Racial justice audits set to rise in 2023

March 17, 2023

With 2022 being another record year for shareholder proposals on racial justice audits, 2023 looks set to continue the trend.

Analysts agree that the human and economic cost of systemic racial inequalities impair GDP growth and inevitably lead to lower returns across the portfolios of diversified investors. On the other hand, policies that successfully target and reduce racial inequalities in the market aid stable economic growth, thereby benefiting long-term investors.

This year, many shareholders are aiming to address such racial equity issues by filing racial justice audit proposals at companies. Such audit proposals request companies to not only address company-specific risks and harms related to systemic racism but also take an open stakeholder-focused approach to ensure the audit comprehensively examines all company policies, services and products for any contributing factors toward racial inequalities.

Outside of specific racial equity audit requests, in 2023 we are also likely to see shareholders take specific directors to account for failing to adequately oversee a racial justice audit. For example, action may be taken against a director if they have failed to publicly release audit findings or has not met an agreed deadline with no clear explanation.

According to Majority Action, there are likely to be major racial justice audit proposals at 19 companies this proxy voting season:

• Alphabet
• Altria
• American Water Works
• AT&T
• Bank of America
• Chevron
• Coca Cola
• Comcast
• Elevance Health
• GEO Group
• Goldman Sachs
• Johnson & Johnson
• Lumen Technologies
• Salesforce
• SVB Financial Group
• The Travelers Companies
• UnitedHealth Group
• Valero Energy Corp
• Walmart

In 2022, Minerva published an analysis of racial justice audit proposals in the US and found a significant uptick in the number of such proposals year-on-year. Minerva identified nine proposals filed by shareholders in 2021 across the US and 35 in the first eight months of 2022: a 289% increase.

The increase in the number of proposals filed has been matched by an increase in the range of proposals filed. Whilst the wording of the proposals may vary, there is a common request for an independent audit of companies’ practices related to racial equity and/or civil rights to address racial or civil injustice. Minerva has identified seven categories of racial justice audit requests: civil rights audits; culture audits; diversity and equity audits; environmental justice audits; non-discrimination audits; racial equity audits, and racial impact audits.