Melinda Hightower and Lynette Jefferson, executives at UBS Global Wealth Management, explain how racial-equity investing works. Jefferson will speak at the Barron’s ESG + Impact Summit in New York on June 22.
Photograph by Lauren Perlstein
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Lynette Jefferson and Melinda Hightower, two executives at
UBS
Global Wealth Management, come at the same goal—fostering racial equality in finance—from different angles.
As head of sustainable and inclusive solutions at UBS, Jefferson leads a team that finds and vets investments that foster racial equity, such as funds with people of color in management or that invest in Black-owned businesses. Hightower, meanwhile, heads the multicultural investors strategic clients segment, which UBS launched in January. Her mandate is to make sure the unique needs of Black, Asian, and Hispanic wealth management clients are understood and met.
Barron’s spoke with Hightower and Jefferson recently to learn more about how racial-equity investing works.
Barron’s: How closely do you two work together?
Melinda Hightower: We fit hand in glove in the sense that my team is responsible for multicultural client insights and engagement that then inform the work that’s done by Lynette’s team on the investment side. We’re constantly picking each other’s brains.
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Are Black clients more interested in racial-equity investing?
Hightower: We found that nearly eight in 10 Black investors were asking for opportunities to invest in minority-owned businesses and for solutions that are advancing racial equity. And nearly six in 10 Asian investors and Latino investors were looking for the same thing. It’s not just happening with our clients of color, but also with our allied clients—those who may not be racially or ethnically diverse themselves but are committed to advancing racial equity. They are actually some of the loudest voices in the room.
What are the factors that have led to increased demand?
Lynette Jefferson: Investing to drive positive social outcomes is certainly not new. But I think there are a few things that have shined a light on it over the last 24 months and contributed to what we call the rise of the S, meaning the social component in ESG.
For a long time, [environmental, social, and governance] investors were mainly focused on environmental outcomes. Due to the pandemic, George Floyd’s murder, and other tragic murders, the spotlight has shifted to driving diversity, equity, and inclusion, or DEI. These crises have exaggerated wealth gaps and social tensions. Investors are asking what they can do to participate in creating world change.
Are clients willing to sacrifice returns to be part of that change?
Jefferson: Actually, they can benefit as investors. There’s a growing body of evidence showing benefits to companies that promote diversity and equal rights. More-diverse companies are likely to be more innovative and enjoy higher profitability. There is also evidence of the broader economic benefits of a more-inclusive society.
Melinda, your research uses the term “trust gap.” Does that personally resonate with you?
“When I started in financial services, there were very few investment professionals who looked like me.”
Hightower: Oh, absolutely. My grandparents built their wealth through real estate, and I would go to the bank with them regularly, but they still kept a portion of their money in cash. They would always tell me, “You never know.” That may be because when we walked into the bank, there wasn’t representation among the leadership of that institution to make my grandparents comfortable that their finances were going to be looked after. As I started my career, I learned that there was a whole new avenue to creating wealth through investing. I realized that if only my grandparents had realized this sooner, imagine how much faster we could have built wealth as a family. But there was a reason that trust gap existed. The financial-services industry was not built with inclusion in mind.
Lynette, what about you?
Jefferson: For me, it was the observation growing up in the ’70s and ’80s in New York City with working parents from a law-enforcement background that there was an inherent exclusion, whether it was neighborhoods where we were allowed to buy real estate, or other opportunities. It always motivated me and my siblings to do better and really try to effect change. When I started in financial services, there were very few investment professionals who looked like me. I dealt with lots of assumptions, prejudgments. I was always having to validate who I am, what I do, why I’m here. So it’s especially rewarding for me to have the opportunity to give clients choice, give others access to capital, and do what I can personally to level the playing field.
How do these goals tie into actual investment options?
Jefferson: We consider an investment firm or an asset management firm to be diverse if at least 25% of it is owned by people who identify as diverse. And we look at diversity in portfolio management. Who is calling the shots? If at least one member of the team in that key decision-making or risk-taking function is diverse, we consider the investment diverse.
Are you looking at racial diversity in particular?
Jefferson: We wanted to be as expansive as possible. So, diversity for us spans a number of different groups, including women, racial or ethnic minorities, LGBTQ+ people, veterans, persons with disability—a broad lens.
What’s your advice for investors interested in racial equity?
Jefferson: I would start with looking at the actual mission statement of the firm and the makeup of senior management. Then, when you’re talking about the actual investment solutions, what are the types of products available? We have inclusive offerings including mutual funds, ETFs [exchange-traded funds], separately managed accounts, hedge funds, funds of funds, private real estate funds, and private-equity funds. Those solutions are there.
Hightower: To add to that, you need to reflect on what’s important to you and select the value you want to emphasize with your investing. And you have to pick your experts and the firms you work with carefully. Then there’s always monitoring and updating after that. And I think that’s the recurring conversation that needs to happen, because this work and this area is ever evolving.
Thank you, both.
Write to Amey Stone at [email protected]