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<Invest in Racial Justice Yale SOM’s Teresa Chahine>
July 14, 2020 • jainendra joshi • business

 

 

<Yale SOM’s Teresa Chahine and a panel of experts discussed to  increase opportunity.>

In 2016, the typical white family had a net worth of $171,000. Divide that figure by 10 and you get internet

worth of the typical African American family. A half-century ago, the wealth gap looked virtually identical.

“If we eliminated the racial wealth gap by 2028, some estimates suggest it might contribute 4–6% in

GDP,” said Anna Blanding ’09, director of impact investments at ConnCAT, a replacement Haven

workforce development organization. “Closing this gap isn't just an ethical imperative, but an economic

imperative.”

Blanding was speaking as a part of a web panel on how financial tools can better empower minority

groups and communities. together with her on the webinar were Janice Shade, founding father of The

Initiative for Local Capital, and Michael Shuman, an economist and attorney focused on community

economics. Teresa Chahine, a senior lecturer in social entrepreneurship at Yale SOM, moderated the

discussion.

Shuman began by describing one major a part of the problem—and, by meaning , limning the size of the

chance . “The most up-to-date data said that $56 trillion is locked up in long-terms saving, stocks, bonds,

pension funds, and insurance funds,” he said. And yet the majority of that $56 trillion dollars gets invested

during a limited segment of the economy composed of worldwide , publicly traded companies. How, he

wondered, can we divert a number of this huge pool of cash faraway from multinational corporations that

are overwhelmingly led by white men and into the sprawling diversity of local communities that would

enjoy the investment? 


One promising route is that the creation of “community investment funds” that function like all other fund

during a financial market except they contain a portfolio of community businesses. (Importantly,

“community” needn't be defined by geography, but could as readily be defined by affinity, like women-

owned.)

“All folks , if we would like to be allies in fighting racism, should be moving some percentage of our life

savings out of worldwide companies and into businesses travel by people of color our community.” —

Michael Shuman
For instance, a for-profit subsidiary of ConnCAT is currently developing a $200 million, 7.5-acre plaza

within the Dixwell neighborhood of latest Haven, where 55% of residents are low-income. The project

includes market-rate and affordable housing, a grocery and food court, daycare facilities, retail

storefronts, and office and business incubator space. Blanding described the project as “a catalytic

investment within the community,” and it's precisely the type of opportunity that Shuman says should be

bundled up during a community fund. ConnCAT also recently announced the launch of their Economic

Justice Fund, which aims to boost $5 million to support Black-owned businesses in New Haven .

Standing within the way of this type of investment are 80-year-old regulatory hurdles. The 2012 JOBS Act

dismantled many barriers between individual investors and little business owners, but impediments

remain within the outdated investment trust Act of 1940. “I’m now advocating for policy changes with the

SEC that leave easier ways to aggregate capital from citizen investors to take a position within the sorts

of opportunities [Blanding] is describing,” said Shade. “Once those changes are made, I’ll work on

creating accelerators for communities that want to start out these sorts of funds.”

In addition to any about-face , behavior change are going to be a necessary a part of the equation. Most

prominent is investor fear of uninspiring returns: Sure, the cash goes to an honest cause, but won’t I take

an enormous hit? Though many socially aware investments actually post competitive returns—hedge

funds that aren’t led by white males tend to outperform, for instance—Shade noted that investors may

have to broaden their thinking: Investments that ultimately reduce welfare work expenditures and lower

the tax burden provide measurable, if unconventional, financial returns.

Equally important, these sorts of investments must root their planning and investment processes within

the communities during which they happen . “We’re not coming in to save lots of the landscape, but to

concentrate to and act on community feedback,” Blanding said with reference to the Dixwell

development. The community said it needed a daycare; the community expressed frustration about being

a food desert. ConnCAT responded. “Everything goes slower because we would like community feedback

and involvement, but it’s a richer process and a richer project at the end—one that really meets the

requirements of everyone,” Blanding said.

Finally, all three panelists suggested that regenerative finance, as its known, generally requires

reconsidering the size of business. Moving faraway from companies that are too big to fail, Shuman said,

represents an effort to “replace long-distance, opaque, hard to know relationships with personal

relationships.” (Shuman made room for exceptions, just like the large Australian bank Bendigo, which

uses its size to assist small rural towns very efficiently establish community banks.)

And while policy reform unfolds over years, the panelists offered actions that, taken presently, can

support economic justice. Blanding suggested that, among other things, institutions should develop a

concrete strategy for investing in local businesses, especially people who are minority- or women-owned;

this might mean anything from rethinking caterers to shuffling endowment holdings. Shuman

recommended adopting an area business, describing what he did with one among his favorite

neighborhood restaurants: assuming he would spend roughly $1,000 there over the course of this year,

and knowing the financial challenges presented by COVID-19, he paid the proprietor $1,000 upfront.

“And he gave me a 20% add-on, so—like that—I got a 20% return on my investment,” Shuman said. He

also encouraged everybody to require their own small a part of that $56 trillion pot and push it into more

beneficial investments. “All folks , if we would like to be allies in fighting racism, should be moving some

percentage of our life savings out of worldwide companies and into businesses travel by people of color

our community.”