Name: How DEI and ESG Investing Has Changed Under Trump
Uploaded: 2025-06-18T16:00:00Z
Duration: 19 min 3 s
Description: How have the recent pullbacks in corporate DEI and ESG commitments affected investors with a socially conscious approach to investing? Rachel Robasciotti, founder and Co-CEO of investment firm Adasina Social Capital, joins WSJ’s Take On the Week to share her views on the financial advantages of social conscious investing and the enduring importance of DEI principles despite political pressures.

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How have the recent pullbacks in corporate DEI and ESG commitments affected investors with a socially conscious approach to investing? Rachel Robasciotti, founder and Co-CEO of investment firm Adasina Social Capital, joins WSJ’s Take On the Week to share her views on the financial advantages of social conscious investing and the enduring importance of DEI principles despite political pressures. Photo: WSJ

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How have the recent pullbacks in corporate DEI and ESG commitments affected investors with a socially conscious approach to investing? Rachel Robasciotti, founder and Co-CEO of investment firm Adasina Social Capital, joins WSJ’s Take On the Week to share her views on the financial advantages of social conscious investing and the enduring importance of DEI principles despite political pressures.

How DEI and ESG Investing Has Changed Under Trump

DEI is just good business, and ESG is just prudent investing. So they may be suffering a popularity crisis right now, but that doesn't mean that they're a bad idea.

Hi everyone, I'm Miriam Gottfried, I'm here with a bonus episode of WSJ's "Take on the Week." After a wave of companies announced commitments to diversity, equity, and inclusion, many are now pulling back or de-emphasizing those policies. Here to talk to us about why that's happening, and what it means for investors is Rachel Robasciotti, founder and Co-CEO of Adasina Social Capital. Hi Rachel.

Hi, it's nice to be here, thanks for having me.

Thanks for being here. Many of our listeners may not have heard about your firm. Can you give us a brief overview of what you do, and who your investors are in general?

Sure, so Adasina Social Capital is an impact investment firm, and we believe that investing with social justice values can deliver both competitive financial performance and some meaningful social progress. Our approach basically evaluates publicly traded companies and only invests in those that align with our core social justice principles, which are racial, gender, economic, and climate justice. We have an exchange traded fund, it trades over the New York Stock Exchange, which means that it can be purchased like a stock, and that fund is the Adasina Social Justice All Cap Global ETF, the ticker symbol is JSTC, and many know it seeks to track the Adasina Social Justice index, and it was designed to replace a public equities index fund for investors with social justice values.

So you talk about social justice investing, social justice values, what does that mean, and how does it differ from more common terms like impact investing?

Well, I, and many in the impact investing space believe that all investing is impact investing, all of our investments have an impact, we're living into the future that our investment several decades ago set into place, because investing is really all about putting your money toward what you want more of in the future that you hopefully also earn a financial return on. And so impact investing is just being very intentional about what that impact is. You see it as a primary focus rather than something that's in your peripheral vision. And what we do with social justice investing that's a bit different is that we have a data partnership with social justice organizations, which means that they provide us with the data and the metrics we use in our company evaluation process, because we evaluate almost 10,000 publicly traded companies across the globe, and across all company sizes, and we only invest in about 600 that align with social justice principles that they've given their input on. And that really ensures our portfolios reflect these real world needs rather than just relying solely on corporate self-reporting, which is, what more conventional environmental social governance or ESG investing does.

Yeah, I wanna ask about ESG, DEI, we hear all these acronyms, how do they fit in to what you do?

So we both take a look from the DEI perspective, the diversity, equity and inclusion perspective, we both take a look at how companies are performing in those areas, and DEI is really one of the many factors that ESG investors focus on. So it falls in that S, or the social part of ESG. And in our evaluation, we are looking at over 80 different ways of measuring companies across those four areas I talked about, racial, gender, economic, and climate justice. And DEI falls very clearly under racial, gender, and often economic justice as well. So many of the criteria that we use to evaluate these companies fall within the scope of DEI

And ESG.

And ESG more broadly, absolutely.

So can you talk a little bit about what is in the social justice index?

So a little different from ESG, sometimes ESG is allowing a company to be included if they're pretty good on one particular measure. And our investment thesis is that social justice movements, which include a bunch of the people who aren't in every day investing, these are your workers, these are your consumers that have a huge impact on the success of your company. So the social justice movements who represent these people outside of the marketplace, they're giving us some early indicators of risk, and let me tell you, that's been pretty huge for our index performance in the recent history.

So it sounds like you do a level of quantitative and qualitative evaluation of each of the components of the index?

That's true. Yeah, we're evaluating companies on all 80 of those metrics. None of those metrics can have a flag on them. Before 80 plus I should say, none of those metrics can have a flag in order for them to be included in the index. And then we also have a level of values aligned investment, professional analysis, looking at those companies to see if there's anything that the data missed to ensure that that portfolio is truly aligned with all of those social justice principles.

