What Happens Here Cannot Stay Here

Notes from a first conversation of racial justice practitioners on racial justice and capital allocation

By Oscar Perry Abello, Project Editor for Transform Finance’s Racial Justice Project

Nineteen people walked into a room. Some knew each other, some were new to each other. There were hugs as well as handshakes. It was a good mix of strangers and kindred spirits for a conversation as complicated and fraught as one concerning racial justice and finance.

The room was the Rockefeller Foundation boardroom, in midtown Manhattan. The nineteen people were an assortment of folks from all over the U.S., from Oakland to Detroit to Jackson, Mississippi, to Washington D.C., to New York City. Fifteen were people of color, 12 were women. All work in some capacity on some dimension of racial justice. Transform Finance convened this gathering of racial justice practitioners to begin a conversation about creating a racial justice lens for investing. What follows is a summary of this initial gathering, the key points established among the group, and some reflections on what’s to come.

For most if not all who were in the room, the idea that capital plays a role in driving racial injustice is very old, one of the oldest in the history of the United States. From slavery to segregation to mass incarceration, there are many instances where owners of capital have financed racial injustice in the form of stolen labor, stolen wealth or stolen life from people of color and especially black people and communities. While there is much knowledge and data that many have published and disseminated about that history, there was a consensus in the room that such knowledge has never been compiled in one place under the umbrella of “here are the many ways that capital continues to finance racial injustice — and what investors can do about it.” The project for which they were convened is an opportunity to start creating such a resource: a data-rich compendium or catalogue of ways in which capital and racial injustice intersect, with the explicit purpose of guiding owners of capital toward racial justice.

What does it mean for race and finance to intersect, both in obvious and non-obvious ways? Food alone provides multiple layers of examples.

At one layer, we know that diabetes steals life by shortening lives. We also know that it disproportionately affects minorities, and especially African Americans. Knowing that, how would one evaluate businesses that rely on selling sugary food and beverages under a racial justice investing lens — everything from makers of sugary sweeteners to the food and beverage brands that use them to the grocery stores that hawk them? How would one approach the question of a soda tax — which may reduce consumption, but may also disproportionately fall financially on the shoulders of youth of color?

At another layer, the restaurant industry is full of examples where a white-owned restaurant or franchise has appropriated a culinary concept rooted in black or brown culture. The white-owned enterprise raises venture capital to scale up an interpretation of a concept that originated in a community of color that never had access to venture capitalists because of pattern matching and the fact that venture capitalists are predominantly white and male. What if a racial justice investing lens took into account the fact that culture is a form of wealth and recognized its creators as owners? How could an asset owner align its investments with this consideration?

As this conversation moves forward, these are a tiny slice of the kinds of examples Transform Finance will be seeking to unpack to help inform a racial justice investment lens from the lived experience of communities of color. These can vary from the implicit bias of venture capital and the structural racism of finance, to the disparate impact of allocations that are race-neutral on their face. This means looking at business models predicated on stolen life, stolen wealth, and stolen labor — all the way from predatory lending to gentrification to gig economy business models reliant on a permanent minority underclass with limited career options.

While the discussion around the negative racial justice implications of business felt well explored for the group in the Rockefeller Foundation boardroom, the discussion of the logistics of capital allocation seemed mostly new. Breaking down “investors” into a taxonomy of asset owners, asset managers, financial advisors and fund managers turned out to be one of the liveliest parts of the conversation. The group considered how decisions about capital allocations get made and by whom — and therefore where the power lies. This group was certainly one that understands and shares a deep understanding of power dynamics, but this landscape felt unexplored — for the obvious reason that investors have historically been distant, if not closed off from, anyone who isn’t white and male. It was like peeling back a new species of onion with a cohort of onion aficionados.

The room was also mindful of the haziness around what actions would be available for investors who would eventually put a racial justice lens into action, given the complex nature of the investment landscape. There are past precedents to examine, such as the environmental justice movement, gender-lens investing, or divestment from South Africa under apartheid. What can those who are already interested in fostering racial justice do with their investments now, what are some action items that may someday fall somewhere along a spectrum of furthering racial justice?

As Transform Finance attempts to create a framework for such a spectrum, a “give and get” dynamic might be helpful. This project looks to connect investors with racial justice practitioners. Practitioners’ knowledge and wisdom can help inform the investor understanding of who and what perpetrates racial injustice. At the same time, racial justice practitioners can benefit from a more intimate understanding of how investors allocate capital. Even in this one room, there was appetite for more discussion around the investor landscape and the specific levers where racial justice advocates can apply pressure or draw attention. Certainly there are other “rooms” where such a discussion might also find a receptive audience among racial justice practitioners.

If you know of such a room, or of another circle of racial justice practitioners and researchers who would be interested in mapping out where racial injustice is occurring or has occurred and how it gets financed, please, tell us where to find those rooms, or invite us in.

For more information about this project, please contact info@transformfinance.org.