Impact investing–investing to generate not only financial returns, but also social and environmental returns–has been held up as a solution to the world’s greatest social and environmental challenges, by unlocking private capital and overcoming funding gaps. One of the biggest challenges of our time is the high level of inequalities within and among countries, which the Sustainable Development Goal 10 seeks to address.
A study by the charity Oxfam from January 2019 finds that the world’s 26 richest people own as much as the poorest 50%. This issue of wealth inequalities can be seen as an issue of racial inequalities–considering that most of the richest people are white and the poorest 50% live in developing countries. In the U.S., racial wealth inequalities are endemic. A Forbes estimate from the same time finds that the Forbes 400 richest Americans own more wealth than all black households plus a quarter of Latin households. Another estimate finds that the wealth owned by the median black family in the U.S. is only 2% of the $147,000 that the median white family owns. The scale of the racial inequalities is daunting, and can impact investing be a solution to this?
The urgency of tackling the challenge
As impact investing is poised to grow exponentially–the current size of impact investing market is half a trillion dollars, doubling almost every year–now is the right time to discuss this topic. Gillian Marcelle, an impact investing professional and racial justice advocate, says, “At this point in the lifecycle of an industry, ways of being and mindsets become hard-coded. Impact investing is in a high growth phase, and is maturing and becoming more legitimate. Therefore, we must tackle racial diversity now or run the risk that this does not become a burning issue, but remains marginalized and considered non-core.”
