Non-Profit Quarterly delves into LISC’s Black Economic Development Fund and the ways it aims to “reinforce vital economic infrastructure in Black communities” as part of the organization's work to help close racial wealth and opportunity gaps. LISC's Annie Donovan and George Ashton explain the impetus for and structure of the Fund and the impact it is designed to have over the short and long term.
The excerpt below was originally published:
Economic Development Fund Seeks to Boost Black Economic Infrastructure
By Steve Dubb, Non-Profit Quarterly
In May, LISC (Local Initiatives Support Corporation) announced that its Black Economic Development Fund (BEDF) had met its $250 million fundraising goal. BEDF aims to convert corporations’ public racial equity fund commitment into investments that can help boost the capacity of Black-owned economic institutions. The fund is part of LISC’s Project 10X, which seeks to invest $1 billion over 10 years to reduce the racial wealth gap. To date, $400 million toward that goal has been raised.
At NPQ, we have covered LISC before, including an in-depth profile about a year ago. Prior to the pandemic, the nonprofit had begun to shift to focus on dismantling structural racism directly, rather than aiming to reduce racial inequality indirectly as it had done for much of its history.
As Annie Donovan, LISC’s chief operating officer, explained, community development had often taken a “race neutral” approach. But this can reinforce existing structural racism. For instance, Donovan, who used to direct the federal Community Development Financial Institutions (CDFI) Fund, notes that white-owned CDFIs win most New Markets Tax Credit awards because they have a “track record” that most CDFIs directed by people of color lack. To be race neutral, Donovan observed, “requires you to ignore our history completely.… We haven’t created a level playing field, and we need to own that.”
The uprising against anti-Black racism that followed the murder of George Floyd last May has pushed the field to do more, as George Ashton, managing director of strategic investments at LISC and manager of the BEDF, readily acknowledges. As Ashton explains, “On the heels of George Floyd, Breonna Taylor, a lot of folks were trying to figure out how we can solve some of the challenges that led to the violence we were seeing at the hands of police officers.”
LISC saw an opportunity to boost capital for Black businesses by tapping into new money that many corporations are now publicly committing to address structural racism. But there was a problem in how many corporations were doing that. One popular approach among Fortune 500 companies was to deposit money into Black-owned banks, but this only helps if the banks can convert those deposits into income-earning loans. Deposits themselves, notes Ashton, are “actually a liability.”
LISC’s strategy is different. The idea, Ashton explains, is to “help the banks and push money into black businesses and black anchor institutions like HBCUs [historically black colleges and universities].” A design challenge, however, notes Ashton, is that the time horizons of corporate America and community economic development do not align well. Corporations prefer not to lock down cash for more than two years, but community economic development projects often last 15–20 years.