Intersection: What if your bonus hinged on your D&I performance?

DELIVERING ON DIVERSITY, GENDER EQUALITY, AND INCLUSION

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In this issue, we look at a new commitment by the Carlyle Group, an effort by top banks to expand credit access in the US, and why Americans are hearing so much about lead lately.

THE ZEITGEIST

Committed capital

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Upping the ante. Last week, the private-equity firm the Carlyle Group announced that it will link the compensation of its CEO, Kewsong Lee, to the firm’s performance when it comes to hiring diverse candidates, fostering an inclusive culture, and diversifying its portfolio companies’ boards. Carlyle employees’ performance bonuses will also hinge on whether they meet individual diversity objectives. Women and people of color made up nearly two-thirds of the firm’s US hires last year, and Carlyle reports that women manage more than half of its $260 billion in assets under management. That’s a rarity in the industry; women make up just one in five private-equity employees worldwide, and they hold less than 12 percent of senior roles. In the United States, McKinsey research shows, Black professionals make up only 1 to 2 percent of investment-deal teams. At the same time, private-equity firms have an outsize ability to shape the status quo of business; they back nearly 20,000 companies in North America alone. Tackling gender and racial inequities at firms and their portfolio companies—including on those companies’ management teams—could change the face of business.

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To their credit. A group of top banks will soon offer credit cards to Americans who don’t have credit scores. Several industry giants will start exchanging deposit-account data, and they will take balances and overdrafts into consideration when evaluating credit-card applications. Black, Hispanic, and Latinx Americans are more likely to require credit during the COVID-19 pandemic and its aftermath—but they are less likely to have a credit history with one of the main credit-reporting bureaus. Nearly 30 percent of Black Americans and one in four Hispanic and Latinx Americans do not have access to a credit card. McKinsey research shows that using innovative methods to assess borrowers’ creditworthiness could help integrate more Americans into the mainstream financial system.

THE FACTS

A pipe problem

Much of America’s infrastructure is outdated or in disrepair, and water and sewer systems are no exception. An estimated six to ten million homes in the United States receive drinking water through lead pipes and service lines, which means that many Americans are ingesting this powerful neurotoxin. Complicating the matter is the fact that utilities don’t know where all of the lead pipes and service lines are. Finding and replacing these lines will be extremely costly, but it could yield billions in future benefits. This is also an issue of equity, given that lead exposure is particularly high among Black children and those from low-income families. A few cities, including Lansing, Michigan, and Madison, Wisconsin, have already gotten rid of all their lead service lines. Others—including Flint, Michigan—are on their way there. One tool that’s helping tackle the issue in Flint and beyond: machine learning. A statistical model built by a team from the University of Michigan can accurately predict which service lines are made of lead. (If you asked the model to distinguish between two homes in Flint—one with a lead service line, one randomly chosen—the model would be right 94 percent of the time.) That’s one way AI can be used for good.

Chart of blocks of houses in the Grand Traverse district of Flint, Michigan

— Edited by Julia Arnous, an editor in McKinsey’s Boston office

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