Purpose, Logistics and Future of PE Sponsors Using Racial Equity Audits to Evaluate Their Portfolios’ DEI Efforts (Part One of Two)

As part of the rising prominence of environmental, social and governance factors in the private funds industry, participants are focusing on issues of diversity, equity and inclusion (DEI). To support the advancement of DEI measures, racial equity audits – third-party assessments of the scope, and effectiveness, of organizations’ DEI-focused efforts – have emerged as a tool available to well-intentioned fund managers and companies. PE sponsors have increasingly pursued racial equity audits to gauge the DEI efforts of their portfolio companies – both broadly and at the individual company level. The Private Equity Law Report interviewed Zachary N. Coseglia, co‑founder and manager of R&G Insights Lab (the legal consulting arm of Ropes & Gray), and Michael R. Littenberg, partner at Ropes & Gray, on the purpose, mechanics and future of racial equity audits in the PE industry. This first article in a two-part series provides an overview of R&G Insights Lab, the goals behind racial equity audits, the logistics of completing one and future trends in the field. The second article will detail the five steps of a racial equity audit of a PE sponsor’s portfolio companies. See our four-part series on diversity: “Why Equal Representation Within Fund Managers Is Essential” (Oct. 4, 2018); “Ways Fund Managers Can Promote Diversity and Inclusion” (Oct. 11, 2018); “What Implicit Biases Are and Whether Interventions Are Effective” (Oct. 18, 2018); and “How Constrained Decision Making, Along With Legal and Compliance Leadership, Can Help Reduce Fund Manager Bias” (Nov. 1, 2018).

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