Impact Voices | December 8, 2021

Shifting power, redefining risk, and advancing justice: A model for investors to advance racial equity

Amit Bouri, Tynesia Boyea-Robinson and Michael McAfee
Guest Author

Amit Bouri

Guest Author

Tynesia Boyea-Robinson

Guest Author

Michael McAfee

Over 100 million people in America live in economic insecurity, which includes half of all people of color. 

As we become a more racially diverse nation, we face, without a dramatic intervention, an economic future of increased instability and an increasingly fractured society. Racial gaps in income and wealth cost the US economy $2.3 trillion in 2018 alone.  

Regardless of where you fall on the political spectrum, these numbers are only going to increase if we continue holding equitable outcomes hostage to ideological arguments that mean nothing to people struggling to make ends meet.

The murder of George Floyd and countless other Black people by police led to people of color and their allies taking to the streets and no longer accepting racism and structural oppression as the status quo. These trends have, in turn, forced investors to take a hard look at their own practices and consider the role they play in systemic economic inequities across our society. 

To support these efforts and encourage standardization in racial equity investment strategies, the Global Impact Investing Network (GIIN), in partnership with PolicyLink and CapEQ, co-created a framework for racially equitable investing. 

Equity is defined as just and fair inclusion into a society in which all can participate, prosper, and reach their full potential.

The shorthand for the framework’s three goals: “Shifting power, redefining risk and advancing justice.” 

These strategic goals apply to all investors – not just those focused on ESG integration or impact investing strategies. Why? In order to address systemic inequities, all investments need to have equitable impacts. We can no longer afford the harmful compounding effects of systemic bias from the continued economic exclusion of populations due to race and/or ethnicity. 

These recommendations are a call to action and a guide to support investors to intentionally integrate racial equity awareness and action in their investment strategies, portfolio decisions, and return on investment considerations across the board.

Systemic inequality

What investors have found as they looked at their practices is not encouraging. 

People of color are dramatically under-represented as decision makers in the financial industry, as well as dramatically under-represented as beneficiaries of capital investments. Fund managers of color manage only 3.9% of mutual funds, 8.9% of hedge funds, and 1.2% of real estate assets under management, or AUM, in the U.S. Historically marginalized people due to race and/or ethnicity are dramatically underrepresented as capital decision-makers, who tend more often to invest in a company or person with similar racial and ethnic identities as themselves

This lack of representation leads to unequal and unjust allocation and distribution of capital, allowing dominant majority groups (mainly white) to benefit more from the tools of capitalism as compared to groups that have been historically and currently marginalized due to race and/or ethnicity.

Many investors and other organizations have recognized this gap – both in the racial and ethnic diversity of their staff as well as the impact of their capital flows – and have begun to do something about it. A growing number of investors are now looking to integrate racial equity into their investing strategies to both increase their ability to close racial gaps within their own organizations and within the businesses and communities they invest in. 

This is the right direction to move in and represents the highest level of professional practice for investors. The billions in investor and corporate pledges since the summer of 2020 only scratch the surface of the work that is required (not to say anything of the superficial nature of many stated investments and the troubling lack of transparency around them).

Investors can and must create accountability mechanisms within their firms to ensure decision-making, capital allocation, and outcomes across their portfolios are equitable for all of us  – this is the essence of becoming an antiracist, equitable enterprise. Changing their behavior will help change the economic structure of our global financial markets, benefiting those economically insecure–the 100 million in the US and the millions more around the globe. 

The new framework for racially equitable investing is affiliated with the Corporate Racial Equity Alliance, which was co-founded by PolicyLink, JUST Capital and FSG. The framework has three strategic goals: 

  1. Increasing the power of historically marginalized populations due to race and/or ethnicity; 
  2. Shifting the perception of riskiness of investing in those populations; and
  3. Creating just systems that produce equitable outcomes. 

Within each of the goals, investors can take a number of investment approaches to increase racially equitable outcomes:

  • Shifting Power: Shifting power through investing requires addressing racial bias and ensuring equitable representation and decision-making within investment firms and investee companies. Investments will aim to change the make-up of existing decision-makers around capital allocation and implement racially equitable policies to promote and increase the deployment of capital to businesses owned by and employing marginalized populations due to race and/or ethnicity.
  • Redefining Risk: Investments will aim to change the concept of what constitutes “risky” investments. Creating equitable deal sourcing, due diligence, and deal terms can shift perceptions of risk. This change to investor process and policy will in turn — by removing some built-in obstacles for entrepreneurs of color — allow more capital to flow to businesses and communities of historically marginalized populations due to race and/or ethnicity.
  • Advancing Justice: Working towards racial justice with investing requires increasing inclusive capital to create equitable outcomes for communities of color, such as increasing affordable housing, reducing environmental pollution, or improving healthcare access. Investments will use inclusive capital allocation to improve social, economic, and environmental outcomes for historically and currently marginalized populations due to race and/or ethnicity. These activities will create a more just society that allows for more equitable distribution of resources, and lead to more equitable outcomes between majority (often white) populations and populations that have been historically marginalized due to race and/or ethnicity.

Included within each of these strategic goals are recommended indicators and metrics. These provide guidance to investors on how to implement these recommendations into their investment strategies and set targets to hold themselves accountable to their racial equity commitments. 

For example, under all three strategic goals, we recommend using and setting clear targets on an indicator of “amount and percent of capital deployed to entrepreneurs from historically marginalized populations due to race and/or ethnicity.” Other examples include completing racial equity audits (under Power and Risk) and the number and percent of policy advocacy efforts that are racially equitable under “Justice.”

The recommendations should apply to investors across geographic areas, even though definitions of race and ethnicity differ across the globe. That is why we are using the language of “populations historically marginalized due to race and ethnicity” and not language like “BIPOC” or “people of color.” Investors must learn about the needs of the communities in which they work, understand the history of racism and oppression, and commit to engaging equitably with communities that are currently and historically marginalized.

By developing these strategic investment goals, we are calling on the entire investment industry to get serious about racial equity. They should not only make bold, public commitments to racial justice – as many have done in the last year – but also have robust and intentional approaches to implementing and following through on these commitments and achieving results. 

Integrating racial equity considerations into investment strategies requires persistence as well as a deep commitment, both at an organizational and personal level. Existing racial inequities are the result of long-standing systemic decisions that have played out over centuries. Undoing those inequities will not happen easily or quickly, so investors must begin this work as soon as possible. If they haven’t yet, they are already behind.

Achieving racial equity requires both diligent, intentional processes and consistent, rigorous evaluation on outcomes. Racial equity is often seen as both an emergent process and an outcome – investors cannot have one without the other. Our emergent process on these goals continues, as we are sourcing feedback on these strategic areas through a public comment period from November 2021 to January 2022. To request an invitation to comment, sign up and add “Racial Equity theme” here

We invite the ecosystem as a whole to test, share, and guide the next phase of this work alongside us. 

More directly, we call on investors to apply the process-oriented changes outlined in these strategic goals to transform organizational operations to become more equitable, and in doing so, contribute to the development of more equitable outcomes in communities across the globe. 


Amit Bouri is CEO of the Global Impact Investing Network. Tynesia Boyea-Robinson is president and CEO of CapEQ. Michael McAfee is president and CEO of PolicyLink.