OP-ED: Four ways to tackle social finance inequalities in racialized communities

From the time racism emerged as a social construct at the end of the 15th Century, it took more than 500 years to federally outlaw it in Canada and the U.S.

The extant issues stemming from this historical racism—poverty, social exclusion, and lack of access to education, modern technology, and other opportunities—cannot be ignored. 

In addition to racism being a terrible thing, according to Overcoming the Racial Bias in Philanthropic Funding, failure to combat racism is detrimental to the non-profit sector as a whole:

“Many people in the non-profit sector already know racial disparities matter. Indeed, philanthropy is increasingly acting on the belief that a less diverse sector in terms of people, organizations, and ideas jeopardizes the overall impact of the entire sector. … This growing awareness that equity and inclusion are needed, however, isn’t sufficient to close the existing racial gaps. For change to occur, awareness must lead to deliberate action.”

Policies like Affirmative Action and DEI hiring and training practices are meant to combat, reverse, and unteach intentional and unconscious racial bias, but fully reversing hundreds of years of unethical treatment and mindsets may take hundreds more years. 

Moreover, these policies primarily seek to address inequities in employment and education, but what about other inequities? 

Are non-profits the answer?

Race can impact equitable fund distribution

Maybe. But, ironically, non-profit organizations—many of which exist to combat these perpetual social inequities—are often led by BIPOC individuals who themselves have had difficulty accessing capital relative to their white counterparts due to the same historical racial inequities. 

Based on 50 interviews with non-profit executives of colour, philanthropic staff and others working to address discrimination in fund distribution, the Bridgespan Group identified four key barriers to accessing capital: Getting Connected, Building Rapport, Securing Support, and Sustaining Relationships. 

Essentially, these issues revolve around a lack of the “correct” relationships, mistrust, and friction rooted in cultural differences on what constitutes success and sound measurement and evaluation practices. 

Due to these barriers, BIPOC-led non-profits may struggle to access the necessary capital to grow and build capacity in their organizations. Therefore, they continue to appear as a riskier investment compared to larger, more well-resourced competitor organizations. 

Alas, the cycle continues. 

So, how do we escape this cycle to overcome the barriers to accessing capital? 

Educate leaders and take action through governance

First, continued education, training, and recognition of inequities, coupled with a shift in governance and investment practices, is required. 

Imagine Canada conducted a study highlighting the key role that funders play in changing the course of funding access for BIPOC-led organizations. To ignite the equitable funding process, they recommended that funders host discussions with their stakeholders to determine where DEI fits in with the organization’s strategy and conduct an equity audit to baseline their current DEI practices. 

Speaking of auditing, initiatives like the SELI coding system—a framework for ensuring that the Social Finance Fund (SFF) is adhering to its social equity and gender equality investment goals—require SFF wholesalers to put a minimum of 35 per cent of their investments towards Social Finance Intermediaries (SFIs) who are socially equitable. 

SELI should be utilized as a tool to overcome criticism from organizations like the Ontario Nonprofit Network, which accused the SFF of favoring for-profit organizations. Other funding bodies may also use it as a template for conducting a DEI audit. 

Level the playing field: open doors and increase risk tolerance

There’s an opportunity to overcome the first funding barrier that Bridgespan identified, Getting Connected, by breaking down the “exclusive club” doors of funders and their historic recipients. 

For example, skincare brand philosophy, Inc. and their grantmaking initiative the ‘hope & grace fund’ allowed interested grantees to reach out to them to express interest rather than solely inviting specific organizations to apply for funding. 

Additionally, funders could consider being more lenient in their application processes. 

Arabella Advisors, the consulting firm working with philosophy, inc. suggested providing smaller, less-resourced organizations several additional weeks to complete their funding applications, and having conversations with funding applicants who are perceived as a higher risk based on their financials alone. 

These deeper conversations can allow applicants to feel heard rather than disregarded solely based on numbers, while allowing funders to have more information beyond numbers to assess their willingness and ability to fund. 

Treat funders and recipients as partners

A longstanding barrier between funders and recipients is agreeing on what to measure in a project; funders are set on reporting output metrics like “number of people served” to flesh out their annual reports, while recipients feel it’s crucial to also report on outcome metrics that demonstrate systemic change. 

While this issue isn’t directly tied to DEI or race, it does relate to Bridgespan’s third barrier to funding, Securing Support, whereby funders and recipients clash over what constitutes an appropriate approach to tackling the impact work at hand. 

This could involve determining what interventions are needed or how to measure and evaluate progress, which could involve cultural relevance and understanding. This is an DEI issue. 

A wonderful example of funders and recipients overcoming this barrier and acting as partners is the Canadian government’s Strategic Partnerships Initiative, whereby government departments collaborate with each other and with Indigenous communities and partners to identify economic development opportunities.  

Leverage technology as a conduit

Once there is an acknowledgment that race disparities exist in fund distribution and that action must be taken, technology can be used as a conduit to help achieve equity. 

For example, funders and recipients can use affordable self-service software platforms like b.world to co-design impact projects, record disaggregated measurement data and share stories about their achievements, all in a centralized, secure location. 

Moreover, b.world, along with a handful of other software platforms and Common Approach’s free data utility extensions in Excel and Airtable, are aligned to Common Approach’s Common Impact Data Standard; aligning to this Standard is required for organizations to receive funding from the SFF.

Organizations need not do any extra work to align their work to the Standard beyond entering data into one of these tools and exporting a pre-configured JSON-LD file. This ease of access and use is designed to facilitate streamlined data sharing and build bridges among all actors in the SFF ecosystem: wholesalers, SFIs, and SPOs.

While technology surely isn’t the answer to fixing inequities in fund distribution or otherwise, it can help expedite achieving solutions to these problems by promoting collaboration and communication, the formation of agreed-upon approaches and understanding, and information sharing between funders, recipients, and other key ecosystem stakeholders.

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