Missing The ‘Impact’ in Impact Investing?
If the goal is to disrupt social injustices, impact investing must not resemble the very same exclusionary systems it works to dismantle.
There is an ever-apparent disconnect between real systems change and this thing we call “Impact Investing” — one I continue to see over and over again. Today we have a great deal of what I affectionately call hyperbolic do-gooding — yes, I made that word up — when we really need to use money in socially conscious ways that drive deep social change.
I’ve been in the impact investing space for five years; however, I’m not new to finance. It seems a lifetime ago when I put in my time at Sherson/Lehman Brothers as a stock analyst. Twenty-five years later, from the first time I learned about this big harry audacious thing called impact investing, I’ve had concerns that it would perpetuate broken systems (at best) or have unintended consequences (at worst) — under the delusional bubble of doing good with a financial return. I remember talking to my dear friend in philanthropy Donna Vogel from the Chamiza Foundation (rest in peace) and prognosticated that impact investing was perpetuating the very social problem it says it wants to disrupt. As I continue to walk this journey, my concerns are growing as impact investing continues to be a lost opportunity for true social impact.
Here is one example of many ritualistic experiences when attending impact investing events. I attended the Ascent-US Bank Impact Investing Symposium. Susan Hammel of Cogent Consulting (my ConnectUP! MN co-producer) invited me and three other people of color (POC) to the event. The event hosted approximately 150 asset holders and wealth managers. US Bank graciously asked their guests to invite four other guests. Of the entire attendees, there were six — YES, SIX — people of color in the room: a staff person who appeared to help orchestrate the event (a young Middle-Eastern or East Asian man), our cohort (who arrived together) which included; Lance Knuckles, @crf_usa, @ErikaSeth76, @baltcommfdn, Stephen Williams, Morgan Family Foundation and me. Of this clan, two were from out of state.
The last person of color was one of three presenters introduced as recipients of impact investing dollars. The presentations included three women: leadership from @EurekaMN, owner of @TheButteredTin and a Black women who gave heartfelt words about how she was positively impacted by the financial literacy provided by the organization that actually received the impact investing dollars. There’s an important distinction that needs to be made here. Of the three presentations, the person of color was a recipient of services rather than an investee.
Besides the fact that these are all smart, savvy women, I have to imagine there may have been some intentionality about featuring successful women-led investments (as an example of gender lens investing); since women-led companies (as with POC and LGBTQ) are consistently over-looked and under-resourced. People of color want to be seen in the same positive light; not just as recipients, but as bankable opportunities. Despite what I assume are US Bank’s best intentions, the presenter scenarios caused (what I believe is) an unintended outcome of the event: perpetuating an unspoken myth/stereotype: ‘Black people are not ready for investment’.
No, I don’t think anyone in that room specifically had this thought. However, there is data that documents implicit (and sometimes explicit) bias against investing in POC and scenarios like this support that paradigm. More positive examples lifting-up POC at events like this need to lift-up POC, not maintain the status quo. Events like this are opportunities to challenge conventional investment strategies. If your thinking is not challenged, than you won’t look to do something different.
This raises several questions:
· Why was the only person on a panel a recipient of services and not an entrepreneur that received impact investing funds?
· How does her presentation feed into the assumption, myth, implicit bias of lack of readiness or amount of viable and investable entrepreneurs of color?
· What implicit biases are fed by not having an entrepreneur of equal caliber as the other entrepreneurs presenting to this all-white audience of asset-holders and wealth managers?
· Does the audience thus presume there are not entrepreneurs of color that their impact investing dollars could support?
· More importantly, if there had been an entrepreneur of color there to present, would they have been motivated to think about looking for POC-led impact investing opportunities?
· Why wasn’t a social entrepreneur of color highlighted/selected to present?
· If there were no — or few — US-based social entrepreneurs of color who could be selected to present, is that a reflection of the amount of US-based entrepreneurs that receive impact investing dollars?
· How many impact investment recipients are enterprises led by people of color? (Anecdotally, I know this number to be small) Why is that?
· Are there barriers? What are those barriers to opportunity?
· Are there no wealth managers of color in the Twin Cities? (I finally found a few)
· Why weren’t there more POC asset-holders at this meeting?
Let me be clear, I am not indicting the savvy entrepreneurs who were able to advance their success with the assistance of impact investment dollars. I want to acknowledge there is good work happening with impact investing as demonstrated by the entrepreneurs highlighted at the event, the mapping of the Twin Cities Impact Investing Ecosystem (by Cogent Consulting), and the Angel investment fund at Swift Foundation for investments below $75,000 focused on Indigenous Peoples.
What I am saying is, if the goal is to disrupt the social change systems — such as the providing alternative routes to capital for entrepreneurs to attain sustainable success — then impact investing must not be set up to resemble the very same exclusionary systems its working to dismantle. I would argue that in its current form, its success as an innovative tool is limited by the access it does and does not provide.
Here are a few practices that limit access: Investment portfolio/policy limitations such as $100,000 investment minimums, lack of cultural competence to know what enterprises best serve community (social good) and have returns on investment; such as beauty shops in black communities, Halal grocery stores in Muslim communities, just to name a few.
Inspired by the words of Gandhi, “be the change you want to see”, I created ConnectUP! MN.
ConnectUP! MN is a day and a half convening that bridges the 180 degrees of separation between investors interested in local investing and entrepreneurs of color. ConnectUP! MN will highlight entrepreneurs of color and innovation in Minnesota and across the nation with the a focus on four goals:
1. We are the sum average of our network and if our networks look like us, they will continue to look like us. Entrepreneurs and investors need to expand their networks be connected in meaningful engagement and relationship building.
2. Raise the transparency of the variety of financial instruments and capital raising options for entrepreneurs of color — who are typically only offered debt options.
3. Bring together the entrepreneur ecosystem (other sources of capital like CDFIs, academia, incubators, accelerators, etc.) to co-design a new vision for a more equitable access and options.
4. To create a dynamic butterfly effect. If we all flapped our individual wings what wave could we make together? Participants will asked to make a commitment to an action that moves toward the new vision.
Who wouldn’t want to support this effort in a ‘progressive’ state (Minnesota) that has disparities that rival the Deep South? You would think Susan and I would have had to beat back individuals, corporations and philanthropic organizations wanting to support this. Unfortunately, that was not the case. I personally financed the first seven months of expenses to produce this event from my 401K. Thanks to The Jay and Rose Phillips Foundation for being the first to come on board the minute they heard about #ConnectUP! MN.
Today, this event is made financially possible by mainly three organizations that moved beyond lip service: The Jay and Rose Phillips Family Foundation (first in), Nexus Community Partners (a small, but mighty activist organization with a small grantmaking arm) and Bush Foundation.
I only have some of the answers to the questions I seek; however, I am interested in raising transparency, and engaging in honest dialogue about what is happening — or is not happening — in order to create ‘a more perfect union’ that offers more inclusive opportunities for social entrepreneurs of color (and women).