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Earlier this year, John Deere and Al Roker Entertainment released a powerful documentary, Gaining Ground: The Fight for Black Land, that examined why Black ownership of farmland across the United States has dwindled to alarmingly low numbers over the past century. In just a few decades after the end of enslavement, Black Americans were able to amass millions of acres of farmland. But today, approximately 90% of that land is no longer in Black hands.
While various factors have proven to work against Black land ownership, Gaining Ground spotlighted a little-known issue, the exploitation of Heirs’ Property, as having had the most devastating effect on African-American farmland ownership. This land ownership plight afflicting Black farmers exposed the need for impact investments to target wealth gaps that are still embedded along racial lines across American society.
According to Federal Reserve measurements, in the third quarter of 2022, the nation’s white households had $124.5 trillion in assets. In comparison, all Black households had just under $8 trillion in total assets, while Hispanic households had $5.5 trillion, and all other racial groups combined had roughly $15.7 trillion. Wealth disparity in the United States couldn’t be more apparent, and public funding will never reverse this.
Related: Compounding Inequality to Compounding Success: Bridging the Racial Wealth Gap
Financial institutions driving impact
After many years in nonprofits, I came to my current role in the impact investing space, working primarily with housing developers to rebuild crumbling urban core communities. We used mixed-finance, multi-family housing as a revitalization platform. Having invested so much of my time toward the empowerment of people and the communities where they live, I have long realized the pivotal gap for catalyzing undercapitalized regions has always been about attracting private investment dollars.
Philanthropy and government subsidies, while important forms of investment, are not the way to tackle wealth disparity in America. You can’t grant enough money to drive vitality in an economically distressed area. Plus, such programs have unrealistic structures. For most grant and government subsidy programs, the cycles for achieving success are far too brief. Grants usually expect to reap progress within a year. Government programs are not much better, typically allowing just a couple of years to drive impact. That’s just not enough time to undo generations of neglect.
Related: Primed For Growth: The Impact Investment Mindset
In reality, private financial institutions and organizations have both money to invest and the motivation to generate a return on double-bottom-line investments, making them the ones who drive the real results in impact investing. Look at Truist Bank, which has many impact investments across its portfolio, including sizable support for affordable housing, job growth and career development in cities such as Charlotte and Atlanta.
They invest in funds focusing on job creators and should be recognized for deploying their own money into minority-led businesses and projects that uplift communities. It’s a very concerted effort and targets systemic issues correctly, making them a critical impact investing partner for my firm and many others.
Another financial institution that stands out is U.S. Bancorp Impact Finance. The institution has been addressing wealth disparities among Black Americans for quite some time, advancing diverse leaders, increasing business with diverse suppliers, growing ownership and assets for people and small businesses, and investing in Black communities. U.S. Bancorp Impact Finance does a lot of small business and New Markets Tax Credit investing, which allows firms to invest in undercapitalized businesses.
Also incredibly impactful in funding minority-owned businesses are Minority Depository Institutions (MDIs). These banks, credit unions and SBICs, which are minority-owned and led, have recently become well-funded due to current administration initiatives and are now the best source for many small businesses seeking capital.
Following the Dodd-Frank decision, MDIs were cash-strapped, but now they are flush with money and investing prolifically. Their approach should be celebrated for helping to get public monies into the hands of the communities that can then use them to drive their own vision of success. Carver FSB, Industrial Bank and Southern Bancorp are among the many minority-led banking institutions with Black and brown eyes on the community while furnishing SBA-guaranteed small business loans. Efforts like these support not just short-term results, but the critical generational wealth.
Related: Why Addressing the Racial Wealth Gap is Good for Business
Others champions of impact investing
Also having an outsized effect in the impact investing world are foundations and funds that are committed to eliminating wealth disparities over the long term.
The Ewing Marion Kauffman Foundation has long been committed to championing ideas and supporting solutions designed to improve education, boost entrepreneurship and help communities and individuals thrive. Much of the Kauffman Foundation’s success in building inclusive prosperity through a prepared workforce and entrepreneur-focused economic development is attributed to patient investments. Their work to address the “friends and family” gap in funding for Black entrepreneurs, in collaboration with Living Cities, is dedicated to helping entrepreneurs of color access more capital and grow their businesses.
The same should be said for the Case Foundation, founded in 1997 by Jean and Steve Case, which aims to drive entrepreneurship and innovation while addressing chronic social challenges. Their investments into companies, organizations and funds to generate social and environmental impact, alongside a financial return, have served as a long-standing model for impact investors. The Rise of the Rest Seed Fund from Revolution, a Case-founded investment firm that backs entrepreneurs at every stage of development, invests in passionate entrepreneurs who are based outside of traditional business hubs, with the effect of reaching more underrepresented entrepreneurs.
As we have seen, tackling wealth gap disparities, such as the loss of land owned by Black farmers, requires the private sector to lead the way in affecting lasting positive change. This work is far from complete. Given the financial strain and uphill climb so many people are facing, the private sector must commit to further investments that foster greater economic inclusion by growing minority-led businesses and funding those who, far too often, are shut out of receiving investment capital.
