As Arabella Advisors was working to open our newest office in Durham, North Carolina earlier this month, we used a co-working space in a building that also houses North Carolina Mutual Life Insurance Company. NC Mutual Life is the oldest and largest African American life insurance business in the world. Sharing a space with such a historically significant enterprise is not only inspiring, it’s also been a fortuitous opportunity to learn from and observe the parallels between NC Mutual’s approach to community development and our own recent work to close the racial wealth gap.

Over the past two decades, our work with a wide range of donors, impact investors, advocates, and changemakers has taught us that challenges of this magnitude typically require coordinated interventions that combine the tools of philanthropy, impact investing, and policy advocacy. This challenge is a clear case-in-point: No one factor or system was responsible for creating the societal fissures that led to the racial wealth gap — nor for continuing to widen it. Thus, we need to pull all levers available to us in order to adequately tackle the intersecting systems of oppression and widespread systemic racism that perpetuate it.

The first lever is effective, efficient, and equitable grantmaking — that is, philanthropy as it can and should be practiced today. Routine grantmaking is the bread-and-butter of an integrated strategy, and it provides a distinctive opportunity for donors to deliver dollars to grassroots, high-impact, BIPOC-led and BIPOC-serving organizations. Grantmaking allows capital to flow in support of essential services, and grants are an effective way to de-risk innovative investments and catalyze additional investment in proven models. In this way, donors can seed new ideas and test solutions that could be scaled through other funding streams or public policy, such as baby bonds.

Given that closing the racial wealth gap is about wealth creation, impact investing is also a critical lever. It’s a way to support entrepreneurs of color who face bias in fundraising, reduce the cost of capital for Black- and other people of color-owned businesses, or solve market failures by using different-in-kind financing instruments. Since capital has for so long been denied to Black entrepreneurs, and predatory lending practices continue to target Black individuals, there is significant distrust among these communities in traditional financial institutions and a lack of confidence in traditional lending and equity practices. Thus, impact investing may be a more viable pathway for building trust with communities—assuming the investors do the hard work of examining their practices and rooting out biases that may perpetuate inequities.

Grantmaking and impact investing are essential, but alone, they aren’t enough. Too many of our systems — from the criminal justice system to education to legalized, discriminatory business practices — have methodically excluded Black and other communities of color from opportunities to build wealth. Thus, to effectively address the racial wealth gap, we must acknowledge, interrogate, and strategically reform these systems. This means enshrining our desired reforms in more just laws, regulations, policies, and practices across a variety of fields, including real estate, health care, banking, and more.

Read the full article about the racial wealth gap by Sampriti Ganguli at the Center for Effective Philanthropy.