In a Q&A with Private Equity Law Report, R&G Insights Lab managing principal and head of innovation, Zachary Coseglia, and partner and global head of the ESG, CSR and business and human rights practice Michael Littenberg, discussed the purpose and future trends of racial equity audits in the private equity industry.
The aim of a racial equity audit is to “understand whether an organization’s efforts to promote diversity—and its efforts to create a more inclusive workplace culture—are, in fact, working,” Zachary said. Diversity, equity, and inclusion (DEI) reviews are commonly conducted at large companies whose shareholders are concerned with civil rights and racial equality in the workplace. “As those companies are seeing the value of the audits, larger PE sponsors that are more sophisticated have also been considering deploying these audits for some of their larger portfolio companies or across their portfolios more broadly,” Michael commented.
Many PE sponsors are pursing audits from “two angles,” Zachary said. “The first is for a PE sponsor to use a racial equity audit to conduct an internal review of its own DEI practices… the other approach PE sponsors take—which is more common—is to conduct racial equity audits of their entire portfolios in order to verify whether their portfolio’s practices are consistent with their own corporate values.”
“Beyond that, racial equity audits obviously dovetail with the ESG initiatives that many companies and PE sponsors are pursuing. In other words, many sponsors see this work as part of the broader ESG value proposition,” Zachary added.
R&G Insights Lab is an innovative legal consulting group that unites the Ropes & Gray’s world-class legal talent with a multi-disciplinary team of creative, business-minded consultants and data scientists. The Lab offers a variety of unique services, but the team “take[s] a distinctly human-centered and data-driven approach to racial equity audits in a way that purely legal or quantitative reviews may lack,” Zachary noted.
Subscribers can view the full article here. This Q&A is the first of a two-part series from Private Equity Law Report. Part two will explore the mechanics of racial equity audits.
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