G L O B A L B R I E F I N G R E P O RT N O RT H W E S T E R N U N I V E R S I T Y G 2 0 _ F E AT U R E
Separate and Unequal Won’t Suffice to Channel Investment to Address Racial Inequity An over-reliance on Community Development Financial Institutions (CDFIs) could represent a dangerous segregation of investment as companies seek to right past wrongs and address current inequities. By Megan Kashner, Northwestern University
On the face of it... the news is exciting. The past several months have seen many headlines about major investments targeting underrepresented minority business leaders and their enterprises. We’ve seen Bank of America announce a $1B commitment to “Advance Racial Equality and Economic Opportunity” over the coming four years. Facebook announced a similar commitment of $200M, and Netflix pledged to move over $100M in deposits to black-owned banks. Globally, announcements from Cargill and Mondelez have focused on support for minority- and women-owned businesses and supply chain partners, with Mondelez pledging $1B toward such enterprises by 2024. Some of these announcements and investments have been in the works for years; others were spurred by the waves of protest about and focus on racial justice in the U.S. and beyond, which kicked into high gear in reaction to the killing of George Floyd at the hands of police in May. While these and other similar news items represent an important movement to support underrepresented communities and individuals often subject to longtime institutionalized bias, they mask an underlying inequity: much of the capital in question will be deployed through local Community Development Financial Institutions, or CDFIs, using debt. These nonprofit institutions were developed specifically to serve underserved populations and, thus, overreliance on them for socialjustice-driven investment actually represents perpetuation of a “separate and unequal” mentality that must be recognized and addressed sooner rather than later. The Rise of CDFIs It turns out not all corporate pledges of capital for under-represented minority communities and businesses are the same, not by any stretch. While the headlines focus on big-name corporations and the dollar amounts committed to racial-justice and socialequity-focused pledges, the vehicles by which they will deploy the capital vary widely. Among the predominant
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