Income inequality and wealth disparities are not new barriers to those working to accumulate wealth. After two years of the COVID-19 pandemic and its fallout, challenges such as the war in Ukraine and economic setbacks caused by inflation and congressional gridlock, amid debates about student loan debt and the child tax credit, have exacerbated decades of inequality.

Moreover, increasing wealth inequality and poor prospects for upward mobility have created a distinct class divide that is at odds with the idea of what the American Dream is supposed to be, according to the Brookings Institution. The chasm further widens when discussing the Black-white wealth gap, where historically, the Black community has faced racially based institutional barriers and obstacles to acquiring wealth: hindrances such as limited access to banks, financial institutions, and credit; few opportunities to purchase land; violence that destroyed property; widespread discrimination; and economic systems that favored their white counterparts all exacerbated the racial wealth gap.

In 1870, several years after Emancipation, the wealth gap between Black and white Americans was 23 to 1, the equivalent of about $4 of wealth for Black Americans for every $100 for white Americans, as reported by the Federal Reserve Bank of Minneapolis. More than 150 years later, during the first quarter of 2022, the average Black family acquired 24 cents for every dollar earned by a white family, according to the Federal Reserve Bank of St. Louis.

During 2022, nonprofits increasingly worked to dismantle some longstanding racially based obstacles to mitigate the economic impact of systemic racism through the continuation of the Black Lives Matter movement and increases in corporate giving to bolster racial equity efforts. For instance, the International Economic Development Council, funded by the Kresge and Rockefeller foundations, developed the Playbook for Equitable Economic Development: Guidance on identifying structural racism and implementing equitable practices to assist economic development organizations (EDOs) and economic developers in addressing disparities by assessing economic development practices through a racial equity lens to compile best practices from the field for integrating racial equity.

Early in 2022, JPMorgan Chase announced a five-year, $75 million investment to close the racial wealth gap through philanthropic capital and flexible, low-cost loans in the greater Washington, D.C., area. Goldman Sachs also announced plans to invest, partner, and provide grants to help advance Black women and girls across the United States with a 10-year, $10 billion commitment, including $100 million in philanthropic capital, to their One Million Black Women initiative. Assisting those in the Black community in acquiring capital to spur entrepreneurship has become a focal point for organizations working to mitigate wealth loss.

In August, PND reported that Echoing Green was reflecting on nearly a decade of investment in Black leaders and communities through the Black Male Achievement (BMA) Fellowship program. It explored the philanthropic dynamics affecting Black leaders and reflected on lessons learned for the social entrepreneurship field concerning funding and supporting Black innovation and community impact amid calls for expanded long-term financing.

“Inequity in investment in Black-led businesses is ubiquitous, and the social entrepreneurship sector is no exception. Our research found that the revenues of Black-led organizations are 24 percent smaller than those of their white-led counterparts and that the unrestricted net assets of Black-led organizations are 76 percent smaller than their white-led counterparts,” Tiffany Thompson, senior director of global partnerships and equity at Echoing Green, told PND. “Social entrepreneurs are also particularly vulnerable to the ‘Death Valley’ curve—a period in startup growth where the core work has begun, but initial capital is depleted. A greater focus on follow-on funding is crucial for organizations that address racial and ethnic inequities, especially those with proximate leaders of color. Building Black wealth will require patient, risk-tolerant financial support to create a world where everyone benefits from the promises that innovation and entrepreneurship offer.”

As Thompson stated, capital gains are core to social entrepreneurship's success. The differential in capital gains between Black and white Americans is noted as the primary factor fueling the wealth gap, economists Ellora Derenoncourt and colleagues Chi Hyun Kim, Moritz Kuhn, and Moritz Schularick discuss in their paper, Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020.

As mentioned, Black-owned banks play an integral part in Black wealth accumulation as they can help reduce biases created by the mainstream banking system, which may reject Black applicants from receiving loans or mortgages. According to an opinion piece from the Urban Institute, “racial disparities pervade the credit indicators that drive lending outcomes,” and “the three Cs that determine mortgage access—credit, collateral, and capacity—reflect the results of a long history of racial discrimination in U.S. public and private institutions.” Therefore, investing in Black-owned banks and businesses further allows those in the Black community to fund their portion of the American dream.

In March, the Local Initiatives Support Corporation (LISC) announced it would invest $122 million in support of Black-owned banks and businesses across the country. In June, Truist Financial Corporation, together with Truist Foundation and Truist Charitable Fund committed $120 million in support of small businesses, focusing on Black-, Latinx-, and women-owned businesses. And in October, Ballmer Group announced a $400 million investment with four organizations focused on Black investment managers and Black-owned businesses, with the investments going exclusively to Black-led venture capital and private equity funds to include 30 percent of the underlying portfolio companies led by Black entrepreneurs and founders.

Derenoncourt, Kim, Kuhn, and Schularick also noted that the Black-White wealth gap would likely persist without government-aided redistribution. Beyond that, they stated redistribution should work in tandem with eliminating disparities in wealth accumulation. In September, HOPE Credit Union launched an effort to merge federal funding needs with wealth disparity mitigation by pledging $1 billion in financing to improve lives and close the racial and gender opportunity gaps in the Deep South. The commitment was catalyzed by a recent $92.6 million investment by the U.S. Department of Treasury’s Emergency Capital Investment Program (ECIP).

Targeted Black philanthropy also has its place in working to mitigate economic disparities. In 2022, the efforts of billionaire philanthropist MacKenzie Scott through her donations to HBCUs have centered and prioritized funding for BIPOC (Black, Indigenous, and people of color) causes in a way not readily seen in decades. According to PND’s exclusive report, Black Philanthropy: Overcoming the wealth gap to build on a legacy of giving, Black Americans can trace lapses in wealth accumulation back to a lack of generational wealth. While Black leaders expressed their appreciation of supportive billionaire philanthropists, they emphasized that listening to the Black community—which collectively donates 25 percent more of their income annually than their White counterparts—and connecting with Black people about the community’s needs are vital to making funding decisions. They believe this approach will garner greater success over time. As such, the Black Philanthropy Month organization has outlined 10 Global Black Funding Principles to assist funders in identifying areas of most need and priority for Black people and communities.

To assist in creating the full picture of Black wealth to better highlight those needs and priorities, Bloomberg Philanthropies’ Greenwood Initiative recently launched the Black Wealth Data Center (BWDC), which will house the Racial Wealth Equity Database and work to address the problem of insufficient and inaccessible data on Black wealth. Indeed, that lack of accessible, contextualized, and high-quality data disaggregated by race has made it difficult to assess what’s working to grow Black wealth and what isn’t.

“Right now, the need for investments in moving toward racial wealth equity is greater than ever,” said Garnesha Ezediaro, who leads the Bloomberg Philanthropies Greenwood Initiative. “We hope the many commitments made within the last few years translate to the scaling of innovative programs in communities across the country and to the powering of new ideas and solutions.″

Lauren Brathwaite is content editor at Philanthropy News Digest.

(Photo credit: Shutterstock.com/Andy Dean Photography)