It’s time for foundations and other impact investors to face the truth. No more navel-gazing, no more conferring, no more research. Investors built the impact investing field to drive capital toward addressing climate change and social justice. But while the recent uprisings against racial injustice in the United States and elsewhere have forced all kinds of institutions into self-examination, most still fail to acknowledge and actively change the ways in which their investment strategies perpetuate inequality.

This is especially true of foundations whose assets globally exceed $1.5 trillion. Foundations are not only best positioned among all impact investors to provide catalytic capital (patient, risk-tolerant, or concessionary capital that helps attract additional investors to a project), but also have a fiduciary duty to invest in a way that aligns with their social mission and supports their grantees.

Consider: Foundations have an internal investment team, governed by an investment committee, and are typically assisted by outside advisors who allocate capital to investment fund managers. The investment team’s goal usually is to earn more than 5 percent annually, maintaining or ideally growing the endowment—and the people in control are overwhelmingly white and male. Meanwhile, when the investment team does deploy investment capital to fund managers (who are, again, overwhelmingly white men), they almost always allocate it in a way that mirrors biases and inequities embedded in the mainstream investment process. There’s no question that these practices help maintain systemic racism and gender inequality.

This needs to change now. Here are five structural barriers that foundation investors and investment committees can easily upend today in their due diligence process to improve outcomes for people of color—especially underrepresented Black, Indigenous, and Latinx people—and women.

  1. Dismantle the Risk Misconception
  2. Rethink Your Criteria
  3. Confront Blind Spots
  4. Be Better than Mainstream Investors
  5. Be Willing to Fire Your Advisor

Read the full article about failing diverse management by Tracy Gray & Emilie Cortes at Stanford Social Innovation Review.