Racial Equity: The Economic and Business Case for Change
The moral imperative to pursue racial equity is clear and urgent. At the same time, foundations and others have also worked to demonstrate the ways in which racial inequity poses financial risks that often go under-recognized in the investment decision-making process. In addition, evidence suggests that businesses that commit to racial equity perform better in comparison to their counterparts.
This page compiles evidence, in reports going back to 2013, illuminating how and why racial equity is good for business — and how inequity causes economic harm — with increasing implications as America's heads towards a population in which more than half of U.S. workers and consumers will be people of color by 2050. Impact investors can use these data to make the case for why pursuing racial equity in impact investing may indeed be a fiduciary responsibility and lead to long-term gains.
Two reports, by the W.K. Kellogg Foundation and Altarum, providing compelling economic arguments for racial equity. Beyond an increase in economic output, advancing racial equity can translate into meaningful increases in consumer spending, as well as federal and state/local tax revenues, and decreases in social services spending and health-related costs. For example, the 2018 report notes that, on consumer spending alone, closing the racial equity gap in the U.S. would generate an additional $191 billion spent on food, $500 billion on housing, $52 billion on apparel, $259 billion on transportation, and $77 billion on entertainment each year. Federal tax revenues would increase by $450 billion and state and local tax revenues would increase by $100 billion annually.
Developed in partnership with PolicyLink and funded by the Ford and W.K. Kellogg foundations in 2017, this report highlights examples from 12 leading companies that are driving innovation and growth by advancing racial equity. Companies can create economic value and advance racial equity by reconceiving products and markets, and more. To begin this work, business leaders must first understand why racial inequities exist and then examine every aspect of their business to find opportunities for innovation.
This synthesis of articles and reports on the business case for racial equity, published in 2013 in The Atlantic, include references to the W.K. Kellogg Foundation and Altarum report, as well as past studies articulating the economic case for racial equity.
In this paper, published in 2013, Altarum quantifies certain economic benefits associated with eliminating the earnings gap between non‐Hispanic whites and persons of color. The economic benefits that they estimate in the paper are linked to an increase in America's overall GDP.