impact investing

A Guide to Social Justice Investing

I have long believed that the vote I cast with my dollars is of equal and possibly more importance than the vote I cast at the ballot box. What our money supports and where it sleeps has a tremendous impact on shaping the world in which we live. Right now, in the wake of George Floyd’s murder and the ensuing protests around the country (and world), more of us are waking up to the fact that our money is supporting some bad stuff. As people of all colors search for ways to address the systemic racism that permeates every fiber of our cultural tapestry here in the USA, I encourage you to look more closely at your money and consider social justice investing.

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What is Social Justice Investing?

While to my knowledge no official definition of social justice investing exists, I think of it as a way we can strategically wield the power of the dollars that pass through our hands to invest much-needed capital into businesses and communities of color and divert our money from those companies that play a role in perpetuating and/or maintaining systemic racism. Just to be clear in this article I’m not talking about donations to worthy non-profits and initiatives (which are necessary as well). I’m referring to investments that earn us a return on our money, however small or large.

A recent article in ImpactAlpha points out that from a financial perspective systemic racism has “left a long tally of misallocated capital, lost talent, overlooked markets, untapped innovation and wasted time.” Social justice investing offers a way to start course-correcting by recognizing all of these amazing assets we’ve disregarded for way too long, while simultaneously lifting people up, improving lives, and re-directing our money from extractive and harmful investments toward regenerative and equitable practices instead.

That article goes on to discuss how venture capital firms and institutional investors are stepping up to start “flipping the script” and “shifting narratives” by intentionally steering “larger percentages of capital to entrepreneurs and fund managers of color.” They’re also “backing ventures that explicitly seek to close racial gaps in wealth and social outcomes.” And that’s exciting and wonderful. My intent here though, is to arm other non-accredited (read non-wealthy) investors like myself with the knowledge and resources to achieve tremendous impact with their financial resources as well and play a role in helping to shift the narrative.

Even representatives from the mainstream financial industry are acknowledging that “Investing has a role to play in ending systemic racism.” That was the title of a recent article written by Jon Hale, the Global Head of Sustainable Investing Research at Morningstar.

Side Note: Social justice investing can also refer to advancing gender equity through our investments, which is also very much needed, but in light of current events for this piece I’m going focus on the racial equity investing component.

regenerative investments
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Meet One of the Women at the Forefront of Social Justice Investing

When I enter “social justice investing” in a Google search the top non-sponsored hit directs me to the website of the black-owned all-female wealth management firm Robasciotti & Philipson. In 2020 they launched Adasina Social Capital to serve as” a bridge between social justice movements and financial markets as well as the new home of their social justice investing strategy.

Principal Rachel Robasciotti is a queer black woman, who grew up in poverty in California. Last week she shared some very personal information in her Twitter feed revealing how police brutality has directly and tragically touched her family on several occasions. (Start following her at @rrobasciotti to learn more about her and her firm’s work.)

Tweet by Rachel Robasciotti - re social justice

Robasciotti opened her firm in 2004 and has already spent many years “build[ing] bridges that bring the investment industry into deep alignment with social justice movements.” Recent events have prompted Robasciotti to raise her voice even louder exposing a broader audience to phrases like “decarcerate” your portfolio and “defund mass incarceration.” Last week an article in Financial Planning quoted her as asserting that “If your portfolio includes private prisons you are part of the problem.” (and I can’t disagree.) You’d be surprised how many popular mutual funds hold shares in prison companies.

One thing in particular that struck me when reading about Robasciotti and her firm is that they integrate emotional intelligence into financial decision making. Conventional investing wisdom tells us to leave our emotions out of our money decisions. I find however, that impact investing is very personal and definitely influenced by my emotions such as outrage at racial injustice. I imagine that this approach has contributed to the fact that at least at the time this podcast interview was recorded with her the firm’s clients were 80% women, 70% LGBTQ, and 100% progressive.

Become a “Financial Activist”

If I had a team of colleagues I would have liked to have birthed something as comprehensive as this fantastic article by Jasmine Rashid of Candide Group, Morgan Simon’s innovative investment advisory firm focused on social justice and sustainability. Congratulations, Jasmine & Co.! This article is such a valuable contribution. And bonus points for the cool visuals.

