Equities.com hosted a webinar on Nov. 19 focused on investing challenges and opportunities in the midst of potential policy changes expected when President-elect Donald Trump takes office on Jan. 20.
The four-hour event, titled “Investment Strategies Under a Trump Administration,” was sponsored by First Affirmative Financial Network, EquityMultiple, Impax Asset Management and Gordian Knot Strategies.
The webinar included a panel led by Angela Atherton, CFA, Co-Founder and Principal, Parallelle Finance, on diversity, equity and inclusion initiatives.
Atherton engaged in a robust discussion with Julie Gorte, SVP Sustainable Investing, Impax Asset Management; Tammy Haygood, Financial Advisor, RBC Wealth Management; and Matthew Patsky, CEO, Trillium Asset Management. They discussed concerns about how Trump’s return to the White House will impact DEI initiatives, including possible backlash to such initiatives in the workplace and on college campuses.
Republicans in Washington and on the campaign trail have made clear that dismantling DEI is one of their goals. A second Trump administration could ban training federal employees on DEI, eliminate DEI offices in federal agencies or threaten to cut off funding to universities that embrace DEI. While these moves could face legal challenges, anti-DEI efforts are expected to gain momentum after Trump takes office. But DEI advocates are expected to put up a fight to keep the initiatives in place in the government and educational institutions.
Companies seek to end DEI initiatives
The panel began by discussing how companies will deal with DEI initiatives in an administration that strongly opposes them. Gorte admitted that DEI initiatives are changing, and not for the better.
“We see a lot of companies saying less about their DEI efforts, and a couple that actually said they will end their DEI programs. Most are disclosing less, but are still doing it. They still say they see value in diversity efforts,” she said.
Patsky agreed: “You’re walking a fine line of trying not to talk about it too much. They’ll use different language, trying to hide what they’re working on.”
Gorte warned that opponents to DEI and ESG initiatives will gain traction in the second Trump administration. “They’ve already made that clear with some of the Cabinet picks and some of the public statements that have been made. If I were in the federal workforce, I would worry a whole lot more,” she said.
Patsky pointed out that in the first Trump administration “there were attempts to reverse a lot of policy issues that mattered to DEI and ESG efforts, but the state and municipal governments stepped up.” California and New York were among the Democratically-controlled states that pushed back with statewide policies.
Companies wipe DEI from their websites
The panelists discussed that some companies are wiping DEI language from their websites.
Patsky shared an example of a New York asset manager he knows who shared he was “told to take everything off of their website: DEI, Sustainable, ESG. And they took it all down.”
They are still making these investments, Patsky notes, and their clients want it. But they don’t want to anger anyone. “They want to stay below the radar,” he added.
“An awful lot of products were labeled ESG that have just been unlabeled. There are two factors for this. One was the anti-ESG movement, but the more important factor was regulatory. There is a growing recognition that if you say you’re doing something, you actually have to do it. That was a big part of the backpedaling we saw on labeling,” Patsky said.
Two approaches to sustainable investing
The panel discussed the importance of sustainable investing and the different ways that investors can get involved. Gorte explained there are two approaches to sustainable investing.
The first method is a “top-down approach, one that rates every industry in the world” based on nine measures of sustainability. Gorte recommended avoiding investing in companies that are high-risk and low opportunity.
The second approach, Gorte said, is a “bottom-up process called ESG 2.0.” She said that basically, every company compares itself to its peers “on sustainability-related issues, everything from emissions to pollution to green commitments targets and DEI numbers.”
AI and future investment opportunities
Panelists also addressed the growing influence of artificial intelligence.
“AI is a huge source of opportunity,” Gorte said. “It’s also a huge risk because it can multiply and metastasize things like diversity and discrimination if the model is trained on the wrong data.”
Haygood recommended investors “take the opportunity to educate yourself on who’s out there supporting you in this journey that you’re going on, and who respects that journey and not just giving lip service to it.”
Haygood had positive words about future investment opportunities. “We know the world is going to change, and we know we will not always get it right and we’ll miss some things. But if you’re riding with a team that has intentionality to do it correctly, then you’ll ride through the rough times and the unknown.”
Patsky agreed: “We try to make sure there’s positive social and environmental impact in what we do. We remain very committed to that.”
Engagement vs. shareholder proposals
Gorte reminded the panel of the difference between engaging with companies and shareholder proposals.
“We engage with hundreds of companies every year,” she said, but engagements are off the record. “That’s where you need impact reports to see what companies are really doing.”
“We made some interesting discoveries,” Gorte said. “I would say that the way to really understand what firms are doing in terms of intentionality and implementing the commitment to sustainability is to read their impact reports.”
Haygood agreed: “As a financial advisor, that’s what we should be doing. We should be going below the surface and add value by interpreting the impact statement for our clients.”
Haygood added that “you have to trust your managers to make the best decisions, not the perfect decision, because that doesn’t exist, but the best decision given what we have in front of us.”
‘Go deep and decide what’s important’
During turbulent times, Haygood said the best approach is to “go deep and decide what’s important to you.”
“It’s time to put together your plan of action because we will come to the light again,” she added.
Patsky said the work on DEI and ESG is not done yet. “We have to roll up our sleeves and keep working harder. I’ve been at this for 40 years, and I keep thinking it feels like we’re moving at a very slow pace.”
Gorte added: “We do expect changes to happen because of the policies in this administration, but our commitment to sustainability hasn’t budged an inch.”
Atherton concluded with a reminder that there is lots of work left to do.
“Everyone on this panel is committed to that work, and we know plenty of others who are. We encourage investors to look for opportunities to bring their dollars into the space and support these efforts,” she added.
This is the third article in a three-part series on an Equities webinar focused on the second Trump administration. You can watch that webinar and learn more about the guest speakers here.
Read more: Consider these real estate strategies under a second Trump administration
