Getting to Economic Equity
- Keywords:
- diversity
- bmo empower
This is an important moment in history. There was the COVID-19 pandemic’s disproportionate impact on communities of color. On top of that were a series of tragic events, including the police killings of George Floyd and Breonna Taylor, that unmasked the harsh reality of systemic racism. It’s imperative that we address issues of systemic racism in our society. Everyone needs to step up, and public-private partnerships will be crucial to emerging from this crisis better and stronger than before.
I recently spoke with three leaders who have long been committed to issues of racial and social justice on the theme of getting to economic equity:
- Gloria Castillo, former President and CEO of Chicago United and a pioneering advocate for advancing diversity, equity and inclusion through the lens of business strategy
- Dr. Helene Gayle, President and CEO of the Chicago Community Trust, one of the country's oldest and largest community foundations with an endowment fund of over $3 billion
- Marc Morial, President and CEO of the National Urban League, the nation's largest historic civil rights and urban advocacy organization. Morial is a former mayor of New Orleans and was inducted into the International Civil Rights Walk of Fame in Atlanta in 2011
Following is a summary of our discussion.
Power Shift
The words equity and equality are often used interchangeably, but Castillo sees a key difference.
“Equality is our founding national promise,” she said. “Equity is how we achieve the promise. But we need equity as a process as well as an outcome, and that means that we need to take action in order for equity to be real. So where we need to start is understanding that race is at the core of the deepest divisions and disparities in our country. And right now very often, one’s racial identity determines one's life outcomes.”
In this context, Castillo said, equity takes the form of a power shift. “It's reimagining how policy decisions are made and who is at the table, and it's deconstructing some current practices that leave stakeholders out in favor of those who have, perhaps, unearned status. So to shift the outcomes we have to shift the decision-making power to those who are most impacted by the current and historical inequities that we experience. And we know that there will be pushback, but that's part of the common good—to make sure that those who are affected by policy and decisions are at the table, and that's what will actually help us achieve the American promise of equality.”
2020 and the Impact on Minority-Owned Businesses
The COVID-19 pandemic and its resulting economic crisis have affected everyone, but the impact on minority-owned businesses has been especially severe. For Morial, 2020 has exposed the deep inequities minority-owned businesses face.
Morial noted that about 85% to 90% African American-owned businesses—about 2.5 million in total—are sole proprietorships. But that’s not necessarily by design; Morial said many Black-owned businesses are simply starved of capital. That lack of access to capital in the form of loans, equity investments and other means is what Morial calls “the biggest barrier that Black-owned businesses face.”
“Central to addressing the economic downturn, or the COVID recession as I call it, is a high level of emphasis on Black- and Latino-owned businesses in this country,” he said. “And what that means is you need a new round or a different kind of PPP [Paycheck Protection Program], and you need a permanent PPP. You need permanent mechanisms, and this is where equity comes in. There's got to be a mechanism to provide capital in the form of equity grants, no matter what their source is, in addition to loans at reasonable interest rates to African American- and Latino-owned businesses.”
Lifting All Boats
While there’s a moral imperative in helping communities of color thrive, there’s also a broader economic case for doing so. “Imagine if there are two and a half million Black-owned businesses and each of them simply had the opportunity to add one employee, then there’d be two and a half million more people working,” Morial said.
Gayle pointed to a recent Citigroup report that stated if four key gaps in the Black community—wages, education, housing and investment—are closed today, it would add $5 trillion to the U.S. GDP by 2025. 1 “More and more data are becoming available that this wealth gap is keeping our whole nation's economy back,” she said. “So this isn't just good for the communities that we're talking about who have been robbed of economic equity. This is going to drive our economy in the future, and particularly as our demographics shift and we have more people of color, it’s just numerically the smart thing to do to invest in businesses of color.”
Gayle said this will require a close partnership between the public and private sectors, much in the model of the Chicago Community Trust’s “Together We Rise” initiative,2 which is designed to ensure communities hardest hit by the pandemic can rebuild stronger and more resilient. The initiative also aims to align business practices and policies that foster economic equity.
"We recognized that these were the communities that went into this crisis more economically and financially fragile and were most hard hit by the COVID pandemic, in both the health and the economic consequences,” Gayle said. “And we said that we did not want this recovery to be like the recession in 2008 where Black and brown communities really never recovered. What we want is an equitable recovery, which means: What is it going to take—what is going to be different for Black and brown communities than it is for white communities—to come out of this stronger, more economically stable and more economically resilient?”
Private equity firms currently hold roughly $4 trillion in assets, up about 12% from the prior year.3 In this moment when many forms of inequalities are being addressed, how do we create a paradigm shift to promote economic equity through social impact investing in Black and Latinx communities? And how do we get PE firms excited about investing in minority businesses?
“We have a very exciting moment to do things differently,” Gayle said. “I think there's a real recognition that we must do better as a nation, particularly when it comes to more equitable economic growth. One of the big drivers is that people are not recognizing the value that there is to be created by investing in communities that have such a huge potential because it just hasn't been realized. And I think we can just do a better job of sitting with these firms to help them appreciate that. I talk to a lot of venture [capital] firms, a lot of PE firms—they don't know how to build that pipeline. I think that's where we can help build that pipeline as people start to recognize there is huge economic value to be created by investing in Black and brown communities.”