I hadn’t heard the term before, but I am a proud financial activist, which is what is inspiring me to put pen to paper (or in this case fingers to keyboard) to assemble the information in this post. If you would like to further educate yourself about things that I just don’t have the bandwidth or knowledge to cover here do yourself and all of us a favor and read Jasmine’s article. It is packed with far more historical context and information than just the eight strategies I’m sharing from it in the infographic below.

racial justice

So let’s take a deeper dive into a few of these strategies…

Break Up with Your Bank (or as I call it, Impact Banking)

I wrote recently about the concept of impact banking noting that it is an effective way to move much-needed capital into under-resourced communities. It’s also a way to move your money out of financial institutions using predatory practices or assigning your money while it “sleeps” at their bank to things that likely don’t align with your values.

Impact banking is a low/no-risk way to put your money to work doing good in the world. I have long kept the money in my personal and business bank accounts in local credit unions, which keep more of their money in my community.

If you now find yourself wanting to #bankblack for instance consider depositing some money at one of these black-owned banks here in the U.S. There is no black-owned bank based in my community so I opened an account with OneUnited Bank, which operates nationally.

impact banking

Divest from Companies that Cause Harm to Black Communities

In the realm of socially responsible investing, divesting refers to the act of selling an asset for social goals. Last year the word divesting appeared in numerous headlines particularly when BlackRock, one of the world’s biggest fund managers, committed to divesting from fossil fuels.

We can also screen out companies that negatively impact black communities. The team at Robasciotti & Phillipson compiled this Racial Justice Exclusion list years ago and used it internally to ensure that their clients’ money did not support racist systems. Now they have released their list so others can make informed investment decisions as well.

On the Investigate website, the American Friends Service Committee (AFSC) provides a fund search tool that indicates which funds AFSC recommends divesting from based on various criteria. This tool indicates that most Vanguard funds, including the highly venerated in financial independence circles VTSAX, have NOT decarcerated their portfolios and in fact contain significant numbers of prison companies.

Social Justice Investing Racial Justice Exclusion List
A Sneak Peak at the List Prepared by Robasciotti & Phillips – Rid Your Portfolio of these

A personal note: I disclosed in one of the first posts on this website that I am in the slow process of taking the even more extreme step of divesting from most of the publicly traded stocks I own because I don’t believe the majority of shareholder driven companies prioritize people and planet equally with profit. Divesting from even socially responsible and ESG mutual funds is one of the key methods I am implementing to align my investing with my values.

Ric Marshall, senior corporate governance analyst at MSCI, was quoted in this New York Times article about socially responsible investing from earlier this year as asking “Aren’t we all better off if we retain at least a bit of whatever leverage we have over powerful companies like these?” And even if I haven’t prioritized that strategy I see his point about the value of shareholder activism.

What is Shareholder Advocacy?

Social Justice Investment Choices
Photo credit: Mohamed Hassan from Pixabay

Voicing our concerns as shareholders in companies that employ or sustain racist practices is also very much part of racial equity investing. everyone who owns shares of a company has the right to influence that company’s policies. The two primary mechanisms to flex this muscle are through direct engagement and proxy voting.

There can be a great deal of legalese and reviewing of financial reports involved in shareholder activism, which can make it overwhelming for individuals to take it on. Luckily, independent organizations like As You Sow and Majority Action exist to help the “lay” person navigate this process.

And a fellow member of the Socially Conscious Mustachians Facebook Group introduced me to the website Say, which is another online resource that helps investors’ voices be heard by the companies they invest in.

An additional resource is the Interfaith Center on Corporate Responsibility (ICCR). On their website they share an insightful overview of shareholder engagement and the proxy process as well as this guide to filing shareholder resolutions. A few months ago I published this post as a call to action for people to weigh in with the Securities & Exchange Commission (SEC) regarding unfavorable changes to shareholder advocacy they are considering making. My understanding is that for now these changes are still pending review and a final decision, so the information in ICCR’s is likely still accurate, but the $2,000 investment threshold to file a resolution (as well as some other details) could change.

If you don’t own stocks directly, but invest through an employer based retirement account or brokerage firm you can still work to sway things. Check the bottom of this page on the As You Sow website to find out how.

