How Racial Inequity Shapes All Aspects of American Society
From education, health, and poverty, to culture, environmental harm, the economy, and beyond, all aspects of American society are shaped in some way by racial inequity. Understanding the depth and complexity of racial inequity can help impact investors ground themselves in a wider context and see how their work interrelates with many other social challenges beyond a single investment or investing strategy. The literature on this topic is vast and often specialized according to the sector or social challenge being addressed. Instead of covering all topics, these resources provide a starting point for impact investors seeking to understand the magnitude of the challenges our society faces in undoing racial inequity, particularly against Black people in America, and the great need for urgent action and ambitious solutions. They also focus primarily on content that demonstrates a more direct connection between racial inequity and the flow of investment capital.
Takeaways
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Structural racial inequity intersects with every social challenge in America, both through intentional discrimination strategies, or as a result of unintentional unconscious biases. The end result is that social challenges disproportionately harm communities of color, while simultaneously excluding them from social benefits.
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Consider how race and racial inequity or disparities might show up in the outcomes of your existing investments and strategy, from education, to the arts, to climate change. For example, who is or is not able to benefit from your investments, and why? How might investments have unintended negative consequences for certain communities?
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There are many topics not covered below: Please send us your recommendations for resources that should be included on this page or elsewhere on the MIE site.
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Visit our Racial Equity Library for a growing list of resources on this topic as it relates to impact investing.
Red-Lining: Systematic Racial Discrimination in Place
Redlining is a process of systematically denying services to residents of specific, often racially associated, neighborhoods or communities. Reverse redlining is the practice of charging higher prices in redlined areas, rather than denying services. The terms originated in the 1930s through a practice by which mortgage lenders deliberately 'redlined' or marked specific neighborhoods with higher proportions of non-white residents to intentionally deny loans in those areas. “Homeownership is the number-one method of accumulating wealth," notes John Taylor, president and chief executive of the NCRC, in an article in the Washington Post. "But the effect of these policies that create more hurdles for the poor is a permanent underclass that’s disproportionately minority.”
Since the 1930s, denying services based on geography has extended to many industries, including insurance, healthcare, and supermarkets, resulting in communities that have experienced chronic disinvestment and extraction of resources over time. Redlining also went on without significant interruption until new laws began to emerge in the 1960s and '70s. For example, the Fair Housing Act of 1968 sought to end housing discrimination, while the Community Reinvestment Act (CRA) of 1977 was intended to reduce discriminatory credit and lending practices and prohibit redlining. Among its results, CRA gave birth to community development financial institutions (CDFIs)— organizations in the United States designed to make impact investments in low income communites.
Today, redlining continues in less overt ways, with data suggesting the biases continue to exist throughout the lending process and disproportionately affect people of color. Visit this page for impact investing strategies related to this topic.
America's Growing Racial Wealth Gap
Redlining and many other structural inequities have contributed to an ever-growing racial wealth gap in America. Although impact investors can find many, many ways to address racial equity through their impact investments, the resources below dive deeper into the connections between racial inequity and wealth— a key driver of who can and can't invest, and who has access to investment resources. (Visit the Racial Equity Library for a variety of strategies all intended to work in concert against these inequities.)
The Road to Zero Wealth
This report by Prosperity Now and Institute for Policy Studies examines the growing racial wealth divide at the median and provides forecasts through 2043, when the country’s population is projected to become majority non-white. They discover that, without a dramatic change in course, the country is "heading towards a racial and economic apartheid state." Key findings:
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Median Black household wealth is on a path to hit zero by 2053 and median Latino household wealth is projected to hit zero twenty years later. Median White household wealth would climb to $137,000 by 2053.
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Even earning a middle-class income does not guarantee a family middle-class economic security, according to the report. White households in the middle income quintile—those earning $37,201-61,328 annually—own nearly eight times as much wealth ($86,100) as Black middle-income earners ($11,000) and ten times that of their Latino counterparts ($8,600).
Black-White Wage Gaps Expand with Rising Wage Inequality
This study by the Economic Policy Institute examines patterns in wage inequality between Black and White Americans. The report finds that the wage gaps are larger today than they were in 1979, but the increase has not occurred along a straight line.
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In the early 1980s, rising unemployment, declining unionization, and policies such as the failure to raise the minimum wage and lax enforcement of anti-discrimination laws contributed to the growing wage gap.
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In the late 1990s, the gap shrank due in part to tighter labor markets, which made discrimination more costly, and increases in the minimum wage.
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Since 2000 the gap has grown again. As of 2015, relative to the average hourly wages of White men with the same education, experience, metro status, and region of residence, Black men make 22.0 percent less, and Black women make 34.2 percent less than White mean and 11.7 percent less than White women.
All-In Nation: Solutions for Policy Change
- "Infrastructure: Supporting Communities So All Can Thrive” explains the importance of modernizing our public infrastructure system so that communities of color are not left lacking the basics that many Americans take for granted.
- “Jobs, Income and Assets: Economic Security for All” argues that national economic growth relies on individuals having enough money to cover basic needs— today and for their future. Yet economic security has become increasingly elusive for too many Americans, particularly for people of color.
- “Building Healthy Communities for a Healthy Nation” explores how geography is destiny in America. Due to historic racism, the neighborhoods where people of color live tend to have fewer resources promoting good health—including grocery stores and quality health care. They also have more detrimental resources, such as liquor stores and pollution sources, that lead to preventable health problems.
- “Education and Job Readiness for a Prosperous America” warns that America's failing and inequitable education system will ultimately weaken its competitive edge in the global economy.
- “Americans in Waiting: An Immigration System that Works” describes the central role that immigrants play in America's economy. In addition to exploring the nation’s flawed immigration system and paths to citizenship, the chapter discusses the treatment of legal immigrants and new citizens.
- “Locked-Up Potential” describes the magnitude of injustice in the nation’s broken criminal justice system, including racial disenfranchisement associated with mass incarceration and how corrections spending diverts money from our hospitals, universities, and more.
- “Democratic Participation and Leadership in a Diverse Nation” describes how communities of color, including immigrants, face barriers to democratic participation that prevent them from helping to shape our institutions of governance.
