Category Archives: Financing Black Progress

After Baltimore: Revitalizing Distressed Communities through Impact Investing and Entrepreneurship

Updated, February 2016.

From LivingCities.org:

The imperative, rationale and framework for an impact investment fund specifically targeted to distressed communities:

After Baltimore: Revitalizing Distressed Communities through Impact Investing and Entrepreneurship. By Michael J. Isimbabi, Ph.D.

Part 1: The Imperative and Rationale for an Impact Investment Fund Specifically Targeted to Distressed Communities. Nov 5, 2015.

Part II: A Vision for an Impact Investment Fund Specifically Targeted to Distressed Communities. Nov 12, 2015.

Part III: How Engaged Celebrities and Other Philanthropists, as “Pioneer Investors,” Can Jump-Start an Impact Investment Fund and Galvanize Other Investors and Communities. Dec 10, 2015

Excerpt:

….According to the Fast Company article, [Di-Ann] Eisnor and [Lupe] Fiasco met in May 2014 as Henry Crown Fellows at the Aspen Institute, “hit it off” and started discussing their shared concerns about “inequality in America, ghettoized neighborhoods, and the lack of diversity in the innovation economy. They had a shared belief that good ideas could come from anywhere, and began to wonder whether there wasn’t a way to start hunting for business ideas—and funding them—in neglected neighborhoods around the country.”

Their initiative is consistent with the concept of the EXCEL-TRANSFORM Fund. Indeed, in my eBook [Pooling Our Resources to Foster Black Progress: An Entrepreneurship and Impact Investing Framework], I posit that a group of five to ten successful, philanthropic-minded, respected, and influential people – arts/music/movie/TV/radio/sports/other celebrities, entrepreneurs, corporate and financial professionals, angel investors, etc. – could set up the Fund and hire competent and experienced professionals to run it.

Such a first-rate team, by virtue of their accomplishments, credibility, high profiles, and celebrity, would give the Fund the instant credibility, imprimatur and massive publicity necessary to enable it to overcome the trust barrier, galvanize large numbers of investors (potentially in the millions), and thereby raise enough capital to have transformational impact.

Some of these “pioneer investors” would be high-net worth individuals who can provide seed capital to start the Fund, and others could be highly-accomplished personalities who may not be wealthy enough to invest significant amounts but can lend the public respect and credibility they command, e.g., by helping to engage and galvanize communities.

As discussed in my eBook – and well-chronicled by blogs such as BlackGivesBack.com and BlackCelebrityGiving.com – such people already do substantial charitable giving in various ways. However, while they give to many worthy causes, e.g., education, health, poverty, museums, etc., in many cases, it is often difficult to determine the effectiveness of their giving.

For example, a recent UBS survey found that “while millionaires highly value charitable giving, they are not confident about the impact of their giving. Only 20% of millionaires rate their giving approach as highly effective, and only 41% are highly satisfied with the impact they have made on their broader communities and society.”

Similarly, a U.S. Trust study found that, in 2013, 98.4% of high-net-worth households donated to charity; of these, 53.4% monitor or evaluate the impact of their charitable giving while 46.6% do not, and only 40% of the latter category report achieving their desired impact through their giving.

As I argued in the previous post, people who are already engaged in philanthropic giving to uplift distressed communities are the most obvious prospective investors in the Fund. To the extent that they are convinced that the Fund, by virtue of its business/entrepreneurship focus and industry-standard transparency and accountability, would have greater impact than “traditional” charitable giving, while also providing them financial returns, some would find the Fund to be a more attractive option for their philanthropy dollars.

Furthermore, some may even consider investing in the Fund beyond their normal levels of charitable giving as part of their investment portfolios. Lupe Fiasco’s efforts, and other similar efforts by other celebrities – such as Grammy-winning songwriter/producer Bryan Michael Cox (100 Urban Entrepreneurs and other initiatives)– potentially could inspire more celebrities to become more engaged in impact investing, especially by pooling capital through collaborative partnerships to establish a national, large-scale initiative such as the Fund….. Continue reading

Related:

  • PODCAST: Revitalizing Communities Through Impact InvestingGoldman Sachs. On this episode of Exchanges at Goldman Sachs, Margaret Anadu, a managing director in the Urban Investment Group at Goldman Sachs, discusses impact investing and the firm’s efforts to help rebuild communities in Newark and New York City.
  • The Distressed Communities Index (DCI) is a customized dataset created by the Economic Innovation Group examining economic distress throughout the country and made up of interactive maps, infographics, and a report. 