So one of the reasons that we brought you here today is, you know, there was really a clear uptick in enthusiasm and focus on diversity, equity, and inclusion at companies and investment firms following the death of George Floyd in 2020. But I think it's fair to say that we've seen a reversal in that, if not a complete 180, since Trump was elected. What have those changes in the, like overall political zeitgeist meant for a firm like Adasina that's explicitly focused on socially responsible investing and what has been the response of your investor base?

Well, when I look at the data, I see a somewhat different story. I see a well-known companies are pulling back on their DEI commitments in the face of political pressure. But what's happening in the Adasina Social Justice Index, and our ETF that seeks to track it is that, those companies are standing strong in their commitments. And there's a broader story that's being told that I think is being reported on as of yet. There was a very recent study of about 750 US business leaders, and two thirds of them say that their companies, if they cut DEI, really suffered some severe consequences, everything from boycotts, to diminished morale, to difficulty hiring top talent. And one in three of those business leaders actually said that DEI is being reinstated, but most of them are doing it quietly. And they're telling us that it's really about the bottom line, it's not politicized. You're seeing that both in what companies are doing and also in how shareholders are responding to this rash of anti-DEI shareholder proposals that have come before public companies this year.

But have those proposals had any impact on you? Has there been more hesitancy on the part of investors to put money behind social justice investing?

So we've had some pretty tremendous growth, we're coming up on our fifth IVR year anniversary for the fund, and we've had some pretty tremendous growth year over year. I would say overall, in our larger industry of impact investing, asset flows have reduced. What's interesting for us is that for our particular fund, we've seen net inflows of over 10 million in the first quarter alone. And so we're really looking at a situation in which we're separating the wheat from the chaff. You're getting the asset managers who were doing a good job on DEI or ESG metrics, simply because it was popular at the time, you know, they were working on that, but they were giving it lip service in terms of their analysis of the public companies they were including. Those are kind of being seen for not being authentic. And while we are the only fund that we are aware of in our peer group that's actually seeing net inflows, I think it's really coming down to who's truly committed, there's a strong investor base committed to these principles, not just because of their values, but even more importantly because DEI is just good business, and ESG is just prudent investing. So they may be suffering a popularity crisis right now, but that doesn't mean that they're a bad idea. They were a great idea when there was so many focusing on them in 2020, they're still a good idea, they're just suffering some political pushback, but they're here to stay, no matter what we end up calling them, because they just make sense.

So if I'm an investor and I put money into your fund, how does my money go to translating into social justice?

So this is a really great question. Ultimately, the money that we put into funds gets invested into company stock. And if it's an initial public offering, then you're actually putting money into the hands of the company. If it's not an initial public offering, which is what, you know, most funds aren't trading in those, they're trading in the secondary market, then what's happening is you're either supporting or depressing the share price. And what happens when you put money toward companies that align with your values is that, it's supporting that particular share price in aggregate, if all investors are doing that. And that has a real impact on how management runs the company, a majority of management compensation is often inside of those equity compensation plans. So they're paying a lot of attention to what investors are supporting and not supporting, whether it's in the IPO, or the secondary market. So you're really playing a part in influencing what the leaders of these large publicly traded companies do.

So one thing that seems to come up a lot in impact investing is measurement, and how you measure societal impact. Do your investors get any kind of information about these 80 metrics, and you know, how the companies have fared on them, or is that proprietary to you? How much information do investors get about the impact, or about the nature of these companies they're investing in?

Well, we do publish a very comprehensive impact report, and what really sets us apart is that data partnership model with social justice organizations, we also, they have a direct line to our portfolio management team, and accountability with our portfolio management team. So if a social justice organization that says focus on this issue and we don't focus on it, and we make no progress on it, we're hearing from them directly. So we've set up a direct accountability system, which is something that's otherwise unheard of in the asset management world. And the way that we seek to make impact is not just with putting the investment dollars one place, and not the other, for example, but it's also how we leverage our capital to make large scale positive impact. So we use these coordinated investor mobilization campaigns, and we bring investors together beyond the funds that are in our portfolios. We bring investors together across the industry to advance critical issues. I can just give you a couple of quick examples.

Yeah, please gimme some examples.

