Tools & Resources

Social Equity Investing: Righting Institutional Wrongs

A new report by investment firm Cambridge Associates on social equity investing – the practice of making financial investments that promote equal opportunity for all, regardless of background – points out that when those allocations focus on racial equity, the potential social-problem solving and financial benefits are accentuated.
The report underlines the financial and economic upside of effectively addressing racial inequity, as communities of color represent the fastest growing US consumer markets. It cites research that shows that the combined buying power of blacks, Asians and Native Americans was $2.2 trillion, up 138% from 2000, and that of Hispanics increased by 181% to $1.4 trillion. Further, raising the average income of people of color to the average incomes of white people would generate an additional $1 trillion in earnings.

The report highlights questions that institutions pursuing such allocations should ask about investment managers under consideration:

  • Do the managers have the cultural know-how and acumen to address the needs of racially diverse communities?
  • Are the managers themselves espousing inclusive principles throughout their organizations? Do they have programs around diversity and equity?
  • Are the managers acting to involve the community directly in the investment decision-making process and leveraging the expertise and voices of community members?
  • Have the managers thought about any undue risks that communities might bear that could run counter to institutional investors’ impact goals?


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