A heightened awareness around racial injustice is leading to increased commitment to more equitable investing and access to capital. This year, SV2 is hosting a four-part series on Investing for Racial Equity to help our community explore the opportunities and capital investment strategies that are emerging. Special thanks to SV2 Board member and longtime impact investing Partner, Tony Stayner, for his work to plan this series and bring in outstanding speakers.
Our initial session, with special guests Morgan Simon, Founding Partner at the Candide Group, and Daryn Dodson, Founder and Managing Director at Illumen Capital, provided an overview of investing for racial equity across a variety of asset classes such as public market investments, private equities, debt/loan funds, and real estate. We learned that only 1.3% of assets are managed by funds owned by people of color and/or women. We also learned how implicit bias restricts fundraising opportunities for Black founders but creates attractive investment opportunities for those able to overcome it.
Our second session focused on public equities and debt, and featured Rachel Robasciotti, the founder of Adasina Social Capital and Chelsea McDaniel of Frontline Solutions. By building a diverse team and partnering with social justice organizations within impacted communities, Adasina defines the criteria that guide their investments. Their social justice ETF (JSTC) launched shortly after our session. In addition, their municipal bond strategy is built on research showing that Black communities are rated riskier than communities with other similar risk characteristics, and so provide a higher yield to their municipal bond holders. Over time, Adasina’s outperformance is intended to bid this unjustified premium away.
The third session focused on venture capital equity funds — Partners heard pitches from three funds with Black founders:
- Precursor Ventures invests in people over product at the earliest stage of the entrepreneurial journey providing that hard to get first check to entrepreneurs with a priority for companies led by women and people of color.
- HomeTeam Ventures invests in early stage founders bringing breakthrough technology to one the world’s largest but least innovative industries—construction and housing—with a goal of ending global homelessness.
- Zeal Capital Partners invests in exceptional diverse management teams building high-growth, early-stage businesses that are bridging America’s wealth and skills gap, with a focus on FinTech and the Future of Work.
After a follow-up diligence process designed specifically for equity funds, Partners voted to invest $25,000 in Zeal Capital Partners — SV2’s 17th impact investment since 2015. Their Inclusive Investing strategy is intended to provide impact at each step: they invest in and partner with exceptional founders with diverse management teams in underrepresented geographies that can create solutions to wealth, employment, and education gaps in the US.
In our fourth session in this series on Investing for Racial Equity, we will hear from some of the leading names in the Community Development Finance Institution (CDFI) sector about the deep impact of CDFIs and the unique opportunities they present to invest to address the racial wealth gap. CDFIs provide vital credit and financial services to underserved populations making loans for housing, business, consumer, and community infrastructure. Their impact recently has been and remains especially critical to help those in low income communities survive the economic effects of the pandemic.
Our upcoming panel includes:
Amir Kirkwood, Chief Lending and Investment Officer of Opportunity Finance Network, the National Association of CDFIs.
Caroline Yarborough, Syndications and Strategy Officer of Calvert Impact Capital, one of the largest non-profit investment firms that funnels capital to CDFIs at favorable rates.
Lori Chatman, President of Enterprise Community Loan Fund, one of the largest CDFI affordable housing loan funds in the US.
Steve Zuckerman, President of Self-Help Federal Credit Union, part of a leading national CDFI with more than 70 credit union branches in low income communities in CA, WA, IL, WI, NC, SC and FL.
RSVP here for this session, scheduled for March 23 from 12pm-1:15pm.
If you’re interested in reading more about this important equity issue, please see the following background articles:
– This June 15, 2020 Forbes article: Have we Reached the Tipping Point in Racial Equity Investing? demonstrates how the heightened awareness around racial injustice is now resulting in a higher commitment to racial equity in investing.
– ImpactAlpha, July 10 – The movement for racial justice in the criminal justice system has cast a spotlight as well on systemic and anti-Black racism in finance.
Long before the protests, ImpactAlpha has featured Agents of Impact and New Revivalists doing the work of changing assumptions, practices and power structures within finance and investing. They are dismantling age-old excuses, biases and malpractices, including within impact investing itself, that lead to inefficient allocation of capital, underfunded founders of color and unrealized solutions to community needs.
– An SSIR article that highlights case examples of impact investing for racial equity is: How foundations are using impact investing to advance racial equity
– A recent SSIR article Racial bias in philanthropic funding and webinar with Echoing Green and BridgeSpan group quantified the difference in capital invested in organizations led by people of color, and the reasons why this is happening.