By Andy Hall, Chief Impact Officer; Research by Daniel Enemark, Ph.D., Senior Economist @danielenemark
A racial reckoning has been set off by the killings of Elijah McClain, George Floyd, Breonna Taylor, Ahmaud Arbery, Daunte Wright and many more Black Americans. This demands an urgent examination of the systems that lead to and perpetuate inequity in our society. The financial system, and our own money habits within that system, should also be placed under the microscope.
It may seem like the financial system underpinning American capitalism only sees green, but for decades our government and banking institutions—and white voters—have prevented qualified buyers of color from purchasing homes in San Diego.1 Black entrepreneurs are more likely to be denied loans than white peers with equivalent creditworthiness,2 and in 2019 just 1% of venture capital funds went to Black and Hispanic founders.
The historic exclusion of ownership and financing opportunities has compounded over generations. In 2016, the median net worth of Black households in the U.S. was $16,000, compared to $163,000 for white households.
In the journey toward economic justice, where we bank, spend and invest our money matters. Our investments can bring more resources to underinvested communities, or they can perpetuate inequality by supporting activities that do not align with our values, like mass incarceration (e.g. investing in private prisons). We must regularly ask ourselves, and our organizations, the following two questions:
- How do our investments and expenditures stack up against our values?
- What capital can we influence today to advance toward a more just society?
A few specific applications to consider:
Where we buy products and services makes a big difference in where wealth flows and accumulates. Here are San Diego-specific opportunities that can help you or your organization approach purchasing in ways that broaden prosperity in San Diego:
- Purchasing goods and services from historically excluded groups, such as Black-owned businesses in San Diego. This keeps money local and directs it to owners and entrepreneurs from diverse backgrounds, creating a more inclusive San Diego economy.
- Connecting the procurement and purchasing budgets of large public and community-focused organizations like hospitals, universities and local governments (sometimes referred to as “anchor institutions”) to local businesses led by women and Black, Indigenous, and other persons of color (BIPOC) owners and/or with track records of providing quality jobs in under-resourced communities. The San Diego Regional Economic Development Corporation is focused on just that.
- Patronizing businesses that have broad-based profit sharing and employee ownership structures, like Taylor Guitars, helps drive wealth to more San Diegans. To learn more about employee ownership, watch this webinar then register for our workshop.
Examine Your Banking Relationship
If you are like me, you haphazardly signed up for a checking account with one of the big banks at a young age with zero dollars to your name. As time passed, I simply drifted into more products and services offered by that bank. It wasn’t until 2020 that I decided to “break up with my bank” and direct my checking and savings accounts to a bank more aligned with my values.
This is true for individuals and organizations. Intentional banking, or impact banking, is an easy way to move much needed capital into under-resourced communities. Consider this list of Black-owned banks and this list of Community Development Financial Institutions (CDFIs) to learn about alternative options that are more likely to put your money to work for causes you care about.
In 2018, the San Diego Workforce Partnership added socially responsible, or ESG funds, to our retirement plan options for employees. This is a start, but ESG funds are mostly focused on screening out companies based on surface-level factors (think big tobacco).
To drive the systemic change in how capital flows, deeper investigation into the ownership group, quality of jobs, and environmental impact of investment decisions are needed. Some of the national and local leaders and resources in impact investing we are following include:
- Rachel J. Robasciotti’s (@rrobasciotti) groundbreaking work shared on this podcast interview is bridging the gap between financial markets and social justice
- ImpactAlpha is one of the primary media and journalistic outlets following the growing “social impact investing” space
- The “Rich and Resilient” blog covers personal finance, among other topics, and has a great summary on social justice personal finance
- Here in San Diego, Mission Driven Finance is working to “change the face of finance” from one traditionally overrepresented by white men through fellowship opportunities for candidates from diverse backgrounds. This is designed to ultimately help increase financing opportunities for female and BIPOC entrepreneurs by changing which businesses are seen as ‘too risky’ or worth a shot—ultimately expanding access to capital more equitably.
Wealth inequality by race and gender in the United States is not only explained by the wage gap between male and female, Black and white. Our own money habits: what we buy, where we bank and how we invest dictate where and with whom wealth accumulates.
Every dollar that is directed with intention sends a signal that a more just and inclusive economic order is not only possible, but inevitable. Every time we align our money with our values, we help accelerate progress on the long arc that bends toward economic justice.
 San Diego’s redlining map, created in 1935 by the federal government with support from the city engineer’s office, identified Talmadge as one of the best neighborhoods for banks to lend to because there was “no threat of infiltration [as ownership is] restricted to the Caucasian race.” Loma Portal was praised for being “100% white.” Four decades later, the San Diego Union found that less than 2% of home loans from local banks went to communities of color, and Ford & Griffin (1979) reported that a study of 29 San Diego neighborhoods showed all of them had “racial covenants” written into real estate contracts forbidding the sale of property to nonwhite buyers. In 1964, 68% of white San Diegans voted in favor of a ballot initiative amending the state constitution to guarantee the right of homeowners to discriminate on the basis of race when selling or renting property.
Ross, Charles W. (1977). Low Income, Minority Home Loans Avoided. San Diego Union January 16, 1977.
Ford, L and E Griffin. (1979). The Ghettoization of Paradise. Geographical Review 69 (2): 140-158.
 Fairlie, R. W., Robb, A., & Robinson, D. T. (2020). Black and white: Access to capital among minority-owned startups (No. w28154). National Bureau of Economic Research.