Back in 2017 Pat Miguel Tomaino from Zevin Asset Management published this piece highlighting how a responsible investment approach simultaneously confronts and avoids racial injustice. He noted that “Zevin votes our clients’ shares at company meetings, and we support shareholder proposals that ask firms to improve workforce diversity. We also go further by voting against all board directors at companies that lack racial and ethnic diversity.” There’s no reason other funds and brokerage firms can’t do the same.

Racial Justice Investing Actions

Social Justice Investments

Below are social justice investments that are open to non-accredited investors (outside of the stock market) in which I have already invested.

I revealed what alternative investments I’ve made to date in an earlier post “How I Am Investing to Save the Planet.” Besides being environmentally responsible investments a number of them promote social justice as well.

And now a brief interlude for a DISCLAIMER – It goes without saying, but I’ll say it anyway to be on the safe side. I am not a certified financial advisor. In fact, my master’s degree is in Russian & East European studies, which is not very useful in this realm. So just remember that this is NOT investment or financial advice. It is for educational and informational purposes ONLY. These are investments and there is risk involved with all of them.

Kachuwa Impact Fund identified a set of impact themes that are very much aligned with what I would like to be investing in. One of those themes is social justice. The fund’s current holdings include 1) Harlem Capital Partners Venture Fund I, a venture capital fund that invests solely in women and people of color founders 2) Capital Good Fund, which provides small-dollar personal loans and one-on-one financial and health coaching to tackle poverty, foster upward mobility, and reshape the predatory loan industry.

socially responsible investing

CNote customers invest in loans issued by community development financial institutions (CDFIs). CDFIs are federally certified nonprofit and for-profit banks that are required to direct the majority of their lending dollars to their stated missions, which typically help lift up communities (think lending to low-income families, investing in locally owned small businesses, affordable housing, etc.). Investments with CNote earn up to 2.75% interest and support a more inclusive economy. (You and I will both get $10 when you open a new account using this link.)

crowdfunding investment return

I also made social justice investments through the crowdfunding platform Wefunder that are no longer open for investment. However, just the other day I received an email from Wefunder showcasing current opportunities to invest in black-founder led startups. Check them out here if you are interested.

Additional Social Justice Investments

Below are some social justice investments that I know about but haven’t yet invested in. These are a good place to start if you are looking for investments that make a difference.

There are other social justice investments on my radar, but I just haven’t prioritized the time yet to complete all of the due diligence, fill out the necessary forms, and transfer the money to initiate them. Here’s hoping that recent events and this post light an accountability fire under me (and others) to get some money invested in these.

impact investing

According to their website, Community Vision Capital & Consulting, formerly Northern California Community Loan Fund (NCCLF), “provides socially responsible investors with the opportunity to invest in our revolving loan fund comprised of diverse nonprofit organizations, cooperatives, and mission-driven enterprises.” In a public letter dated June 3 the Community Vision team stated that they will “continue, and will deepen [their] work to prioritize racial equity in [their] organization, communities, and individual lives in and outside of the office.” The minimum investment is $1,000. Interest rates range from 0% to 3.75%, depending on the amount and length of investment, which ranges from one to ten years. Interest is typically paid annually.

sustainable investing

BlueHub Capital, formerly Boston Community Capital, makes loans to support community development initiatives with the goal of expanding opportunities for low-income communities the the majority of which are African-American and Latino. These initiatives include affordable housing, education, health, access to affordable and healthy food and commercial development. The BlueHub Loan Fund offer investors a private debt, fixed income note product with options for 1-10 year terms with rates ranging from 1 to 3% depending on the investment term. The minimum investment is $1,000 and interest is paid annually.

As a proud former resident of the District of Columbia (in which 600,000+ disenfranchised U.S. citizens still reside without a voice in our country’s government – thus the Taxation without Representation snub boldly emblazoned on the DC licence plates), I regret that I only discovered Wacif this year. The Washington Area Community Investment Fund’s (Wacif) mission is to promote equity and economic opportunity in underserved neighborhoods in the Washington, D.C. region.

Investments made with Wacif offer an average rate of return of 2% and help launch and grow locally-owned small businesses, create jobs and support community-minded organizations build affordable housing and expand child care access. In a city that until recently was informally referred to as Chocolate City when a majority of the population was African-American, I feel pretty safe assuming that investing with Wacif would qualify as a social justice investment. (Plus, I see that Wacif provided funding to The Community Forklift, one of my all-time favorite DC businesses and definitely one of the things I miss most from the area.)

