Impact Investing and Economic Opportunity: Pathways to Overcome Economic Disparities

In early December, I was honored to moderate a panel discussion hosted by the 92nd Street Y, a leading cultural institution in New York City, entitled “Impact Investing and Economic Opportunity.” Together with three impact investors/social entrepreneurs, we discussed innovative ideas to narrow wealth inequalities and inspire social change.

Jonathan Rose, founder of Jonathan Rose Companies LLC, works with cities and not-for-profits to build green, affordable, and mixed-income housing, along with cultural, health and educational infrastructure. Geraldine (Gerry) Laybourne, former president of Nickelodeon, is the co-founder of Day One Early Learning and pioneering an innovative, leading-edge children’s program. Shauntel Garvey, founder of Reach Capital, is spearheading an effort to expand education beyond classrooms and building stronger communities.

While impact investing has been steadily gaining momentum, much remains to improve income disparities and opportunity sets that divide our neighborhoods, cities and world.

Impact Investing and Economic Opportunity: Structural Change May Narrow the Wealth Divide

Over the past three decades, a racial wealth divide has grown between white households and households of color. Since the early 1980s, median wealth among Black and Latino families has been stuck at approximately $10,000 while white household wealth has grown to over $140,000. COVID-19 has only exacerbated these long-standing imbalances. Impact investing (investing which seeks a social and financial return) and inclusive philanthropy (which invests in non-profit social entrepreneurs) can help narrow wealth inequality.

The Stark Racial Wealth Divide

_{Source: National Bureau of Economic Research, “Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?”, Edward N. Wolff; November 2017.}

Affordable Housing: Structural Change as a Societal Commitment

To shift the landscape, structural and policy changes need to continue in order to lift people out of poverty and change the current unjust distribution of opportunity. One way impact investors can help reshape our cities is by investing in safe, green affordable housing near public transportation. Combined with opportunities from social enterprise and state and local governments, families have more resources for health care, school programs and internet access. Jonathan noted how impact investing can produce strong market rate returns and hopes the Biden/Harris administration reevaluates the Trump administration ERISA (Employee Retirement Income Security Act) regulations on pension funds to again allow investors to include multi-sectoral considerations, such as ESG, in their investments.

Education: An Engine for Upward Mobility

The importance of quality education and early childhood development are critical for creating economic opportunity. Encouraging social-emotional learning may serve as an engine for upward mobility. According to Gerry, a dollar invested in early childhood learning may have a 15 to 1 payoff in social benefit. At Day One Early Learning, Gerry fosters education as a community resource. Her work encourages lifelong learning and a living wage for teachers by connecting education to private and public capital.

“Middle-Skilled" Jobs: Technology Solutions for a Living Wage

In light of COVID-related layoffs, industries are transforming, leaving many feeling they need new skills to re-enter the workforce. To bridge the income-equality divide, individuals need accessible and affordable education curriculums. At Reach Capital, Shauntel Garvey seeks to tackle these barriers through technology solutions and “middle-skilled jobs” credentials that require training rather than a college degree. After re-training, some workers may see a $30,000 income increase.

Improving the Economic Divide for Generations to Come

The evening closed with a lighting round with final takeaways from each of the panelists.

• Jonathan pointed out the many options for investing capital with low minimums and measurable impact, “so having a good advisor is very helpful to find your way.”
• Shauntel noted the importance of “investing in small angel investments with underrepresented founders, such as women or founders of color.”
• Gerry expressed her hope for bipartisan improvements and that “if babies had lobbyists…we could have high-quality early learning.”

The momentum behind these social entrepreneurs’ work has helped implement solutions that embrace theories of change. While structural and systemic problems may seem complicated, by working together in creative ways, we can devise solutions today that may impact future generations.

To view the full webinar, please click here.

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