The finance industry has been too white and too male for too long. That needs to change.

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  • Institutions across the country have been reckoning with America's history of racial injustice.
  • Despite these efforts, one sector of major financial influence lags in addressing the issue of fairness head-on: the asset management industry.
  • Now is the time for institutional investors to actively pursue a pipeline of diverse managers, learn and adopt best practices, and consistently track, report, and analyze progress on diversity within the field. 
  • Roy Swan is Director of Mission Investments for the Ford Foundation.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit Business Insider's homepage for more stories.

Over the summer, thousands of peaceful protesters took to the streets to demand racial justice in America. Their efforts led to a dramatic shift in which our workplaces, our government, and America's C-suites finally began to address our history of systemic racism and the country's race-based caste system. 

One by one, entities across all industries reckoned with their histories and committed themselves to fundamental changes in an attempt to achieve more fairness. Despite these efforts, one sector of major financial influence lags in addressing the issue of fairness head-on: the asset management industry.

A need for change in the finance industry

Institutions across the country have been reckoning with America's race-based caste system and awakening to even the most subtle bias as they grapple with how to move the needle forward when it comes to achieving equality. 

Staff members in workplaces everywhere have come forward with troubling stories of overt racism or unconscious racial bias in the workplace going back decades and stretching into the present day. 

Lack of diversity and inclusion within the world of finance particularly, which is largely a result of America's racial caste system, has systematically impeded Black and brown people's access to capital and subsequent opportunities for economic wealth. 

Black and brown individuals, businesses, and families are locked out of opportunities to create generational wealth and entrepreneurial success. Indeed, according to a new report from Citigroup, systemic racism has cost our country $16 trillion in the last 20 years alone. 

What many seem to be seeing for the first time and what communities of color have long known, is that our systems do not work for everyone, especially Black and brown Americans. Women and people of color manage a mere 1% of the $71 trillion in US assets under management ("AUM"). It is hard to imagine a reason why white men, who make up just 30% of the country, control 99% of all AUM, other than systemic inequality. This is proof positive for why the asset management industry must also rise up to the challenge, reckon with the unfairness that permeates the field, and commit to doing better. 

How to move forward

The truth is that not only is diversifying our industry the right thing to do but it is also a smart business strategy. The data speaks for itself: funds do as well, if not better, under the management of a person of color. Diversifying the asset management industry will ultimately lead to growth. 

Diverse asset managers can offer unique perspectives on consumer trends that can help generate new ideas, which ultimately leads to greater returns. By not broadening the pool of asset managers, including diverse managers, we are missing out on growth in more ways than one.  

There are three things that institutional investors can do today to remedy the lack of diversity in the field. The first is to completely and fully understand that the talent is there; capable Black people, brown people, and women of all colors exist in America. There is no reason why we should not actively pursue a pipeline of diverse managers. 

The second is to learn and adopt best practices. There are allocators who are already getting this right. Meet with them, learn from them, and actively implement the strategies that work. The third is based on metrics - valuing that which we measure. It is fundamental to consistently track, report, and analyze progress. This begins by setting goals and later evaluating our own performance so that we can course-correct where needed.

At the Ford Foundation, we know that rising economic inequality is a massive and foundational problem we must address. It is at the center of everything the Ford Foundation does. We invest in diversifying the asset management sector because we expect doing so will lead to better outcomes not only for investors but for Main Street America. 

According to research from the National Association of Investment Companies and Harvard Business School Professor Josh Lerner, diverse investment managers perform as well as or even better than their white counterparts. They also become high impact donors in their communities, hire diverse professionals, and invest in diverse business owners. 

The asset management industry wields tremendous influence over the economy, but its professionals do not reflect the gender, ethnic, or racial diversity of the world around them. It is on all of us to seize this moment in history and continue the work of ending racism and inequality. 

Every sector of society should be held to account and pushed to create a space for people of color to succeed and build wealth. The asset management industry is no exception and plays, in fact, a pivotal role in the wealth creation that can lead to lasting change. 

Roy Swan leads the Ford Foundation's Mission Investments team, managing Ford's portfolio of mission-related investments (MRIs) and program-related investments (PRIs), and works to expand and strengthen the impact investing field.

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