While many people view their philanthropy as a means to directly address social issues and their investments purely for financial growth, the truth is that all financial decisions are opportunities to reflect one’s personal values. Ultimately, aligning philanthropy and investment decisions presents a strategic opportunity to positively reshape the economy and support a more inclusive and prosperous society.
By harnessing the full force of your financial resources to drive toward a more equitable future, you can leave a meaningful legacy of impact, lead by example, and inspire others to follow suit while feeling a greater sense of integrity and alignment with your values.
By applying a racial equity lens to both philanthropy and investments, you can more effectively combat the stark racial wealth gap that persists as a legacy of historical injustices and a result of current financial practices.
In 2022, for every $100 in wealth held by white households, Black households held only $15. The median wealth for white households was $285,000, compared to just $44,890 for Black households.(1) These disparities are further perpetuated by the inequitable distribution of venture capital, with Black founders receiving only 1% of investment and Hispanic founders receiving 1.7%, despite accounting for 13.6% and 19.1% of the U.S. population, respectively.(2)
Investing in products that provide financing to women and Black, Indigenous, and People of Color (BIPOC)-led businesses helps shrink these gaps in access to capital. By reallocating resources towards investments in funds or businesses led by people of color or those with a clear commitment to diversity, equity, and inclusion, you can support a more equitable distribution of resources while potentially achieving strong financial returns.
Some concrete steps to consider include:
- Moving cash to community development financial institutions (CDFIs) that serve BIPOC communities,
- Investing in funds that prioritize BIPOC entrepreneurs or companies with strong DEI practices and
- Working with diverse asset managers majority-owned by women or people of color.
At SFF, we have top decile returns among community foundations while investing our assets in alignment with our values.
- We have worked hard to reduce implicit biases in selecting fund managers. As a result, 38 percent of the foundation’s assets are allocated to investment funds, which are majority owned by women or people of color, compared to two percent globally.
- We exclude private prisons, predatory lending, tobacco, retailers of assault weapons, and fossil fuels in our mission-aligned and short-term pools and in our separately managed accounts in the long-term and endowment pools. Private prisons and predatory lenders are excluded by all managers.
- SFF’s Bay Area Community Impact Fund (BACIF) helps make the Bay Area a better and more inclusive place through low-interest loans to community-based organizations that create and preserve jobs, affordable housing, and sustainable communities.
If you are interested in being a part of a learning community of donor advisors exploring how to move more of their assets into alignment with their values, reach out to your philanthropic advisor or donorservices@sff.org
This blog is for informational purposes only and not financial advice.
(1) See Greater Wealth, Greater Uncertainty: Changes in Racial Inequality in the Survey of Consumer Finances, Aladangady, Chang, and Krimmel (10/18/2023)
(2) See Venture Forward and and U. S. Census Bureau