Impact Housing REIT (Real Estate Investing Trust) is a crowdfunding platform to buy and transform neglected apartment buildings into thriving communities that are affordable. Their website states that they “take ‘blight properties’ and turn them into clean, safe, supportive, and engaging communities where residents and their families can thrive.” The minimum investment is $1,000.

Find or Start a Community Investment Fund

If the local investment fund you wish existed in your community hasn’t yet been created you could connect with like-minded people in your area to make it a reality. I’ll admit this may take some hard work and a good bit of time (I’m still having conversations here and there in my city trying to get something like this off the ground) , but there are resources out there to assist with this process. In particular, I’m thinking of Community Investment Funds
A How-To Guide for Building Local Wealth, Equity, and Justice
, which was released just last year. Two examples of community investment funds profiled in this publication include Boston Uima Project and Boston Impact Initiative Fund.

co operative investment fund

Boston Ujima Project in my opinion is one of the coolest community investment funds around. Morgan Simon of Candide Group profiled this democratic investment fund in Forbes magazine back in 2018. As discussed in this SOCAP podcast interview, this community controlled investment fund is “financing small businesses, and real estate and infrastructure projects in Boston’s working-class Black, Indigenous, and other communities of color.”

Another example of a community investment fund based in Massachusetts is the Boston Impact Initiative Fund, which focuses on economic justice for those who are oppressed or abandoned by the current economic system. Non-accredited investors are eligible to purchase Community Notes that offer a 3% annual return with a 3 year investment term.

If you are a resident of California I encourage you to check out the East Bay Permanent Real Estate Collective, which is a community investment fund, that buys and preserves real estate to keep tenants of color in their community and address problems associated with poverty concentration and neighborhood disinvestment. You can become and investor-owner for $1,000.

Community Land Trusts and other Innovative Real Estate Options

Creative and innovative real estate investing options also hold tremendous potential for social justice investing. One option to consider is Buy the Block, the first African-American-owned real estate crowdfunding portal. It’s mission is to empower black communities to invest in themselves. Investors can get started with a minimum investment of $100. In this interview with Locavesting, founder Lynn Smith said she “wanted to be able to offer an alternative financing source for developers and allow the community to be the financiers for these deals.”

socially responsible real estate investing

In my blog post about The Dissonance of (FI) Philanthropy I suggested the idea of purchasing a rental property in a marginalized community and providing high-quality low-cost housing to people in need. I also commented that it would be even better to develop a relationship with a local affordable housing non-profit to identify good potential tenants and connect them with wrap around services to help them improve other areas of their lives.

I’d like to now add the idea of offering owner-financing with a low-interest rate as a way to sell these investment properties to low-income buyers, helping them get a leg up on home ownership. I’ve already mentioned in the previous section how important home-ownership is to building wealth in the U.S.

Another lesser-known mechanism for increasing the supply of affordable housing that I think we’ll be hearing more and more about in the future is establishing land trusts. I first learned about land trusts from a friend that worked for The Nature Conservancy, a non-profit that has been using land trusts to pursue environmental conservation for a number of years.

As this article on Shareable indicates, a community land trust (CLT), uses similar legal tools as a standard land trust, but in a very different way to preserve affordable housing, deter gentrification, and build community wealth. A CLT purchases land on behalf of a community then holds it in trust in perpetuity., a project of The Democracy Collaborative, has compiled some helpful information and resources for anyone interested in pursuing a CLT. An individual or group of motivated real estate investors could use these resources to purchase properties and put them into CLTs to ensure future availability of affordable housing.

Tax Advantaged Social Justice Investing Through Self-Directed Retirement Accounts

Most retirement funds do not allow customers to hold the assets and investments I’ve highlighted here in their accounts. Many banks and brokerages consider them alternative investments and restrict clients to a limited menu of assets – primarily, stocks, bonds, and mutual funds. For those interested in finding a tax-advantaged way to make these investments let me introduce you to self-directed retirement accounts.

