Finance & Investment
Regenerative Investing Key to Creating an Inclusive Economy

One of the biggest challenges to improving the economic well-being of low-income communities of color is a pervasive, longstanding lack of access to capital and finance. Chronic underinvestment makes it difficult for many Blacks, Latinos and Native Americans to start businesses, invest in property, and build intergenerational wealth – something many white and Asian American communities take for granted.

In the US, wealth — which refers to accumulated financial assets, such as stocks; or physical possessions, such as property — has even higher racial inequity than income. Black household income is about 56 percent of white household income — already too low; but when it comes to wealth, Black households have on average less than 10 percent of the wealth of white households. This is true for other minority communities, including Latinos and Native Americans. Outside investment is necessary to bridge this gap.

“If we don't actively restore, repair, reinvest in those communities that have been most disproportionately hurt and harmed, it's actually not possible for us to close the racial wealth gap,” said Nwamaka Agbo — an Oakland, California-based restorative economics consultant — during a recent Community Conversation hosted by RSF Social Finance.

This history of underinvestment and neglect goes back decades. Black families, forced into undesirable neighborhoods due to redlining, were for decades unable to get the necessary loans to become homeowners or start small businesses. And Indigenous communities were forced into reservations that, to this day, often remain without basic infrastructure such as water, healthcare, or broadband internet.

The spotlight on racial justice due to the police killings of Black Americans including George Floyd, Breonna Taylor and so many others has sparked introspection in the financial industry about its role in perpetuating discrimination, whether intentionally or unintentionally. While many have responded by pledging to donate money to nonprofits, such as Netflix’s $100 million for Black communities, what is needed, Agbo argues, is a real commitment to regenerative investments.

“Strategically reinvest resources back into Black and Indigenous communities that have been disproportionately extracted from and exploited. Invest in types of businesses and initiatives that actually focus on shared prosperity.” — Nwamaka Agbo

There are efforts to break this cycle of neglect and address systemic underinvestment. RSF Social Finance — a financial services company that invests in regenerative, values-driven economic initiatives — is one institution that’s increasing its focus on low-income communities of color. In late June, RSF announced a $100,000 loan guaranty to Communities Unlimited — focused on making loans available to Black women entrepreneurs in Mississippi, which it hopes has an amplified effect.

“Black women are important role models in their communities. Their business success can motivate young people, multiplying the impact of any single loan to a Black woman-owned business,” said Alexandria Cabral, senior associate of credit at RSF, said in a statement. Other efforts include the Black Land and Power fund, setup by the National Black Food and Justice Alliance, which looks to reverse years of Black land loss by sustaining and investing in shared ownership; and the Black Cooperative Investment Fund, which is providing microloans to Black Americans in Southern California who have a high likelihood of building financial assets.

One key thing to remember, Agbo pointed out, is that just promising donations or funding is not enough. Investments also need to take into consideration the lack of capacity in communities, another result of neglect.

“Social movements on the ground don't actually have the infrastructure to manage the capital that they receive. This is because these communities and organizations are historically underfunded. So, we need to invest in their capacity; because they don't have the infrastructure to redistribute wealth.”

That will require more difficult conversations about the historical impacts of lack of capital, inter-generational discrimination; and politically charged topics such as reparations for slavery and indigenous land seizures, or justice for victims of labor exploitation.

Pledging money and being willing to listen to communities of color are first steps towards real engagement by brands and financial institutions to address racial inequity. But companies and institutions that are willing to devolve decision-making power and tackle systemic issues such as redlining, access to capital, and their own responsibility in perpetuating oppression are the ones who can help make a real difference in bridging racial wealth and power gaps in the US.