Leadership and Innovation in the New Civil Rights Movement: Impact Investing as a Main Cornerstone

Excerpt from:

Leadership and Innovation in the New Civil Rights Movement: Impact Investing as a Main Cornerstone. By Michael J. Isimbabi, Ph.D.  Emerging Practitioners in Philanthropy [EPIP.org] Blog. May 04, 2015.

…Given the limited public funding available even for proven, cost-effective initiatives (such as early childhood education), impact investing is increasingly gathering momentum as a means of addressing social problems.

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Nonetheless, it is unrealistic to expect that impact investment capital will be invested on scales large enough to have transformational impact in the communities where capital, especially equity, is most direly needed. Despite several examples of successful inner-city revitalization efforts in recent years, there remain significant negative perceptions and stereotypes of these environments. Also, many ventures that could have the most direct positive impact on poor communities tend to have high risk and provide relatively low financial returns. Furthermore, even as the impact investment market has grown, there is a disparity in opportunities for impact investing led by and for Black communities.

In order to attract substantial capital to under-resourced communities from impact investors as that market grows, the challenge is to devise feasible business models and strategies and provide persuasive evidence of investment opportunities that will appeal to different categories of impact investors. Some impact investors will accept very low, below-market financial returns if they are convinced a venture has the potential to have transformational social impact.

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So what are the alternatives to (futilely) waiting for the government?

This is where the leadership of visionary and entrepreneurial EPIP members can become a powerful force. Emerging social sector leaders can play a leadership role in the movement to ensure that venture-philanthropic capital flows to under-resourced communities, which, in the past, have either been exploited or ignored by other capital sources.

In my eBook, Pooling Our Resources to Foster Black Progress: An Entrepreneurship and Impact Investing Framework, I present a comprehensive framework for implementing such an approach through the establishment of a (primarily) for-profit venture-philanthropic impact investment fund, the Excellence and Ventures Transformation Fund (“EXCEL- TRANSFORM Fund”).

I argue in the book that the strong trends in impact investing provide a unique opportunity for African Americans to harness their resources on a substantial scale, through a vehicle such as the Fund. By investing in the Fund, African Americans will be able to more efficiently pool some of the money they already give away in the form of charitable giving – which is considerable – as impact investments in entrepreneurial ventures that will have greater impact compared to “traditional” charitable giving to nonprofits, many of which face challenges pertaining to cost-effectiveness and operational efficiency.

The Fund will be a vehicle for galvanizing large numbers, potentially millions, of African Americans as well as non-African Americans – philanthropic-minded individuals and organizations motivated by powerful altruistic, self-interest, and national progress reasons – to pool resources on a large national scale to transform under-resourced communities. ….

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Read the full article here:  

http://www.epip.org/leadership_and_innovation_in_the_new_civil_rights_movement_impact_investing_as_a_main_cornerstone

[Dr. Isimbabi is affiliated with this website.]

Closing the Racial Wealth Gap – The 2015 Color of Wealth Summit

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The 2015 Color of Wealth Summit, organized by the Center for Global Policy Solutions (CGPS) and the Insight Center for Community Economic Development (ICCED), was held at the US Capitol in Washington, DC on April 30, 2015.

The annual summit seeks to “engage Members of Congress, Congressional staff, the media, and the public in a dialogue about the racial wealth gap, its effect on marginalized households, its impact on the U.S. economy, and solutions for closing the gap.”

The informative and insightful sessions featured, among others: Members of Congress, policy researchers, economists, academics, and nonprofit, community development, financial and media professionals.

Watch videos of sessions here: http://globalpolicysolutions.org/2015colorofwealthsummit/

Continue reading

Pooling Our Resources to Foster Black Progress: An Entrepreneurship and Impact Investing Framework

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Check out the new book, Pooling Our Resources to Foster Black Progress: An Entrepreneurship and Impact Investing Framework. The book:

  • Examines the great potential with respect to the powerful nexus among: black earning/buying/investing power, philanthropy and resource-pooling, buying/banking black, entrepreneurship, business development, job creation, wealth-building, and economic and social progress 
  • Shows how a potent, large-scale resource-pooling vehicle with a comprehensive framework that is able to harness this potential, especially with the galvanizing power of online and social media, can have immense impact 
  • Presents a framework for establishing such an initiative, in the form of a national impact investment fund — the “Excellence and Ventures Transformation Fund” (or “EXCEL-TRANSFORM Fund”) — that would address unemployment and poverty and help finish the “unfinished business” of the civil rights movement.

