The evidence is clear: Despite rapid economic growth, the United States has
become more unequal over the past few
decades.
The income of the highest-earning 20 percent of households has steadily grown,
while the wealth gap between the richest and poorest families has doubled since
1989. This is even more true when it comes to racial inequality. The income gap
between Black and white households has held steady since 1970, with average
Black household income stuck at just 56 percent of white household income.
This is problematic, and pervasive. Low-income communities — and communities of
color, in particular — see little investment, even in basic necessities such as
healthcare, education and housing. As government spending drops, this has led to
catastrophes such as Flint, Michigan’s ongoing water
crisis.
Private capital has not replaced government spending in many communities — one
reason is that many financial institutions and investors see no reason to invest
in places where they believe there’s little opportunity to get a return on their
investment.
RBC Global Asset Management, based in Toronto,
Canada, has been doing some form of impact investing across North America
since 1996. According to Ron Homer, RBC’s Chief Strategist for Impact
Investing, the firm looks for synergies.
“Our strategy has been focused on win-win scenarios,” he told Sustainable
Brands™, “activities and products that address a specific social
benefit, and do it in such a way that provides a market rate return.”
Other impact investing efforts include Upstart
Co-Lab — a project of
Rockefeller Philanthropy Advisors, which focuses on the creative industry;
Domini, which factors in
diversity and focuses on investments that build a better future for the planet
and people; Visa’s recent commitment to elevate 50 million small and micro
businesses
worldwide — with a special initiative aimed at helping Black women entrepreneurs
in the US; and Citi’s $150 million Impact
Fund, which makes equity
investments in double-bottom-line private-sector companies. Even Kiva, which
made its name as a microfinance lender for projects in developing countries has
launched a program focused on low-income
communities in the US.
Around the US and elsewhere, protests are highlighting how many communities —
particularly those where minorities reside — have been left
behind.
Impact investing continues to
grow;
and with it, we’ve seen the emergence of firms such as San Francisco-based
Robasciotti &
Philipson,
which focuses its investments in what they call transitional capital, addressing
systemic problems faced disproportionately by people of color. But the movement
has not yet scaled to the level needed to address systemic inequalities and
racial disparities in investing.
It is clear that not only does impact investing need to continue to grow, it
must also be more intentional. RBC’s model works, but Homer agrees it is just
one approach in a sector that needs a diversity of tools.
“The social unrest has highlighted some of the different perspectives on
reaching underserved communities,” he said.
There’s a role for the government, too. Early on, RBC’s impact investing program
worked with federal loan provider Fannie Mae to develop mortgage outreach
programs, to combat predatory lending. Blending private capital with public
finance could be a way to scale impact, reduce risk, and get more investors to
lend to underserved communities and sectors.
“Over the long haul, it will require some private capital married with
government support to solve many of these issues,” Homer said. “There are
certain things that governments can do to make some of the existing programs a
little bit more accessible and intentional. We are hopeful that, going forward,
there will be a focus on public policies and regulations that can help that.”
The COVID-19
pandemic,
though, is adding another challenge. Though the economic fallout is far from
finished, or clear, there is evidence that it is impacting the
poor more than
the well-off, and could disproportionately impact people of
color.
The need for better housing, healthcare, and other public services is only
likely to grow — necessitating more investment. Success will also require
ensuring that community voices, and needs, are central.
“We think that it is important [that within] the communities that are
underserved, local advocates who are trying to promote an improved environment
are aware of some of these tools and how they work, and can make suggestions to
how to make them more effective,” Homer said. “From that, we’ll get a better
outcome.”
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Media, Campaign and Research Consultant
Nithin is a freelance writer who focuses on global economic, and environmental issues with an aim at building channels of communication and collaboration around common challenges.
Published Jun 29, 2020 8am EDT / 5am PDT / 1pm BST / 2pm CEST