Galvanising More Investor Action: Why We Updated the JEDI Investing Toolkit
Those who have the capital to invest (institutional investors and private asset owners) and those who manage capital (asset and wealth managers) are increasingly realising the benefits of investing with gender and other forms of diversity. To support these efforts, the Gender Smart JEDI Investing community has updated its Justice, Equity, Diversity, and Inclusion (JEDI) Investing Principles in Action toolkit with a new series of guides. Khetsiwe Diamini, whose consultancy Triple C Advisory partnered with GenderSmart for the project, shares some of the thinking behind it.
The intention for the JEDI Investment Principles in Action guides is to offer an accessible frame for surfacing and addressing unconscious bias embedded in “normal” investment culture, structures, systems, and narrative for institutional investors, private asset owners (foundations/family offices), asset and wealth managers. The pursuit of "unicorns," traditional investment rules that link diversity with risk, and processes designed to make sure everyone follows the rules that lock investors into small, tight circles that keep diversity out. Breaking out of these circles with a JEDI Investing lens could enable much more significant and inclusive flows of capital.
The cost of JEDI Investing inaction and exclusion are mounting. Estimates suggest that closing the racial wealth gap in the United States would cost between 4 and 6% of GDP between 2019 and 2028, or US$1 trillion and $1.5 trillion. According to the World Bank, there was a loss of $160.2 trillion in human capital in 2019 due to gender inequality. Exclusion has a price we all end up paying, particularly the excluded.
Over the last several months we have worked with GenderSmart to add insights and practical guidance on normalising JEDI Investing to the JEDI Investing Toolkit and Principles, based on research and practical ideas from gender-smart investors worldwide. Investors we spoke to identified four major barriers to JEDI Investing, which we expand on below: limiting diversity to being just about gender and race, the inability to shift power and its dynamics, a lack of practical expertise, and the absence of a critical mass of people collectively pushing from all sides to reshape the investment landscape for diversity and inclusion.
Intersectional Diversity
Some people have noticed that race and/or gender are often singled out as the only or most important forms of discrimination. It was felt that a broader framing of JEDI Investing, which acknowledges the complex compounded “matrix of domination and discrimination” involving facets beyond gender and race, would better address the hierarchical power relations in every society and investment stream. In parts of the Global North, discussions of intersectionality tend to centre almost exclusively on race and gender, and unrealistic expectations set by intransigent power dynamics that this prioritisation must translate directly into other contexts.
There is, for instance, a growing concern in Sub-Saharan Africa that foreign investors are putting their money into multinational corporations rather than supporting the region’s indigenous business owners, creating a national capital divide. Some people believe that caste in Asia, Afro-descendants in Latin America and the Caribbean, and gendered poverty in the Middle East and Northern Africa region are the key entry points for the intersectional disparities that play out from an investment standpoint. JEDI investors must gain a better understanding of the complexities of diversity and inclusion in culturally relevant and contextual ways, but need capacity building, and the people closest to the issues of exclusion to help.
Power
Despite expert, hierarchical, and inherited power among research respondents, there was a general feeling of powerlessness against the normalcy of the socialisation, systems, and structures that drive exclusion. People yearned for guidance on shifting organisations towards a new normal that embedded JEDI constructs in values and strategy, and made it easier to change policies and processes.
Practical Knowledge
There was a general lack of practical knowledge about how to make products and processes for today's more diverse market while managing perceived risk and getting rid of the bias that was built into risk calculation. Very few investors had figured out how to recalibrate risk using a JEDI lens. Those who did were found to be making solid, sustainable returns. However there was a perception that the industry regards these cases as one-offs or “lucky” to have pulled off their model, and interest in replicating and scaling successful JEDI Investment models is low. We found that JEDI Investing can be rewarding for investors if done for the right reasons, and in ways that are context relevant. The updated Toolkit guidance has user-friendly guides and examples of getting JEDI Investing right .
Collective Leadership
Regulation and incentives reward the status quo of exclusion, and investors bear the risk of investing in JEDI. Normalising JEDI Investing would mean negative consequences for opting out. Some of the recommendations made by toolkit informants included more JEDI investing incentives, a collective results framework linked to accountability measures, and safe spaces to share knowledge and engage in collective advocacy for changes that crowd in diversity rather than single it out.
The JEDI Principles in Action Guides
The theory of change underlying the guides is based on human nature. Nothing succeeds like success. The updated JEDI Investing Principles in Action guidance focuses on shifting organisations, adapting policies and practices, and influencing the ecosystem. If organisations embed a JEDI mindset into their purpose and strategy, then policies and practices need to adjust to achieve these. When results can be counted, others become interested in learning how to make more of them happen. If incentives and sanctions enable build-up, then a whole ecosystem can shift, change, and learn in tandem, and JEDI Investing capital has a chance to start flowing.
Asset owners (institutional and private foundations as well as family offices) had a significant role to play in shifting capital, incentives and performance measures toward more JEDI Investing. Those who manage their assets and wealth have exposure to a range of JEDI investing opportunities hidden from sight by bias. These actors together have the power to influence the changes required to shift significant amounts of capital into more diverse markets and create more inclusive workplaces to sustain JEDI Investing innovation.
“The single more realistic and effective way to move forward is to change the investment strategies and approaches of the players who form the cornerstone of our capitalist system: the big asset owners. If they adopt investment strategies aimed at maximising long-term results then other key players – asset and wealth managers, corporate boards and company executives will likely follow”
This is why institutional investors, private asset owners (Foundations/Family Offices), asset and wealth managers are the primary targets of the updates. There is an action guide for each actor type for all stages of progress; whether it is Getting Started, Levelling Up or Going Further, in line with the 7 JEDI Investing Principles. Each guide focuses on important ways to bring about lasting change and results. The guides offer the investment community a pathway to results that can help create a new normal – where everyone has more equal investment access, opportunity and agency whatever their colour, gender or creed.
Explore the guides now at jediinvesting.com.