[Full disclosure: the author, Dr. Michael Isimbabi, a finance and energy industry professional, consultant, and former professor of finance, is affiliated with this website.]

Look inside the book (the first 10%) for free and get it here (at Amazon.com): http://www.amazon.com/POOLING-RESOURCES-FOSTER-BLACK-PROGRESS-ebook/dp/B00HTWJ8BY.

Also join the discussion on the feasibility and establishment of the EXCEL-TRANSFORM Fund, innovative strategies for self-reliant resource-pooling, and related philanthropy, entrepreneurship, impact investing and empowerment issues at the book’s website, www.PoolingOurResources.com, and Google Plus.

The Racial Wealth Gap: Recent Studies

Less Than Equal: Racial Disparities in Wealth Accumulation. Signe-Mary McKernan, Caroline Ratcliffe, C. Eugene Steuerle & Sisi Zhang. Urban Institute. April 2013. 

When it comes to economic gaps between whites and communities of color in the United States, income inequality tells part of the story. But let’s not forget about wealth. Wealth isn’t just money in the bank, it’s insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class. In short, wealth translates into opportunity.

…How Did the Great Recession Affect Wealth, and Who Lost the Most? While the Great Recession didn’t cause the wealth disparities between whites and minorities, it did exacerbate them. The 2007–09 recession brought about sharp declines in the wealth of white, black, and Hispanic families alike, but Hispanics experienced the largest decline. Lower home values account for much of Hispanics’ wealth loss, while retirement accounts are where blacks were hit hardest….

How Do We Fix This? Families of color were disproportionately affected by the recession. However, the fact that they were not on good wealth-building paths before this financial crisis calls into question whether a whole range of policies (from tax to safety net) have actually been helping minorities get ahead in the modern economy. More fundamentally, it raises the question of whether social welfare policies pay too little attention to wealth building and mobility relative to consumption and income….

…A common misconception is that poor or even low-income families cannot save. Research and evidence from savings programs shows they can. When we examined families living below the poverty level, we found that over a decade more than 40 percent were able to increase their networth and save enough to escape asset poverty—in other words, they had enough assets to live at the poverty level for three months without income (about $3,000 for an individual and $6,000 for a family of four). The federal government spends hundreds of billions of dollars each year to support long-term asset development. But these asset building subsidies primarily benefit high income families, while low-income families receive next to nothing. Reforming policies like the mortgage interest tax deduction so it benefits all families, and helping families enroll in automatic savings vehicles, will help improve wealth inequality and promote saving opportunities for all Americans.

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How America Built the Racial Wealth Gap. Lawrence D. Bobo. April 9, 2013.  Straight Up: Will leaders ever step up to fix the mess that social policy and our checkered past created?

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The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide. Thomas Shapiro, Tatjana Meschede and Sam Osoro. Research and Policy Brief. February 2013. Institute on Assets & Social Policy. Brandeis University.

KEY FINDINGS:

1. Tracing the same households over 25 years, the total wealth gap between white and African-American families nearly triples, increasing from $85,000 in 1984 to $236,500 in 2009.

2. The biggest drivers of the growing racial wealth gap are: • Years of homeownership • Household income • Unemployment, which is much more prominent among AfricanAmerican families • A college education • Inheritance, financial supports by families or friends, and preexisting family wealth

3. Equal achievements, such as income gains, yield unequal wealth rewards for whites and African-Americans.

 

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Closing the Racial Wealth Gap Initiative – Publications and Materials. Insight Center for Community Economic Development.

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Lisa Hall, President/CEO of Calvert Foundation, on the Potential of Impact Investing to Transform Underserved Communities

Excerpts: Lisa Hall, President/CEO of Calvert Foundation, on the potential of impact investing to transform underserved communities

LisaHall-239x164Lisa Hall of the Calvert Foundation on Impact Investing: An In-depth Interview. Forbes.com. October 20, 2011.

….Rahim Kanani: How can we convince traditional investors to reevaluate their portfolios and consider social impact investing?

