Earlier this year, Citigroup Inc. urged shareholders to reject a shareholder group SOC Investment Group proposal to perform a racial equity audit, after saying it already committed to Black communities. However, Citi recently relented and agreed to an audit, and it will become the first Wall Street bank to conduct such an audit.
Citi will conduct a racial equality audit to examine the bank’s actions to reduce the racial wealth gap; this is a total change of course after the bank initially refused to do an audit months ago.
Citi To Audit Its $1 Billion Pledge Initiative to Help Close Racial Wealth Gap
Citi is conducting an audit of its Action for Racial Equity initiative that it launched in September 2020 after the murder of George Floyd. As part of the initiative, Citi made a $1 billion commitment, meaning the corporation will invest in Black-owned businesses and provide greater access to banking in Black neighborhoods.
Citi’s ARE promised to provide greater access to banking in communities of color, increase investments in Black-owned businesses and grow homeownership rates among Black Americans.
Citi said it would also have a $500 million investment in affordable housing for African-Americans.
The audit will make sure the bank is taking measurable action to close the Black-White racial wealth gap and is following the goals of the ARE initiative.
“Conducting an audit of our ARE initiative will help us assess the impact our work is having and will help inform how to adapt and grow our work to address the racial wealth gap,” said Citi in a press statement.
Attorneys at Covington and Burling LLP will conduct the Citi racial equity audit. Civil rights groups who are shareholders will also be a part of the audit, which is slated to begin in January 2022 and conclude at the end of next year.
Citi Hopes to Address Black-White Wealth Gap
The Black-White wealth gap has worsened during the pandemic. According to Federal Reserve data, Whites have 84 percent of all the wealth in the U.S., while African-Americans only have 4 percent of total household wealth.
Banks like Citi have also historically discriminated against Black Americans through redlining and other discriminatory loan practices.
Many Companies Coming Up Short with Pledges to Black Community
In the wake of the high-profile police killings of George Floyd and Breonna Taylor, Citi and other major corporations pledged to give money to support Black causes after the summer of 2020. Fifty of the U.S.’s biggest public companies and their foundations collectively committed at least $49.5 billion. More than 90 percent of that amount — $45.2 billion — is allocated as loans like mortgages for Black homeowners or investments that would ultimately benefit the banks, found a recent study by The Washington Post. Only $ 4.2 billion of the money pledged was given in grants to organizations fighting for racial justice.
Can Banks Like Citi Help with Racial Equity?
While Citi vows to enact change through its financial pledges, critics say that the bank can’t solve racial inequality.
“The answer to these massive problems is not in capitalism doing better or more. It’s not going to come from philanthropy. It’s not going to come from promises. It’s got to be a policy change,” Mehrsa Baradaran, a law professor at the University of California at Irvine, told The Washington Post.
“We don’t want just benevolent billionaires and nicer, softer, more-woke monopolies. We want an economic structure that allows for more mobility, and we don’t have that,” added Baradaran.
While there is criticism about corporations like Citi pledging to take action to end racist practices and donate money to bring societal change, the investor group that called for the racial equity audit applauds Citi’s decision.
“By agreeing to a third-party racial equity audit, Citi is taking a critical step toward confronting centuries-old harms against marginalized communities that are still present to this day,” SOC Investment Group’s executive director Dieter Waizenegger said in the blog post. “We look forward to partnering with Citi to address these concerns to pave the way for a financial industry that understands entrenched racial inequity, changes the way it conducts business and invests in the communities it serves to close the racial wealth gap.”