ImpactAlpha, February 6 — The median Black household in the U.S. has one-tenth the wealth of the median white household. Over the next decade, the racial wealth gap could cost the U.S. economy $1.5 trillion per year in lost economic value, says the McKinsey Institute for Black Economic Mobility.
The racial reckoning that followed the 2020 murder of George Floyd pushed investors, corporate executives and policymakers to recognize the risks of systemic racism. Roughly $350 billion in investment dollars have been committed since then, but trillions is needed to make a dent.
In “A guide to impact investing in Black economic mobility,” McKinsey highlights eight investable themes with potential to address the barriers to Black economic mobility. Among them:
Around 20% of Black U.S. households are extremely low-income renters and in need of affordable housing, compared to 6% of white U.S. households. Decades of racial discrimination in real estate, lending practices and federal housing policies have resulted in disproportionately low levels of homeownership for Black Americans.
Investing in real estate impact funds that are preserving and creating quality housing, as well as creating pathways to homeownership for Black Americans, can help Black renters save on monthly payments and build wealth.
Denver-based Dearfield Fund for Black Wealth, backed by the Robert Wood Johnson and Gates Family foundations, is providing interest-free down payment assistance loans to Black families to purchase their first homes. L.A.-based SoLa Impact’s Black Impact Fund has raised hundreds-of-millions from investors including CalSTRS, Pacific Premier Bank and PayPal to invest in affordable housing in Black and brown communities in the U.S.
Black students are more likely than white students to attend underfunded schools in low-income communities. Backing education companies developing tech-based solutions focused on low-income Black students and supporting Black educators and schools, can help improve education outcomes for Black students.
New York-based nonprofit social impact fund Equitables Facilities Fund is deploying low-cost and long-term facility loans to Black public charter schools in low-income communities. Baton Rouge, La-based MasteryPrep, acquired by Achieve Partners late last year, provides low-cost, research-based tools for teachers to help low-income, underserved students prepare for standardized tests.
Black and white Americans experience drastic disparities in health outcomes due to lower access to affordable healthcare, quality providers and lower health literacy. Black-led health venture capital fund Jumpstart Nova, backed by healthcare heavyweights such as Henry Ford Health System and Cardinal Health, invests exclusively in Black healthcare founders. Black-led Cayaba Care and Mae are addressing health inequities for pregnant Black women.
Black Americans are twice as likely to be denied credit as white Americans, and have access to fewer cost-effective options for mortgages, car and business loans and insurance. Inclusive fintech companies are developing innovative tech-based solutions.
Greenwood, a Black-led neobank backed by Bank of America, JPMorgan Chase, Mastercard and Visa, provides banking services for Black individuals and business owners. The bank’s name pays homage to the prosperous “Black Wall Street,” in Tulsa’s Greenwood District in the early 1900s.
Black-led Esusu, backed by Serena Ventures and SoftBank Opportunity Fund, helps low-income Black renters build credit scores by reporting their rental payments to credit bureaus.