In the wake of the murder of George Floyd, private foundations and companies pledged more than $200 billion to support racial justice initiatives. However, a Washington Post analysis found over 90 percent of that amount was allocated as loans that firms would eventually profit from.

The foundation of the globalized economy we see today was established with the commencement of the global trade of enslaved Africans to the Americas (North, Central, South, and Caribbean). The slave trade was an activity participated in by all the European colonizing nations and laid the foundation for the enormous wealth and development of these nations, while exploiting the people and denying them and their societies access to capital for development even after the abolition of the trans-Atlantic slave trade and emancipation.

Last month, six investor networks (American Sustainable Business Network, Confluence Philanthropy, The ImPact, Impact Capital Managers, Intentional Endowments Network, and Toniic) came together as part of a collaborative effort to learn from one another’s work and discuss how to advance racial equity investing across the investment industry. We discussed how private capital is part of the problem, and yet is also part of the solution. Importantly, we must recognize the role of capital in perpetuating and benefiting from harm before it can be used for healing.

The present-day Black-white racial wealth and well-being gap in the United States, as well as between the former colonies and their colonizers globally, is rooted in direct economic exploitation. This fact can be altered by changing the trajectory of private capital – where capital can be harnessed to repair rather than extract. Given the ability of investments to develop narratives throughout markets, it is imperative that we find new ways to deploy the enormous wealth under the control of the private markets.

The idea of reparations is not new, and there have been calls throughout time for private companies and banks to play a larger role in addressing the vestiges of slavery. An example of this appeal is the Slavery Disclosure Ordinances. There are different models of reparations frameworks that institutions can draw from. The model the Reparations Finance Lab (RFL) focuses on is “community harms and community repair.”

This model seeks to identify the range of harms that have been directed to Black individuals, families, and communities by both government policy and the actions of the private sector. The framework has developed a harm measurement model that seeks to identify the cumulative harm from policies such as redlining and the added harm from private sector disinvestment.

In examining the legacy of underinvestment in public services across education, health, transportation, and wealth-enabling infrastructure, we see that this history has entrenched racial inequities that cannot be reversed simply through increased entrepreneurship from Black individuals. As a result, RFL has developed a Social Equity Index that can be used to identify communities where public and private sector investments could potentially have the most systemic and long-lasting positive change in outcomes for residents. We have also developed a Reparations Checklist that can be used to evaluate and guide the deployment of capital – public, private, or philanthropic – that seeks to address the issue of racial equity.

We are in a moment of true global reckoning, where there are calls across the globe for reparations. We are seeing interesting movements in Holland, where the Dutch Prime Minister has apologized for the role of the nation in slavery and its aftermath. In the United Kingdom, King Charles has signaled a willingness to examine and disclose the role of the monarchy in slavery and colonialism.

Peer investor networks, like those that came together last month, have an important role in elevating innovations and demonstrating how private capital can be used to address racial equity. However, there is another equally important role they can play, to ensure that commitments of capital are at a scale that is “fit to purpose” of meaningfully addressing the history of intentional and structural harm to the Black community.

RFL’s Framework for Reparations is adapted from the United Nations and the International Human Rights Framework:

An official acknowledgement and apology for harm, public education, or memorial about the harm; and compensation to a specific, defined group of individuals harmed by a violation, including descendants, as well as family and community members of individuals directly targeted for harm who were adversely affected; and action to restore individuals harmed to the position they were in before the initial harm occurred; and action to stop the systems, institutions, and practices causing the harm; and changes to laws, institutions, and systems aimed at ensuring that harm will not happen again.

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Enith Williams, Founder and Executive Director, Reparations Finance Lab

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