Why Greater Social Cohesion is the “Moonshot” for the Future of Finance and How to Get There

 2019 culminated in many stories of momentous challenge and change, one of which was the 50th anniversary of the moon landing. Sustainable business writer Joel Makower recently wrote a thought-provoking article pondering the term “moonshot” as it relates to sustainability and solving climate change. Makower points out that moonshot has become the going concept for most contemporary audacious problem-solving efforts.

As we begin this new decade, we carry the defining challenges of our time: the dynamics of climate change and rising wealth inequality. In order to truly launch a moonshot-level transformation, we need more traction in terms of addressing the real and pressing threat of excessive inequality.

In the United States, there is a growing lack of social cohesion. The American experience across different demographics is uneven which results in a loss of civic engagement and upward mobility and fosters the development of exclusionary practices which inhibit healthy economic growth.

Seeking Common Ground on Uneven Footing

The data on poverty across the United States, for example, demonstrates that poverty is not evenly distributed across all demographics. In fact, ethnicity is a determining factor across the spectrum of inequality or relative poverty in the US. The 2018 US Census Data shows the steepest poverty rates by race are among Native Americans (25.4%), African Americans (20.8%), and Hispanics (of any race) (17.6%). In comparison, Whites show a poverty rate of 8.1%, while Asians had a poverty rate at 10.1%.

A number of notable efforts are underway across the landscape of building a more equitable system. Think tanks such as the Washington Center for Equitable Growth, grant-making institutions such as the Surdna Foundation, retail investing platforms such as CNOTE, wealth advisors specializing in social justice investing such as Robasciotti and Philipson, coalitions such as the Democracy Collaborative, capacity-building organizations such as United for a Fair Economy, investors such as Candid Group, and emerging initiatives focused on the finance sector such as the Predistribution Initiative—are key entities in the necessary fight against an increasingly risky equation for society.

At Impact Experience, our place-based investing and capacity-building processes are based on  powerful partnerships to connect the dots between social justice and finance. A longstanding partnership with Illumen Capital has informed the design and implementation of our approach with a priority around reducing bias. Illumen Capital is a fund of funds dedicated to reducing racial and gender bias in the financial markets. Last year, Impact Experience hosted a convening where the Stanford SPARQ and Illumen Capital study was launched. The study is designed to better understand how unconscious bias occurs, what the ramifications are in the investment industry and avenues for addressing it.

The Illumen Capital and Stanford study published in PNAS referred to the more than $69 trillion of global financial assets under management which include hedge funds, mutual funds, real estate and private equity, fewer than 1.3 percent of which are managed by people of color and women. This under-allocation into women and people of color is not only due to a pipeline problem, but also to the biased decision-making process of asset allocators. Therefore, the study shows that investors are likely leaving money on the table due to their biases.

Many of our Impact Experience partnerships and efforts have focused on pairing environmental, economic, and social justice efforts and emerging opportunities like Opportunity Zone investing or the JOBS ACT.

We develop thoughtful and comprehensive processes for the deployment of investing strategies to enable cohesion and connection between asset owners and asset allocators and the people and places where wealth and resources are extracted at the ground level.

Moving from Transaction to Transformation

At this point, we know that both inequality and climate change are major risks to investors across all industries and asset classes. However, the real challenge lies in broadening our understanding of how these challenges are intertwined and how to solve for both in a way that is transformative. A change in direction will mean genuine power-sharing, which fundamentally requires fostering social cohesion among different players across social and economic systems in order to catalyze the democratization of finance. Economic and social inclusion needs to become so impactful that an injustice done to anyone, feels like an injustice to everyone—this is the essence of our work in places such as West Virginia, Alabama, and Puerto Rico.

The real moonshot is when we see ourselves and our humanity in each other, regardless of socio-economic status, ethnicity, race, religion, sexual orientation or cultural traditions. The intersectionality in the dynamics across the most pressing issue of wealth inequality and climate change are difficult to put into a neat narrative and then agree on what to measure. But, for real progress and transformation to happen, it must be rooted in the intersectionality of things. There is nothing particularly wrong with staring out at the cosmos and thinking big, but we need to first be grounded in the truth that real launchpad for impact starts in our own social circles, workplaces, and neighborhoods.

Jenna Nicholas is the CEO of Impact Experience, and a recipient of the inaugural SRI 30 Under 30 award for her work pioneering in the impact investing industry. Erina McWilliam-Lopez is the Product Manager and Developer at Impact Experience.

Read Joel Makower’s Article - What’s Your Sustainability Moonshot

Connect with Jenna Nicholas and Impact Experience on Twitter.

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