Capital MarketsD&IInvestment Management

Reaching Out: Treasury Leads Engagement With Diverse-owned Firms

By February 2, 2023No Comments

NeuGroup research reveals treasury is the primary driver of greater engagement with minority-owned banks, brokers and asset managers. 

As chief procurer of financial services, treasury is at the epicenter of a complex ecosystem of financial partners, from banks to brokers to pension and cash investment managers. According to NeuGroup’s D&I Financing and Asset Management Survey, treasury is not only seeking greater engagement with minority-owned firms but is the driving force behind companies’ efforts to build more expansive financial relationships with these firms. 

A bigger share of wallet. Treasurers hold the purse strings and are increasingly sharing their wallets with diverse-owned firms. According to the survey, conducted in partnership with the National Association of Securities Professionals (NASP), Sustainable Fitch and Fitch Ratings: 

  • 25% of respondents expect to invest as much as 50% to 75% of short-term cash with diverse firms, vs. the current ceiling of under 40%.
  • 50% of respondents plan to invest 21% to 30% of strategic cash via minority-owned firms, up from 25% currently. 
  • 50% of respondents intend to allocate between 5% and 10% of pension assets to minority-owned firms, up from 33% currently.
  • 13% of respondents expect to increase underwriting commitments to diverse-owned firms to between 11% and 20%. Currently, the top allocation level is 5% to 10%.
  • 50% of respondents expect to spend 5% to 10% of fees with diverse-owned firms, up from 33% currently. 

A grassroots effort. The drive to increase engagement with diversity firms is coming from within. Ninety-two percent of survey respondents reported they are not experiencing any pressure from the board. Survey data shows that only 50% of CFOs are highly engaged. 

  • “While many CFOs are supportive, treasurers are more connected to the financial market ecosystem,” said Mike Simonton, who is on the Global DEI Advisory Committee at Sustainable Fitch. “Because they have external lens, they can see the importance of this issue and are moving forward.” 
  • “The CFO is not knocking at our door to include diverse firms in our debt underwriting and investment activities,” explained one survey respondent. While treasury maintains a direct communication line to the CFO, “it’s not like he’s actively asking us how things are going.”
  • “The treasury group is pushing up versus responding to a top-down mandate,” added an investment manager at another member company. According to her, treasury is ahead of other corporate functions, such as procurement, in diversifying its vendor base. “We are proactively communicating what we are doing in this space in order to motivate others to take similar steps,” she said.
  • “It’s more of an organically driven process,” agreed a member from a tech company that issued debt recently and included minority-owned brokers. “We have a whole impact team that’s committed to social goals and green initiatives.”
  • The same goes for working with external investment advisors. “It’s us pushing them,” said a respondent, in a follow-up focus group. “Consultants and advisors are not adamant about adding diverse-owned firms to our portfolio.” He added, “We require our advisors to include at least one diverse firm in their RFPs.” 

Getting the CFO on board. While treasurers have been pushing forward with remarkable success, a highly involved CFO is a feature in the profile of a successful treasury effort to expand engagement with diversity firms. When the CFO is a strong partner, treasury is more likely to have:

  1. A formal D&I policy that governs its work with minority-owned firms.
  2. A policy that has been in place for over two years.
  3. Investment advisors who are required to include diverse-owned firms in their proposals.

Key takeaway. For treasurers, this is a call for action: To move up the maturity curve, they should advocate for their programs by demonstrating success through financial KPIs that show the business benefits of expanding the diversity of financial partners.

Justin Jones

Author Justin Jones

More posts by Justin Jones