So we led investors in our very successful effort to end this corporate practice of forced arbitration for sexual harassment. That practice was widely understood to be the root cause of serial workplace harassment that underlined the Me Too movement. So Adasina worked with social justice organizations to collect information on the employment practices of over 3,500 public companies, and we published it. We both used it in our own portfolio, we published it to enable investors to have that information and take action. When we started on that campaign, there were less than 20 companies that had ended the practice. And when we ended our active portion of the campaign, almost 400 public companies had ended it, and we thought we were doing well. That's over 10 million workers who were no longer subject to this practice that led to serial sexual harassment in the workplace. But our work didn't stop there, our data ultimately supported the 2022 federal end of forced arbitration, which impacts workers nationwide. We're going to, you know, or seeing the Me Too movement, going to the gender justice social justice organization saying, what can investors do that we're not already doing? And taking action not only in our own portfolio, but also giving other investors the tools they need to take action, which can have these huge results.

Can you talk at all about, you know, what this translates into in terms of investment performance? Is there a correlation between social impact, or social justice investing, and stronger returns, or the opposite, are you sacrificing returns?

Well, our company is, was founded on the belief really that investors don't have to sacrifice performance to align their investments with social justice principles, in fact, those principles can enhance performance. The Adasina Social Justice index has recently delivered some very strong performance, and we've seen some particularly strong momentum recently with over 5% gains in the past three months. If you look beyond just year to dates, it's been a very volatile time. If you look over the past 12 months, the index has outperformed broad global equities by more than a hundred basis points, or 1%. So those are a couple of data points to really help demonstrate that strong returns and a strong impact on the world in which we live can work together.

And is that possibly why people are still quietly sticking to these investments even in a time when the headlines are kind of anti DEI?

I believe that it is. I believe that broadly, Americans really support DEI, because our nation was founded on these ideals. The term DEI is getting negative political associations. But when you look at the underlying terms, diversity, that's just more viewpoints and ideas, which lead to better decisions, that's been documented time and time again. Equity is just opening doors to everyone to pursue the American dream. That means that veterans and disabled workers are supported in the workplace in addition to racial and gender groups that have historically been excluded. And inclusion is really about basic respect, comfort, belonging in the workplace, and we all perform at our best when we feel secure that we belong. When we attempt to go anti DEI, we're going against the very ideals that our country and its economy were founded upon. And so I think that investors have a gut sense of that. And also know that DEI drives innovation and growth. When you look at these reports, like one that I'm thinking about is that the top quartile of diversity of companies that score in the top quartile on diversity metrics, they outperform on profitability by 36% when you compare them to the bottom quartile. So that's just more evidence, right? That you know, diversity, equity, inclusion are things that drive innovation and growth. And it's actually, I mean it's just really hurting businesses to roll them back. Target said that they saw 5 million fewer shopping trips. Their CEO confirmed that their sales in the first quarter fell, and he specifically cited the reaction to the DEI updates in January. And by contrast, Costco saw 7.7 million more visits since they doubled down on their commitment to DEI. So it hurts to cut, not only because you're going against American ideals, and it's not what we actually want in our country and in our workplaces and our public companies, but you're also giving up this very real and important access to an innovation and growth driver. So in the end, it's really nice when good ideas are also popular. And unfortunately, DEI is having a popularity crisis, but that doesn't change the fact that it simply makes sense.

So one big critique I hear from investors though, is that, a lot of socially conscious investing is just marketing. It's like another way to raise money. I also hear people accusing climate funds of greenwashing by overstating the degree to which they're helping the environment, so these are all sort of related topics. What's your response to that critique?

So again, coming back to this idea of popularity, when a good idea becomes popular, you're always going to have those who are engaging in it from an authentic place, and you're also going to have those that are jumping on the bandwagon. And what we saw in 2020 was a mix of both. And what I see happening now is that when the political pressure is coming to drop DEI and ESG investing principles, those who were never truly committed, and maybe were doing some marketing, have let go of those commitments. And those of us who were engaged in this work from the very beginning because, it's the heart and soul of what we do, we are still doing that work, and I think it's very evident in the marketplace. I have no other way of explaining why there's been so much retreat in the industry, and yet we're having net cash inflows in our fund.

We're gonna take a final break, when we come back, one last question for Rachel Robasciotti. Okay, Rachel, in 30 seconds or less, if you had a magic wand, what political action would you affect to drive more investors toward social justice investing?

Ooh. My magic wand would make the impact of corporate behavior more obvious. So there were some climate disclosure rules that were moving forward with the SEC, and it's uncertain about how those will be implemented, and I would, I think we're headed in the right direction with having companies disclose the impact, whether it's intentional or not, of their actions, both on the climate, but also on the communities that they impact. And so I would really support heading in that direction. Right now, the impacts that publicly traded companies have on the world is something that can be pretty masked. And I believe that the more we're aware of that, the better decisions we make as investors, and as the publicly traded companies.

That was a really interesting conversation, thank you so much.

Yeah, oh good. Yeah, thanks, those were very thoughtful questions.

This weekly video podcast series brings you the insights and analysis you need to get a leg up on the world of money and investing. WSJ's Take On the Week cuts through the noise and dives into markets, the economy and finance.

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