Lisa Hall: I thought about this a lot at the Congressional Black Caucus Foundation’s annual conference, where I spoke about impact investing and the widening wealth gap. During the past few years, our economy has suffered greatly and yet the wealth keeps building at the top. Impact investment creates a virtuous circle of empowerment, opportunity, and engagement by connecting investors, underprivileged individuals, and communities. We need more people to get involved in impact investing because it is a critical part of the solution to closing the wealth gap. ….

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Lisa Hall on How Calvert Foundation is Democratizing Impact Investing. Forbes.com. December 17, 2012.

Sixteen years ago, Calvert Foundation was born of a seemingly improbable idea: using investment dollars to help end poverty.

Today, investment banks describe impact investing as an “emerging asset class”;… the impact investing market is estimated to raise at least $500 billion in the next decade;…and according to Calvert Foundation’s recent research survey, 72 percent of financial advisors are interested in offering impact investing products to clients….

Impact investing is undoubtedly an idea whose time has come. As budgets of philanthropies and governments have shrunk, investment capital has come to be recognized as a tool that can address some of the world’s most pressing problems.…..

Continue reading

Stephen DeBerry on the Power of Impact Investing to Foster Black Progress

16535_200_150One of the very interesting presentations at the Innovation and Impact Forum for Black Male Achievement conference, held October 3, 2012 in New York City, was on the transformational potential of “impact investing” by Stephen DeBerry, Founder and Chief Investment Officer at Bronze Investments and a partner at Kapor Capital

According to his bio, DeBerry “makes and manages investments that align strong financial returns with positive social impact.”

Watch his full presentation here: Stephen DeBerry: Power of Impact Investing & Technology.

Related:

The BlackProgress.com essay, Financing Black Progress, Part 2: A Self-Reliance “Marshall Plan”: Creating a National Resource-Pooling Fund, discusses impact investing in the context of a national resource-pooling “impact fund” that can attract investments from millions of black investors.

See also: Pooling Our Resources on a Large, Transformative Scale: Breaking Through the Trust Barrier

Community Investment Network Annual Conference, “The Philanthropic Renaissance,” to Foster Leveraging of Our Collective Resources

The Community Investment Network (CIN) is a national network of giving circles and “everyday philanthropists” that “inspires, connects and strengthens African Americans and communities of color to leverage their collective resources and create the change THEY wish to see.”

CIN’s 2012 conference, titled The Philanthropic Renaissance: Illuminating Creative Expressions of Giving, was held in Birmingham, Alabama, October 4-7, 2012. Among other things, the conference highlighted the growing movement of giving circles and community philanthropy.

For more information, visit the conference website and blog.

See also BlackGivesBack.com’s report on the conference: The “Philanthropic Renaissance” Illuminates Creative Expressions of Giving in Birmingham.

Perspectives on Buying Black

Maggie Anderson tells the story of her family’s pledge to buy black for an entire year in Our Black Year: One Family’s Quest to Buy Black in America’s Racially Divided Economy. [See links to media coverage of the book here.]

The Andersons’ endeavor evolved into The Empowerment Experiment, which “converts our family’s pledge into a positive awareness campaign about the need for strategic entrepreneurship and conscious consumerism in and to benefit the Black community.”

Ms. Anderson provides an excerpt from the book in Black Enterprise (July 2012): How To Buy Black (“14 strategies for conducting your own empowerment experiment”).  Continue reading

On Banking Black

Support Your Local Black Bank. Derek T. Dingle. Black Enterprise.com.
Buying Black is only one step to economic freedom, we also have to bank Black

“Popular syndicated radio talk show host Warren Ballentine recently teamed up with the National Bankers Association, the Washington, D. C.-based consortium of minority-owned financial institutions, to unveil “The People’s Economic Movement,” a program designed to encourage African American individuals and institutions to deposit dollars in Black banks. The initiative’s supporters, among others, include National Urban League President Marc Morial, NAACP head Benjamin Jealous and National Action Network President Rev. Al Sharpton.

Ballentine firmly believes Black institutions and consumers will recover from the Great Recession by pooling resources and strategically leveraging our buying power . “We don’t want to create a minute. We want to create a movement,” Ballentine told me earlier this week. “We’re asking everyone to get involved.” The call to action has been gaining traction as organizations like the Atlanta Association of Black Journalists have decided to transfer funds to local Black institutions.  Continue reading