Getting Money off the Sidelines: A Starting List to Invest for Racial Equity

This work is a joint project of Bridgespan Social Impact, the Global Impact Investing Network (GIIN), PolicyLink, and CapEQ.

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Since the social unrest over racial injustice in the summer of 2020, philanthropists, corporations, and impact investors across the United States pledged to invest billions of dollars to advance racial equity. However, recent scrutiny of those commitments reveals that the majority of those dollars remain on the sidelines.

A common hypothesis for the shortfall is the lack of investable “shovel-ready” opportunities. But Bridgespan Social Impact has formally and informally advised organizations seeking to invest for racial equity over the years, and found that hypothesis to be patently untrue. To make the case, Bridgespan is publishing this list of racial-equity funds that emerged from our experience, at the request of multiple funds and potential investors, and alongside the launch of a new racial-equity theme in the IRIS+ family of impact measurement and management guides. It comprises more than 160 funds that explicitly seek to improve the livelihoods of individuals who are Black, Indigenous, and people of color (BIPOC) and their communities. And we’re not done yet.

Sourcing these funds, we uncovered dozens of creative financing vehicles aimed at building power, creating economic opportunity, and improving livelihoods for communities of color. Examples include:

• Apis & Heritage, a private-equity fund designed to help close the country’s racial wealth gap by transitioning businesses with large workforces of color into 100 percent employee-owned enterprises.
• Boston Ujima Project, a place-based investment fund, controlled by community members, designed to strengthen local economic control and re-center economic power in low-income communities of color in Boston.
• Collab Capital, a fund built to invest financial, human, and network capital to effectively support, grow, and sustain innovative Black-owned businesses. Its vision is to establish a pathway to economic parity for the Black community through increased ownership in the innovation economy.
• NALCAB Acceso Fund, a fund that aims to deploy over $27 million in loans to support 186 small businesses, producing more than 500 jobs. At least 60 percent of the borrowers will be Latino and more than 80 percent will be minorities.

As investors vet the funds in the list, they should consider a set of critical process and practice considerations:

• A key criterion for racial-equity-focused funds is whether the fund’s strategy and activities raise the power, agency, and wealth of BIPOC individuals and communities in the long term, as opposed to only serving people of color in the short term.
• The funds included in our list explicitly aim to create opportunities or assets for BIPOC individuals or communities in the United States. But investors will need to research further to understand the depth of impact of each fund.
• To fully invest in racial equity, investors should reflect on their own organization’s internal processes and reform processes that may have excluded opportunities to direct capital toward equitable outcomes.
• Partnering with more diverse fund managers correlates strongly with more diverse deal sourcing. In other words, “Who decides where funds are invested?” is an important question that has the power to drive equitable investing—or hamper it.
• The funds on the list offer returns ranging from impact first to market rate. They also reflect a range of approaches to advance racial equity.

This list just scratches the surface of the many local, regional, and national funds that are doing this work—and the many more that this team hopes will join them.

We hope this resource supports the growing number of investors who care about racial equity, galvanizes additional research into funds advancing racial equity, and increases the visibility of the funds and fund managers on this list. We also hope that our list quickly becomes dated as the number of funds investing for racial equity grows.

More Work to Be Done

In addition to investing in shovel-ready opportunities, investors should pursue equitable outcomes by setting targets and measuring progress toward internal equity goals and by championing changes in laws, policies, and regulations toward equity.

Advancing racial equity requires diligent, intentional processes and consistent, rigorous evaluation regarding outcomes. Racial equity is often seen as both an emergent process and an outcome—investors cannot have one without the other. GIIN, PolicyLink, FSG, JUST Capital, and CapEQ recently partnered to launch the prototype of its IRIS+ racial-equity theme to help investors select impact strategies and metrics. They invite everyone in the investing ecosystem to test, share, and guide the next phase of the IRIS+ work during a public comment period from November 2021 to January 2022 (request an invitation to comment by writing “racial-equity theme” on the IRIS+ website’s Collaborate page).

Investors can also band together to advocate for policy changes. For example, a coalition of groups—including the US Impact Investing Alliance, B Lab, and a coalition of 50 impact-centered organizations—are calling for the creation of a White House Initiative on Inclusive Economic Growth. The coalition aims to coordinate federal policies to shift the paradigm from shareholder primacy to stakeholder capitalism and renew a focus on community investing, particularly for communities of color. Policy initiatives like these are needed to reshape the financial system toward equity.

The imperative for racial-equity investing is clear. According to analysis from PolicyLink, more than 100 million Americans are economically insecure (i.e., live below 200 percent of the federal poverty level). That means for one in three even a short-term illness, loss of income, or emergency expense can be insurmountable. This burden falls disproportionately on Black and Latinx residents, who make up 29 percent of the population but 45 percent of those who live in economic insecurity every day. Investors have heard the clarion call and clearly signaled their intent to invest in racial equity. We hope this list—and the strategies described above—can transform that intention into action and ultimately into impact.

Although this list is not comprehensive, it is a good starting point as investors begin their due diligence in racial-equity funding. We also invite you to help us improve the list. If you know of funds that you believe belong on this list, please email info@bridgespan-social-impact.com.

The collaborating organizations thank Jerry Petit-Frere and Nick Zevallos, manager and associate consultant, respectively, at The Bridgespan Group, for their central contributions to this work.

Disclosures

• Bridgespan current clients: Low Income Investment Fund
• Bridgespan former clients: Calvert Foundation, Goldman Sachs Office of Corporate Engagement, JumpStart Inc., Living Cities, Lumina Foundation
• GIIN members: For a list of GIIN members, some of whom are included in this list, see GIIN’s current members list.