Innovative impact fund aims to address Boston's racial wealth gap

Signal of change / Innovative impact fund aims to address Boston's racial wealth gap

By Areeba Hasan / 30 Jul 2019

Deborah Frieze, co-founder of the Boston Impact Initiative is using a unique model, to help address economic inequality through equitable access to capital and opportunity.

The Boston Impact Initiative Fund aims to “create the opportunity for people to own and control their future”: three kinds of groups (social entrepreneurs, street and similar businesses, and ‘established and growing’ companies) receive funds, returns and interest rates depending upon their ability to endure risks, hence flipping the  traditional concept of risk and return. In addition to this, the fund welcomes both ‘accredited’ (wealthy) investors and ‘non-accredited’ (ordinary) investors, but treats them differently based on their ability to handle losses and need for income.

The Boston Impact Initiative is also involved in equity investments, restricted to prevent unfair value extraction from entrepreneurs or employees by the investor. The fund has so far raised $10 million, out of which $2 million will be held in loan loss reserves and the rest will be deployed.

 

So what?

In an attempt to strengthen Boston's lagging economy, Frieze is reforming who gets capital and how it is structured, and so addressing Boston's biggest economic shortcoming: the racial wealth gap.

The Boston Impact Initiative has become an important player in the field of impact investing by placing focus on economic justice, the growing wealth gap as well as current ecological challenges. Their mission is to “invest in opportunity for all people—especially those most oppressed or abandoned by our current economic system—to lead a dignified and productive life”. 

The wealth gap in Boston is the seventh worst in the country with The household median net worth for a white household at $247,500 and a shocking $8 for African-American households. In this dismal situation, Frieze’s initiative speaks volumes about the effort needed to tackle the prevalent economic injustice and will hopefully inspire similar models in other communities.

 

Sources

https://www.forbes.com/sites/devinthorpe/2019/07/05/using-biomimicry-this-activist-is-turning-impact-investing-upside-down-to-erase-racial-wealth-gaps/#32d9092b42d4

What might the implications of this be? What related signals of change have you seen?

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