For every $100 of wealth held through white families in the U. S. , there is a significant increase in the number of people in the U. S. In the U. S. , Black families own just $15, according to the U. S. Federal Reserve’s 2022 Consumer Finance Survey. U. S.
“Centuries of discrimination in public policy, monetary practices, and social norms that limited wealth accumulation among blacks have not been overcome and will require extensive structural adjustments to rectify the lasting effect of inequality,” according to the Brookings Institution, a non-U. S. organization. -for-profit organization, commenting on the report.
It’s a clear call to all sectors to play a role in closing the huge racial wealth gap. And in recent years, activists who have tackled the issue have suggested philanthropic funders take a number of steps: fund Black, Indigenous, and People of Color Led Organizations (BIPOC) people serving BIPOC communities; collaborative paintings; changing strength and building trusting relationships; Check the obstacles created. And, more recently, taking an active role in reparations for Black people.
Yes! These are all smart practices. That’s why I’m advocating for a framework that integrates them all into a single strategy: regenerative finance.
This strategy is already gaining traction in the investment world: the Boston Impact Initiative Fund, the Candide Group’s Olamina Fund, and the organization I work for, RSF Social Finance (a San Francisco-based nonprofit lending organization, which donates, and creates an investment organization) are among those practicing regenerative finance. If applied widely by philanthropic funders, regenerative capital methods may simply catalyze genuine progress in economic justice.
Regenerative finance uses monetary and social capital as a tool to solve systemic disruptions and regenerate communities and natural environments. It is based on 4 pillars: integrated capital, equitable deployment, trust relationships, and holistic analysis.
Embedded capital is a financing design that combines other types of capital (grants, loans, loan guarantees, technical assistance, network connections, etc. ) to provide social enterprises, community-led projects, and cultural and environmental restoration projects with financing tailored to the client’s needs. desires of social enterprises. maximize their success.
Equitable deployment means rebalancing the economic balance not only by expanding the universe of people funded, but also by reforming the investment process to eliminate structural biases and invite stakeholders to play a decision-making role.
Building accepted internal relationships is an imperative component of regenerative finance, as strategy is a collaborative, experiential effort that requires buy-in among the components. The principles of philanthropy based on accepting them internally apply here.
The fourth element, holistic analysis, is to ensure that subsidies and investments are based on a system that takes into account intertwined reasons and effects. This underpins the total approach.
Some foundations are already using embedded capital as a program-related investment (PRI) strategy, and this strategy can and deserves to be extended to grantmaking to multiply the effect of return on grant money.
For example, recoverable and non-recoverable grants, combined with technical assistance, can improve beneficiaries’ goodfortune rates while replenishing program investment. Loans and loan promises with zero or low interest also recycle the budget and can be funded for profit or not-for-profit. -For-profit social enterprises. It’s a way to reduce inequities in the for-profit investment formula and help disadvantaged communities build wealth.
“Fundamental and individual wealth has been built largely through extractive practices that extract herbal resources and capital from communities, resulting in environmental damages, social and economic injustices, and unbalanced systems. “
RSF has deployed embodied capital through its philanthropic fundraising collaborations, adding the Racial Justice Collaborative (RJC). Launched in 2021 with racial justice-focused partners, the RJC provides early, customized monetary and network capital to BIPOC initiatives and marketers. RJC recognizes the fact that due to the structural racism woven into the money sector, BIPOC-led organizations face far greater barriers than their white-led counterparts to accessing capital across the investment spectrum.
JCR assessments are based on what money and aid can bring to communities. First, it awarded grants to four organizations committed to wealth creation and network ownership.
One of the grantees is the Black-led Higher Purpose Co, a Mississippi-based economic justice nonprofit that works to build networked wealth with Black citizens by supporting ownership of financial, cultural, and political power.
RSF first founded Higher Purpose Co in 2020 with a loan guarantee from the Women’s Capital Collaborative, which allowed it to increase its lending to Black women entrepreneurs. The $50,000 JCR grant expanded on this by helping to build a $1 million headquarters designed to serve as a hub for Delta farmers and artists.
Another grant awarded to The East Bay Permanent Real Estate Cooperative, a network of real estate developers that supports BIPOC communities’ access to land and housing. The RJC grant helped implement an assignment that reactivates a historic Black business and arts salon in West Oakland, California.
Providing network resources can be just as vital as offering money. Entrepreneurs and organizations that don’t have equivalent access to monetary capital also don’t have access to resource-rich networks. Embedded capital can come with technical resources for an individual or help to create a collective design where other people and organizations can inform each other, share resources, and build their own network.
“Look for a fund that focuses on equity and parity, and that provides mentorship, training, and other educational resources for marketers and organizations to succeed. “
For example, the Southern Black Farmer Community-Led Fund, a donor-advised fund within RSF, brings together six organizations operating in black farming communities in the southeastern United States. Distribute budget without donor orders (a trust-based fund). technique). Drawing on the region’s history of cooperative development, participants designed a collaborative technique to assess opportunities and needs, seek solutions, and distribute funds.
This farmers’ fund operates with the confidence that the food economy, anchored in Black farmers in the South, is a difficult place for wealth creation and network well-being. Each of the six organizations earned grants to expand Black leadership in agriculture and help farmers. and expand their lands, provide technical assistance, and much more. One of its main goals is to meet the enormous challenge of transferring land, wealth and wisdom from retired baby boomers to younger generations.
Regenerative financing may seem complicated, but it is available to any entity or anyone who has a donor-advised fund.
The simplest way to get started is to make a contribution to an integrated equity fund set up with a regenerative framework. Look for a fund that focuses on equity and parity and provides mentorship, training, and other educational resources to help marketers and organizations succeed. It deserves to collaborate with stakeholders in decision-making and collaborate with community-based organizations. And it deserves to assess its impact in a way that reflects the long-term commitment this kind of work requires.
The other option is to create your own regenerative finance fund. Relationships of trust are at the heart of this effort: launching a regenerative finance fund requires significant effort to perceive partners’ values and goals and ensure they align with yours. It’s also that at least some partners are rooted in the network you need to support.
The wealth of foundations and Americans has been built in large part through extractive practices that extract natural resources and capital from communities, resulting in environmental damage, social and economic injustices, and unbalanced systems.
For those wondering how to fix this damage, regenerative finance is a smart start. Thanks to their holistic approach, they are suitable for solving systemic problems. And with collective action, equity, and networked leadership, they can begin to change the situation. Scale to long-term positive change.
Erika D. Williams, Vice President of Integrated Capital at RSF Social Finance until March 2024 and advisor to the Racial Justice Collaborative.