The renewed focus on racial disparities in America has caused many investment firms to scramble to rewrite their mission statements to be more inclusive, but there is one organization that is committed to social justice. for decades.
Diversity, equity and inclusion are in the DNA of the Ford Foundation. Philanthropy began in 1936 with a $ 25,000 donation from automaker Edsel Ford and grew into a $ 12 billion endowment making $ 500 million in grants around the world each year. The New York-based foundation is putting its money where others are offering lip service to change the appalling statistics on investing in women-owned and minority-owned businesses. The market allocation is 1% on approximately $ 70 trillion in US assets under management; the Ford Foundation’s Mission Investments endowment allocated 57%.
“Tools are only powerful when you use them. The good thing about the Ford Foundation is that they have these tools and they use the equity, ”said Roy Swan, director of Mission Investments for Ford. “We hope to serve as an example and provide a sort of roadmap for like-minded people who wish to help advance economic justice and social justice.”
Swan spoke with Wharton management professor Katherine Klein, who is associate dean of Wharton Social Impact Initiative, during a recent episode of the Dollars and currency Podcast. (Listen to the segment at the top of this page; find more episodes hereTheir conversation centered around the Mission Investments program, which devotes $ 1 billion of Ford’s 10-year endowment to impact investing. Such programs are receiving increased attention due to the spotlight on racial inequalities in the United States and around the world following the death of George Floyd in late May.
In the late 1960s, the Ford Foundation developed a program-linked investment tool to stimulate what President Richard Nixon called “black capitalism.” But, as Klein pointed out, a large wealth gap still persists some 60 years later. The median household income for whites in 2018 was $ 70,642, compared to $ 41,361 for blacks, according to census data.
“We love when the investment managers have diversified ownership. We like teams to be diverse in senior investment ranks and in decision making areas. ” –Roy Swan
“You’re right, we didn’t get very far,” Swan said. “In fact, in some ways we have moved backwards – particularly in the status of African Americans. I think over the last 20 years or so, this is the only demographic … whose wages have gone down. What we hope to do is use our tools as examples and use our voice to influence.
Exercising that influence means speaking out and speaking out often, and Foundation President Darren Walker does it through the Foundation. Equal Change Blog, frequent public and television appearances, and as a member of several boards of directors. The organization also exerts influence in more subtle ways, which Swan called a “honey, not vinegar” approach to getting businesses to see the value of diversity.
“As part of our due diligence process, we make it an important part of our discussions to talk about the importance of diversity in our selection process,” he said. “We love when the investment managers have diversified ownership. We like teams to be diverse in senior investment ranks and in decision making areas. “
Provide access and real solutions
In June, the Ford Foundation launched a $ 26 million program Impact Developer Fund with Morgan Stanley and TruFund Financial Services. The program will provide capital and technical assistance to minority and women-owned property development companies that have encountered institutional barriers in obtaining adequate and affordable capital. In addition, the fund will target businesses that build affordable, quality housing.
Swan said the program is important because there is a critical shortage of affordable housing, and much of it was built by white male developers trying to create products for underprivileged populations that they don’t always understand.
“There are a lot of reasons why there aren’t a lot of black or brown developers,” he said. “This is largely due to the same lack of access to capital that was demonstrated by this statistic of 1% of assets under management [by minority-owned firms]. If you look at another simple pledge… in SBA loan programs, African Americans are lucky if they get 2% of the total value of SBA programs.
“If you really want to invest and don’t know what to do, you can call me. –Roy Swan
Klein has asked Swan to offer his best advice to investors who want to “move the needle” on systemic racism in the financial industry. The answer, Swan said, begins with acknowledging the problem and the fact that the wealth gap is widening, and then looking for real solutions. “It is also a question of going beyond symbolic gestures towards substantial and significant commitments”, he declared.
Perhaps the hardest part is getting consensus on the belief that helping those at the bottom of the pyramid helps an entire society reach a little higher. This is a foolproof argument that many in power are not receptive to because they fear that the enrichment of others will come at their own expense.
“From a political perspective, we have other challenges because the concept of race-targeted assistance is so polarizing that it’s very difficult to achieve success,” Swan said. “People in power and people with money don’t easily give up power or money. It’s sort of, what’s in it for them?
Swan also said that many investors don’t know where to start to move the needle because they don’t have a diverse network of people they can seek advice from. They don’t have close confidants who happen to be minorities, so they don’t know how to open the conversation.
“But guess what? The head of the Ford Foundation’s mission investment programs is an African American male, ”he said, referring to himself. “This is relevant because a recent statistic showed that 75% of whites do not have a single black in their network of friends or in their social network. So if you really want to make an investment and don’t know what to do, you can call me.