Expanding the Field
When you look at the list of Fortune 500 companies, you see iconic brands like Starbucks, Amazon and Apple that started out as small businesses, but none [of those companies] are Black- or Latinx-owned. In fact, very few Fortune 500 companies today are led by a person of color.
In the height of the Black Lives Matter protests, we saw great expressions of solidarity from corporate America. But how can companies move beyond symbolic gestures and take the lead in advancing diversity and inclusion? Castillo said it comes down to leadership and accountability.
“We know that corporations have so much power within their walls,” Castillo said. “They can determine how they are going to bring greater diversity to their boards of directors and ensure that the top level of policymaking is in fact inclusive and has points of view from all of the communities. We know that talent development is critically important, and opening the doors to talent development means that there is accountability across the organization.”
It’s also crucial, she said, for corporations to rethink how they engage with minority-owned businesses. “Many companies look at minority businesses as small businesses that they can do a transaction here and a transaction there. But what we know is wealth is created when there is really accelerated growth. So corporations can take the steps to create more strategic relationships with their minority business partners.”
A Vision of Success
One thing that struck me during the conversation was the shared sense of optimism. Communities of color have come through previous challenging periods stronger than before, and all three panelists believe that will be the case in this moment. But getting there takes work, and it requires a vision of what success looks like. For Morial, that vision centers on economic power.
“Fundamentally, it is closing both the income and wealth gap that exists in America, and to get to that vision we have to do institutional reforms and institutional change in the public, the private and the nonprofit sectors,” he said. “This nation is a great nation, but its Achilles’ heel has been that the broad benefits of economic success have not been shared because people have been locked out, they've been left out, they've been pushed out of the economic mainstream.”
Gayle echoed those sentiments, adding that more equitable economic power may also help address many of the other societal ills that stem from systemic racism. “I do believe that unless we change the economic opportunities that have been held back for so long, we are not going to improve health, we're not going to improve education, we're not going to improve issues of violence.”
“We will not continue to be able to thrive if we don't thrive together,” Gayle added. “I'm hopeful because I think people understand that now. I think that there is a greater recognition that it is critical that we invest in Black and brown communities, and other underrepresented communities, if we're going to move forward.”
1 Citi 
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Eric Smith
Vice Chair, BMO Commercial Bank
Eric is responsible for working with the U.S. Commercial Banking team and across other lines of business to develop the bank’s strategy and product capabiliti…(..)
View Full Profile >This is an important moment in history. There was the COVID-19 pandemic’s disproportionate impact on communities of color. On top of that were a series of tragic events, including the police killings of George Floyd and Breonna Taylor, that unmasked the harsh reality of systemic racism. It’s imperative that we address issues of systemic racism in our society. Everyone needs to step up, and public-private partnerships will be crucial to emerging from this crisis better and stronger than before.
I recently spoke with three leaders who have long been committed to issues of racial and social justice on the theme of getting to economic equity:
- Gloria Castillo, former President and CEO of Chicago United and a pioneering advocate for advancing diversity, equity and inclusion through the lens of business strategy
- Dr. Helene Gayle, President and CEO of the Chicago Community Trust, one of the country's oldest and largest community foundations with an endowment fund of over $3 billion
- Marc Morial, President and CEO of the National Urban League, the nation's largest historic civil rights and urban advocacy organization. Morial is a former mayor of New Orleans and was inducted into the International Civil Rights Walk of Fame in Atlanta in 2011
Following is a summary of our discussion.
Power Shift
The words equity and equality are often used interchangeably, but Castillo sees a key difference.
“Equality is our founding national promise,” she said. “Equity is how we achieve the promise. But we need equity as a process as well as an outcome, and that means that we need to take action in order for equity to be real. So where we need to start is understanding that race is at the core of the deepest divisions and disparities in our country. And right now very often, one’s racial identity determines one's life outcomes.”
In this context, Castillo said, equity takes the form of a power shift. “It's reimagining how policy decisions are made and who is at the table, and it's deconstructing some current practices that leave stakeholders out in favor of those who have, perhaps, unearned status. So to shift the outcomes we have to shift the decision-making power to those who are most impacted by the current and historical inequities that we experience. And we know that there will be pushback, but that's part of the common good—to make sure that those who are affected by policy and decisions are at the table, and that's what will actually help us achieve the American promise of equality.”
2020 and the Impact on Minority-Owned Businesses
The COVID-19 pandemic and its resulting economic crisis have affected everyone, but the impact on minority-owned businesses has been especially severe. For Morial, 2020 has exposed the deep inequities minority-owned businesses face.
Morial noted that about 85% to 90% African American-owned businesses—about 2.5 million in total—are sole proprietorships. But that’s not necessarily by design; Morial said many Black-owned businesses are simply starved of capital. That lack of access to capital in the form of loans, equity investments and other means is what Morial calls “the biggest barrier that Black-owned businesses face.”
