How Impact Investing Can Support Black Economic Mobility

Even as Black purchasing power continues to increase, economic mobility remains a critical concern for many Black Americans and their communities. Impact investing, or investments made with a specific focus on ESG and related topics, may be one solution that can help address key areas and increase support around the solutions with the biggest ability to have a lasting effect.

 

A recent report from McKinsey & Company, “A guide to impact investing in Black economic mobility,” highlights several key factors that are most likely to impact economic mobility for Black Americans. Today, due to the ongoing and far-reaching ripple effects of systemic racism, there is an 80 percent wealth gap between Black and White Americans. Despite the commitment of over $350 billion in investments to address this, there is still a struggle to identify the most effective opportunities to make that money truly have an impact.

 

McKinsey’s analysis identified eight “pillars,” each with its own specific investment opportunities, to improve Black economic mobility while also offering favorable returns for investors:

  • Affordable housing
  • Pre-K–12 education
  • Health equity
  • Financial inclusion
  • Credit and ecosystem development for SMEs
  • Workforce training and job attainment
  • The digital divide
  • Public infrastructure

Currently, the three most popular investment areas among these pillars are financial inclusion, health equity, and the digital divide; the least popular are pre-K-12 education and affordable housing.

 

Specific Investment Opportunities

Each of these pillars highlighted by McKinsey’s team represents some aspect of life that has been affected by racial disparities and systemic racism. Within each category, however, there are specific things that investors can address.

 

For instance, both affordable housing and educational opportunities are tied directly to decades and even centuries of racial bias and discrimination when it comes to living situations. Both are tied to racist “redlining” policies and the creation of de facto segregated communities with low income and minimal investments. Both also severely limit the ability of Black Americans to build their careers, families, and generational wealth – and both also can be addressed through investments that focus on providing affordable and quality services to these communities. Investors might target projects for affordable housing and financial services to Black individuals and families (particularly those who are already low-income), improvements in education technology, affordable housing in existing “high-performing” school districts, and more.

 

Similarly, investments in these communities could also look like investments in access to financial services and healthcare. Something as simple as having more banks in an area can improve financial situations. One study found that majority-Black communities have just 27 financial institutions per 100,000 residents, compared to 41 institutions in majority-White communities, and increasing basic access to functions like savings, checking, and other banking services could save individuals up to $40,000 in a lifetime. Investors may also be able to support racially-conscious healthcare systems to both improve access — another side effect of racially-segregated geographies – and to counteract racist biases baked into diagnostic medicine and other aspects of the healthcare experience.

 

In any area, the key is for investors to find specific actions to take, and then to put their money into action. They don’t have to have the answers – but they can fund the people who do. Impact investing is about giving people with solutions the support they need to ensure the people who need access and assistance can get it.

 

Our Commitment at Diversity Press

Diversity Press is a Black-owned, MBE Certified printing company. Our commitment to diversity, equity, inclusion, and belonging is right there in our name, and it’s there in every step of our processes. We prioritize supplier diversity and community outreach, while also consistently supporting sustainable processes that can, in turn, lead to a more equitable and sustainable society. Wherever possible, we support, create, and elevate opportunities for Black communities to succeed and thrive, and we are proud to stand alongside numerous other individuals and businesses who share the same commitment.

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