’ ability to push banks to conduct racial equity audits designed to identify and remedy adverse impacts of banks’ policies and practices on communities of color.  Following the 2020 uprisings, the Service Employees International Union (SEIU) and the SOC Investment Group (formerly known as, Change to Win, an organization that works with pension funds sponsored by unions representing more than four million members) broke ground by filing novel shareholder proposals requesting racial equity audits at four out of the five banks Pressley wrote to.

At the “ESG Month” markup, Representatives Beatty and Meeks fought back against attempts to undermine racial equity efforts in public companies by proposing amendments to safeguard the SEC’s ability to require diversity disclosures and underscore that companies that incorporate diversity, equity, and inclusion (DEI) into their business models perform better.  The amendments were defeated.

Even though these anti-ESG bills are unlikely to become law in the near future, they are already having a chilling effect on asset managers’ support of racial equity audit shareholder proposals, with their support for these proposals falling this year.  This comes at a time when the largest asset managers — BlackRock, Vanguard, State Street, and Fidelity — are already lagging behind their peers in their support for racial equity efforts in S&P 500 companies.  Indeed, if these asset managers had supported them, racial equity audit proposals would have passed in nine additional companies in 2022, including in Wells Fargo.

Opponents are also attempting to scare companies into walking back their DEI efforts in more direct ways, including through a letter by Republican Attorneys General questioning the legality of corporate DEI efforts in light of the Supreme Court’s recent decision overturning the constitutionality of affirmative action in higher education.  Some Democratic Attorneys General shot back in a letter stating that “corporate efforts to recruit diverse workforces and create inclusive work environments are legal and reduce corporate risk for claims of discrimination.”  However, remaining undeterred, opponents continue to take legal action against some companies’ DEI efforts.

If we hope to address the gaping racial inequities in the United States that have resulted — as outlined in Pressley’s letter — in white households holding 84% of the total household wealth compared to 4% held by Black households, and in the median net worth of a typical white household being nearly eight times that of a typical Black household, we have to fight back against opponents’ every attempt to maintain and worsen this status quo.

That is why we applaud Pressley’s important demand that the five largest banks — which hold outsized power over our economy — use that power “to rectify the wrongdoing and heal the very communities harmed by the historical and contemporary role that [these] institutions . . . have played and continue to play in perpetuating racial inequities.”  Additionally, we hope shareholders’ ability to hold banks accountable on racial equity issues is protected against opponents’ attacks and expanded to become more meaningful.  Lastly, non-bank financial institutions with outsized power in our economy — such as the largest four asset managers that hold significant stakes in these banks and other large public companies — should be compelled to use that power to help steward us toward a more racially equitable, just, and sustainable economy.