Participants of self-directed IRAs (SDIRA) and Solo 401ks are required to adhere to the same eligibility requirements and contribution limits as traditional IRAs. The major difference is that these accounts offer a much higher level of freedom and flexibility. Self-directed accounts allow account holders to invest in a much wider array of assets; essentially everything except S corporation stock, collectibles (such as stamps, art, or wine), and in the case of SDIRAs – life insurance. If you are curious and want to learn more about self-directed retirement accounts check out this post and this one from my two-part series on them.

I opened my SDIRA with Advanta back in 2016 and have been very happy with them. They are an affordable full-service IRA administrator company with excellent customer service. I appreciate the fact that I have one account manager that I deal with when I need help and have always gotten very timely and helpful responses to my question

I learned about Rocket Dollar after I had already opened my Advanta account. Rocket Dollar is moving the self-directed retirement account experience completely online, lowering the costs associated with these accounts in the process, and making them more easily accessible and attractive to retail investors like myself. Their more affordable Core option is pretty streamlined and doesn’t offer the concierge services of their more expensive Gold option, but it’s basic offerings are enough to get you started with self-directed investing.

And one more self-directed retirement accounts custodian company I have recently learned about is IRA Resources. They come highly recommended by a sustainably-minded investment firm for their affordable fees and experience with private placement investments.

If you are interested in joining a subscription-based online community of people “learning to self-direct their retirement savings into investments that repair injustices, sequester carbon, nurture local enterprises, and create a world that will sustain us into retirement and for generations to come” then consider joining The Next Egg initiative. I’ve learned so much from my participation in their monthly webinars and appreciate the online forum for sharing ideas and resources with like-minded individuals. The monthly fee is currently $9.99, although it may be possible to waive the fee in certain situations.

My Social (and Environmental) Justice Investing Journey Continues

It can be very time-consuming to do the research to learn what meaningful investments are available to non-accredited investors. And then you still have to conduct due diligence, fill out all of the application forms, and get the funds transferred. Then there is all the record-keeping you need to do yourself. It’s harder to track these alternative investments in an Excel spreadsheet the way you can traditional investments in stocks, bonds, and real estate. I’ve been working on investing my money in ways that align more with my values for almost four years now and I’m still only about halfway to where I want to be.

I recognize that I am operating from a tremendous place of privilege simply because I am not struggling to survive on a daily basis. Having the money to invest, the time and space to consider the bigger picture, and the capacity to conduct all of the research and fill out that paperwork to make these alternative investments puts me in a place of even greater privilege. Some may argue that there is even privilege (although I want to be clear I am by no means wealthy) in my being willing to accept the lower rate of financial return that comes with some of these investments.

For me though, it’s all about the triple bottom line of valuing people, planet, and profit equally. We live in a complex, nuanced world where everything is interconnected. If we continue to take the easier route to short-term financial gains and low-hanging fruit we will continue to be reminded of this interconnectedness in horrific ways – more civil unrest, future pandemics, and environmental collapse. I hope more of us, who are able to pursue this type of investing, will do so.

This long and detailed compilation of information is NOT meant to make anyone feel bad about how they invest (or don’t invest) their money. It is meant to be inspirational, motivational, and informative. Take these resources and do what you can, when you can if you are so inclined (which of course I hope you will be).

What are your thoughts about social justice investing? Have you made any social justice investments? Know of any others that are open to non-accredited investors that I missed?

Update: Additional Resources Shared by Readers

  1. Kate Poole from Chordata Capital created this extremely visually pleasing zine that is bursting with valuable information and resources that can help us understand and navigate the solidarity economy. Chordata’s work targets wealthy investors, but this piece includes suggestions and details that will benefit retail investors as well.
  2. The financial advising team at Natural Investments hosted a webinar on Investing in Black Economic Liberation. You can watch the webinar here and look over the excellent list of social justice investing resources they compiled.
  3. Kristin Hull of Nia Impact Capital published an article on this topic as well. I really like her suggestion of including racial justice investing goals in your Investment Policy Statement, which is something I still need create to better guide my own investing.
  4. More good resources are presented in this piece from the team at Chordata Capital. I’m particularly, delighted to be introduced to Nwamaka Agbo and her restorative economics work.
  5. This post, written by a Next Egg member, offers suggestions for divesting from sin sectors and moving our money into our local economies.
  6. The NAACP is backing a financial product that addresses issues of racial inequality Learn more about the Impact Shares NAACP Minority Empowerment ETF(NACP) here.

featured image photo credit: @ClayBanks

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