On September 24, Bloomberg reported that Independent Point Advisors (popularly referred to as ‘Saloman Sisters’) will be the first ever women/minority owned investment firm in the industry. Lazard, a well-known asset management company, has a minority stake in the up and coming firm and is partnering with them to offer mergers and acquisitions, and provide corporate governance guidance to the firm in the early days.
Anne Clarke Wolff, a veteran of Salomon Brothers, and someone who held a role in Bank of America as Chairman of Global Corporate and Investment Banking, will be bringing more than just her 30+ years of Wall Street experience. According to individuals familiar with Wolff’s plans, she believes ‘Salomon Sisters’ will give women the golden opportunity to continue managing their families, all the while giving them the much-needed boost to rise up the corporate ladder.
Many women enter the field of investment banking with the opportunity to thrive amongst male peers in one of the most rewarding, but aggressive, environments in finance. According to a research study by McKinsey, while women have made sustainable strides in making up more than 50% of the sector’s entry level workforce, only 20% or so in the past five years have climbed into the C-Suite level of the corporate ladder. Due to mid-career shifts in responsibilities across the sector, many women give up the opportunity to be in these boardrooms that are critical to enhancing diversity and inclusion that bolster financial performance of the firm.
Now, as a woman and a minority, Independent Point Advisors sounds like THE investment bank to work for, right? Forget these other bulge brackets and their six figure first year analyst salaries — someone who actually understands womanhood is leading the firm? Sign me up!
But how much diversity and inclusion can a firm like Lazard help bring to the governance of Independent Point Advisors? And just how much should we rely on corporate governance as stakeholders, even though morally we think it’s the path to heaven?
In my investment classes here at Stevens, I have been challenged to really think about what I get out as a shareholder, even more as a stakeholder, by investing into companies that boast superior ESG goals. Is there a way that a firm can showcase on its financial statements how having low carbon emissions, or actively recruiting culturally diverse candidates, improved their profit margins year over year?
The latter has been argued very well in my opinion by Autumn McDonald in Stanford Social Innovation Review, and bringing diversity of thought by actively hiring culturally diverse employees boosts productivity and enhances strategic decisions, which undoubtedly translates to improved profit margins.
Logically, investing in a high ESG stock, means low risk profiles, that translate to a low expected return, or the premiums for that stock are already priced in by Wall Street. But people that invest in stocks expect they bought the firm at a discount to future cash flows, and hence expect a higher return. When thinking about investing in a stock whose company is on the ESG bandwagon, the riskiness of a stock decreases, and hence you are expecting a lower return … that math doesn’t add up.
However, let’s take a step back on initiatives towards lowering carbon emissions. When thinking of implementing a 25% carbon tax in place of a 28% corporate tax hike, the incentives are greater for both fiscal tax revenues and expanding business cycles. However, the social costs are also in my opinion equally important to consider.
According to the Energy Information Administration, about 75% of New Jersey households rely on natural gas as their primary heating fuel, more than 13% use electric heat, and about 10% depend on petroleum products. These “dirty” energy sources to this day heat our homes during frigid winters, and we feel their worth during days of below zero temperatures. Do manufacturers have the streamlined supply chains to get these renewable heat sources in the same supply to each and every New Jerseyan, as we have currently for natural gas?
Last semester, I had the opportunity to attend and report to The Stute on a fireside chat with guest speaker Steven Pinker. One of the most interesting arguments made by Pinker was how we will need to first find a way to make clean energy cheaper than nonrenewables like coal and oil. We need to be mindful of how we look at the impact of a carbon tax on marginalized communities, which may be politically toxic. So at this point, looking at environmentally safe firms may not always lead to the most rewarding firms.
So what about firms that focus on social and governance policies? Coming back to Independent Point Advisors, I admire the aggressive attitude Wolff has towards making boardrooms more inclusive to at least women in finance. I hope that ‘Salomon Sisters’ will become the much-needed change on Wall Street, and grow a strong community of empowered minorities in finance. However, it is important to not forget that inclusivity is not just vested in a company name — it is a dynamic culture that must significantly boost economic value added to the firm, showing that DNI actually does more good than merely feel good.
Not Financial Times (NFT) is an Opinion column written and created by Roshni Revankar ’22 to share insights and research into her favorite companies, industry trends, and anything in financial markets that really irks her curiosity.
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