Entrepreneurs build businesses, but they also help build communities—by creating jobs, delivering needed services, paying taxes, and more. Providing equitable access to the capital such entrepreneurs need to build their businesses is essential to creating a just society and to realizing our full economic potential as a nation.
Unfortunately, a growing body of research shows that deeply embedded, systematic biases currently restrict access to capital for businesses led by women and people of color.
Philanthropic families can play a crucial role in helping to correct this market failure—and in building an economy that works for all through what the Arabella Advisors team, in a recent report, describes as “inclusive investing.”
There are several strategies that philanthropists and social impact investors can implement to increase access to investment capital for women and people of color and to advance systemic changes to the structural barriers and biases they face in the capital markets. To get started today, consider taking these four simple steps:
- Talk to your wealth advisors and insist that part of your portfolio is invested with women and people of color portfolio managers, building toward a desired long-term goal (e.g. 30% of your portfolio managed by women by 2024)
- Work with your wealth manager to ensure some of your investments are directed to companies or funds like Community Development Financial Institutions (CDFIs) working in communities you care about.
- Join a learning circle of other donors and investors who are trying to close equity and opportunity gaps.
- Use philanthropic capital – money already committed to a donor-advised fund or foundation – to take risks, offer concessionary, catalytic capital, and explore innovative solutions in high impact-sectors to permit future scaling of problem-solving businesses.
Read the full article about inclusive investing by Kate McAdams and Cyrus Kharas at the National Center for Family Philanthropy.