8 Ways for Business to Promote Greater Equity

By Sonal Shah, Lisa Hall, and Betsy Zeidman, Beeck Center for Social Impact + Innovation

“The best way to take care of the future is to take care of the present moment” Thich Nhat Hanh, peace activist and Vietnamese Buddhist Monk

 The COVID-19 pandemic has laid bare the stark inequality in this country, including access to technology, healthcare, educational resources, information, etc. In contrast to the 2008 financial meltdown, this is both a global public health crisis and economic downturn of historic proportions. The economy shrunk by 4.8% in the first quarter. Commerce, travel, and manufacturing has come to a virtual standstill. More than 26 million Americans filed for unemployment benefits in the past five weeks, surpassing the number of jobs created since 2008. Some estimate national unemployment will rise to 30 percent, exceeding rates during the Great Depression. 

Even in the best of times, our most vulnerable communities have not shared in the nation’s prosperity. For years, unemployment and divestment have ravaged communities of color, rural areas and low-income communities, with the added insults of lack of adequate health care, limited access to technology, and markedly fewer educational resources. In cities like Chicago, Detroit, New York City and New Orleans, data shows that Black and Brown communities have significantly higher death rates from COVID-19, disproportionate to their share of the population. Immigrant communities who have contributed much to the country’s economic growth number highly in the occupations hit hardest by the economic downturn (hospitality, retail and caregivers), and are often ineligible for benefits. Those who remain employed (and do not have the option to work at home) are often at risk as essential service workers in healthcare, food delivery and janitorial services. Without significant intervention, these places and the people who live in them will continue to suffer from the health and financial crises long after the news stops covering the story. 

The $2 trillion CARES Act was the start of rescue efforts for millions of Americans and countless businesses, but it is flawed in both formulation and execution. The Paycheck Protection Program (PPP), a part of the package, was insufficient in both the first and second rounds; its regulations allowed large firms to claim funds, keeping money from small businesses, especially main street businesses that are suffering the most. Additionally, insufficient infrastructure caused the system to crash hours after opening, and inadequate oversight limits our ability to monitor where the money ends up. 

The time is now to fundamentally address the underlying issues. We need to build a stronger foundation for a different future where all of our citizens experience economic well-being. To do that requires prioritizing efforts that affect those hit hardest to enable better outcomes for all of America. A commitment to equity during this crisis would demonstrate that we are one America and that our well-being is truly dependent on each other. 

 The following are eight ways that governments, philanthropy and the private sector can ensure resources flow to the country’s most overlooked, underestimated and deserving communities: 

1. Expand the capacity of CDFIs (Community Development Financial Institutions): CDFIs are fully dedicated to serving low-income communities, local communities and businesses that have not been traditionally served by traditional banks and lenders. They exist in every state, the District of Columbia and each territory, with more than 1,000 CDFIs certified by the U.S. Treasury. CDFIs are on the economic front line and the downturn hits their clients the hardest. To ensure that recovery resources reach those most in need, Congress should appropriate $1 billion in the next recovery bill to the CDFI Fund which directly supports community loan funds, community banks and community development credit unions. 
2. Promote relevant resource guides via culturally relevant channels. Excellent resources have already emerged to guide small businesses and entrepreneurs through the maze of programs in response to COVID19. These include #COVID19CapitalRelief from Duke University, and the guide from Kaufman Foundation. We should use our combined communications and marketing budgets to promote resources through organizations, publications and social media that serves communities of color, such as La Raza, The Advancement Project, Urban League, NAIMCO (National Association of Investment Management Companies), the Root.com, #BlackTwitter and others.
3. Counter any efforts to railroad modernization of CRA. The Community Reinvestment Act is one of the most important tools for community revitalization. As the last update was 25 years ago, modernization is essential, but the current draft prioritizes efficiency over impact, allowing banks to pursue fewer larger deals and bypass smaller community-led projects. Instead, regulators should incentivize efforts to the lack of financial services in rural, low-income and other underserved communities, and update the CRA framework to explicitly address racial equity in access to financial services (as highlighted by the U.S. Impact Investing Alliance.
4. Fund private equity firms focused on communities of color and underserved entrepreneurs. Now is the time for funds and large institutional investors to elevate their initiatives focused on diverse and women-led asset managers, whose existing networks will enable them to reach entrepreneurs serving vulnerable communities. Unfortunately, economics often drives such managers to merge into larger, majority-owned entities, which dilutes their focus. For investors in search of such funds here are some leading examples (not exhaustive): Illumen Capital, Bronze Venture Funds, Fairview Capital Partners, Impact America, Harlem Capital, 1863 Ventures, New Voices for America, and Precursor Ventures.
5. Double down on public health investments and climate change investments in vulnerable communities that are disproportionately impacted by the crisis. Poor communities already face greater risk from environmental hazards (resulting from climate change as well as general misuse of resources, e.g., hazardous waste disposal); while simultaneously suffering from inferior health services. The current crisis further exacerbated these challenges. Moving forward requires rethinking the systemic underinvestment in our health and public health systems is critical to ensure more equitable outcomes. 
6. Increase funding for nonprofits who provide direct services and immediate relief to individuals in poor communities, including immigrants. This includes encouraging philanthropy to use multiple tools providing flexible capital to grantees serving the neediest. Increase the nonprofits’ awareness of resources from such field leaders such as Nonprofit Finance Fund and 20 Degrees. Furthermore, policy makers should clarify regulations such as the public charge rule to encourage immigrants to seek health care without fear of reprisal. If they do not seek such services and fall ill, they will impact the health of the broader community.
7. Ensure technology access is affordable and universal. Many lower income communities lack access to technological infrastructure so people can’t access tele-health services, classes, workforce training or even receive their benefits. This infrastructure will enable poor communities to build the tools necessary to thrive as the economy recovers. But, it requires capital from the public, private and philanthropic sectors to make it accessible and affordable.
8. Expand financial services through technology, especially for lower income communities. Over 70 million people still receive paper checks from the government because banking is still too expensive for many of these families. Government and philanthropy should work together to ensure affordable and quality banking services for lower and middle income communities. Their overdraft and bank fees should not be subsidizing the rich. 

After many years of bubbling up in philanthropic gatherings, concerns about inequity are reaching broader audiences and the concept of stakeholder capitalism as a tool to combat it is gathering steam. Last year, the Business Roundtable issued a statement redefining the purpose of a corporation, urging “leading investors to support companies that build long-term value by investing in their employees and communities.” Increasing numbers of institutional investors make decisions using environmental, social and governance criteria. Large foundations seek to align their investment decisions with their philanthropic priorities.

As the country seeks to rebuild and recover from the COVID-19 crisis, there is no better time to mobilize resources to support the neediest among us and invest in strong diverse communities that will build the America of tomorrow.

Sonal Shah is the founder of the Beeck Center for Social Impact + Innovation.

?Lisa Hall is a Senior Fellow and leads the Fair Finance work at the Beeck Center.

Betsy Zeidman is a Fellow at the Beeck Center.