“Central to addressing the economic downturn, or the COVID recession as I call it, is a high level of emphasis on Black- and Latino-owned businesses in this country,” he said. “And what that means is you need a new round or a different kind of PPP [Paycheck Protection Program], and you need a permanent PPP. You need permanent mechanisms, and this is where equity comes in. There's got to be a mechanism to provide capital in the form of equity grants, no matter what their source is, in addition to loans at reasonable interest rates to African American- and Latino-owned businesses.”
Lifting All Boats
While there’s a moral imperative in helping communities of color thrive, there’s also a broader economic case for doing so. “Imagine if there are two and a half million Black-owned businesses and each of them simply had the opportunity to add one employee, then there’d be two and a half million more people working,” Morial said.
Gayle pointed to a recent Citigroup report that stated if four key gaps in the Black community—wages, education, housing and investment—are closed today, it would add $5 trillion to the U.S. GDP by 2025. 1 “More and more data are becoming available that this wealth gap is keeping our whole nation's economy back,” she said. “So this isn't just good for the communities that we're talking about who have been robbed of economic equity. This is going to drive our economy in the future, and particularly as our demographics shift and we have more people of color, it’s just numerically the smart thing to do to invest in businesses of color.”
Gayle said this will require a close partnership between the public and private sectors, much in the model of the Chicago Community Trust’s “Together We Rise” initiative,2 which is designed to ensure communities hardest hit by the pandemic can rebuild stronger and more resilient. The initiative also aims to align business practices and policies that foster economic equity.
"We recognized that these were the communities that went into this crisis more economically and financially fragile and were most hard hit by the COVID pandemic, in both the health and the economic consequences,” Gayle said. “And we said that we did not want this recovery to be like the recession in 2008 where Black and brown communities really never recovered. What we want is an equitable recovery, which means: What is it going to take—what is going to be different for Black and brown communities than it is for white communities—to come out of this stronger, more economically stable and more economically resilient?”
Private equity firms currently hold roughly $4 trillion in assets, up about 12% from the prior year.3 In this moment when many forms of inequalities are being addressed, how do we create a paradigm shift to promote economic equity through social impact investing in Black and Latinx communities? And how do we get PE firms excited about investing in minority businesses?
“We have a very exciting moment to do things differently,” Gayle said. “I think there's a real recognition that we must do better as a nation, particularly when it comes to more equitable economic growth. One of the big drivers is that people are not recognizing the value that there is to be created by investing in communities that have such a huge potential because it just hasn't been realized. And I think we can just do a better job of sitting with these firms to help them appreciate that. I talk to a lot of venture [capital] firms, a lot of PE firms—they don't know how to build that pipeline. I think that's where we can help build that pipeline as people start to recognize there is huge economic value to be created by investing in Black and brown communities.”
Expanding the Field
When you look at the list of Fortune 500 companies, you see iconic brands like Starbucks, Amazon and Apple that started out as small businesses, but none [of those companies] are Black- or Latinx-owned. In fact, very few Fortune 500 companies today are led by a person of color.
In the height of the Black Lives Matter protests, we saw great expressions of solidarity from corporate America. But how can companies move beyond symbolic gestures and take the lead in advancing diversity and inclusion? Castillo said it comes down to leadership and accountability.
“We know that corporations have so much power within their walls,” Castillo said. “They can determine how they are going to bring greater diversity to their boards of directors and ensure that the top level of policymaking is in fact inclusive and has points of view from all of the communities. We know that talent development is critically important, and opening the doors to talent development means that there is accountability across the organization.”
It’s also crucial, she said, for corporations to rethink how they engage with minority-owned businesses. “Many companies look at minority businesses as small businesses that they can do a transaction here and a transaction there. But what we know is wealth is created when there is really accelerated growth. So corporations can take the steps to create more strategic relationships with their minority business partners.”
A Vision of Success
One thing that struck me during the conversation was the shared sense of optimism. Communities of color have come through previous challenging periods stronger than before, and all three panelists believe that will be the case in this moment. But getting there takes work, and it requires a vision of what success looks like. For Morial, that vision centers on economic power.
“Fundamentally, it is closing both the income and wealth gap that exists in America, and to get to that vision we have to do institutional reforms and institutional change in the public, the private and the nonprofit sectors,” he said. “This nation is a great nation, but its Achilles’ heel has been that the broad benefits of economic success have not been shared because people have been locked out, they've been left out, they've been pushed out of the economic mainstream.”
Gayle echoed those sentiments, adding that more equitable economic power may also help address many of the other societal ills that stem from systemic racism. “I do believe that unless we change the economic opportunities that have been held back for so long, we are not going to improve health, we're not going to improve education, we're not going to improve issues of violence.”
“We will not continue to be able to thrive if we don't thrive together,” Gayle added. “I'm hopeful because I think people understand that now. I think that there is a greater recognition that it is critical that we invest in Black and brown communities, and other underrepresented communities, if we're going to move forward.”
1 Citi
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