A year ago Corporate America issued statements and collectively pledged billions of dollars to help erase racial inequities.
Turns out, that was the easy part.
How companies have deployed the money is proving to be as crucial as how much they’ve promised, or even how much they’ve given out so far.
Take, for example, Bank of America, which pledged $1.25 billion over five years toward promoting racial justice and creating economic opportunities for all. The centerpiece of its efforts — and where the bulk of the first year’s disbursements have gone — is a novel program to fund minority-owned venture capital firms that back under-represented entrepreneurs.
It was an idea borne out of the notion the bank had to think differently if it wanted to close the racial wealth gap. The Charlotte, N.C.-based bank, the largest in Massachusetts by market share, typically would have just increased the amount of lending to small businesses owned by people of color.
But after convening a diverse group of its executives, among them market presidents and investment bankers, the feedback was clear: Entrepreneurs of color need capital early on, but that is when banks are the least likely to give them loans because they’re deemed too risky.
These are the entrepreneurs that have been left behind by the financial system — the ones who don’t get the attention of most venture firms. These owners are starving for the capital needed to grow a small business into a big enterprise, whether it is a trucking company looking to double its fleet or a restaurateur who wants to open more locations.
Bank of America chief executive Brian Moynihan pays a compliment to this group, affectionately describing the entrepreneur as the “kind of person the family won’t invite to Thanksgiving anymore because they’re tired of being asked for money.”
The bank is placing a big bet on this category, committing about $256 million across 90 VC funds run by people of color and hoping other financial institutions will follow suit. In investing in these funds, the bank is also helping a diverse group of private equity managers succeed.
“What has been exciting is that we developed this off of our strength of who we are as a company,” said Moynihan. “It’s our local-ness and our global-ness and capability to bring it to size.”
Still, it will take more than money to dismantle systemic racism.
Beyond starting new programs, companies also looked inward to see how they could make their organizations more inclusive following the racial reckoning sparked by George Floyd’s murder. Adidas, owner of Boston-based Reebok, set a goal that at least 30 percent of its new hires in the United States would be Black and Latinx people and that at least 20 percent of corporate roles would be filled by Black and Latinx employees by 2025. The company reports that it is exceeding these goals.
Meanwhile, several Boston-area institutions have hired Black chief executives and presidents over the past year: Dr. Kevin Churchwell oversees Boston Children’s Hospital, making him the first Black leader of a major teaching hospital in the city. Cain Hayes will take the reins of the new insurer that comes out of the merger of Tufts Health Plan and Harvard Pilgrim Health Care. Lee Pelton, who has been the president of Emerson College, will run the Boston Foundation starting in June.
In higher education, Vincent Rougeau, dean of Boston College Law School, will soon become the first Black president of Holy Cross, as Brent Chritebecomes the first Black president of Bentley University. They join Aisha Francis who broke barriers when she became the CEO of the Benjamin Franklin Institute of Technology, along with Gilda Barabino who serves as the president of Olin College of Engineering.
A number of local companies decided to hire chief diversity officers for the first time including Alexion Pharmaceuticals, Bain Capital, Loomis Sayles, and PTC. Businesses also added Black directors at a brisk pace, accounting for about 10 percent of new board members appointed to Russell 3000 companies in 2020, according to an analysis by BoardProspects, an online platform that specializes in corporate director and advisory board searches. Massachusetts companies that did not have a Black director but added one since last summer include: Brightcove, HubSpot, State Street, Wayfair, and TJX Cos., parent of T.J. Maxx and Marshalls.
Despite this sense of urgency, Corporate America has more work to do. Significantly increasing the number of contracts with minority vendors, for example, has been elusive for many companies and the City of Boston.
“The commitment is there, and it’s more than statements, tweets, and even financial contributions,” said Jim Rooney, chief executive of the Greater Boston Chamber of Commerce. “We are into the hard work phase.”
Segun Idowu, chief executive of the Black Economic Council of Massachusetts, said companies have been slow to turn pledges into dollars, but he sees that as a good thing ― it means companies are being thoughtful, taking the time to find the right partners and projects.
“What is being understood by some is that the check will not absolve you,” Idowu said. “There is not a dollar figure that will erase that history.”
Bain Capital and Comcast were among a parade of companies that made big pledges last year to advance social justice and bridge the racial gap, with each committing at least $100 million to be distributed over multiple years.
Comcast has spent $40 million in the first year with a focus on two new programs — one for struggling small-business owners, the other to improve Wi-Fi in underserved communities. Comcast RISE has so far helped more than 2,500 businesses owned by people of color, including 32 in Massachusetts, with tech upgrades or marketing makeovers with free advertising. The cable giant is also rolling out the RISE Investment fund, giving out $10,000 grants to businesses.
Comcast’s Lift Zones is an initiative to set up free Wi-Fi-connected hot spots in community centers. The company has set up 22 in Boston alone, and dozens more locations will be added by years’s end throughout the region.
And on Monday, Comcast announced it has invested an additional $25 million into the Clear Vision Impact Fund, which will issue loans to people of color who own small-to-midsize businesses.
Like other companies, Bain Capital has supported equity efforts over the years through philanthropic funding, but the nation’s racial reckoning prompted the Boston investment firm to do more. In the year since Floyd’s murder, the firm has doled out $15 million to a variety of nonprofits, including ones that help Black- and Latinx-owned businesses grow, diversify corporate boards, and advance Black executives throughout Corporate America.
Beyond money, Bain has formed strategic partnerships with some of these nonprofits, including the Foundation for Business Equity and the GreenLight Fund, so they can tap into the expertise and network of the company’s executives.
In its first year of its equity initiative, Bank of America dispensed more than $350 million across the country to address racial inequities in health care, education, job training, housing, small business, and entrepreneurship. In Massachusetts, the company most notably has given $1 million to King Boston, an effort to create a Boston Common memorial and related programming to honor Martin Luther King Jr., and $500,000 to the Massachusetts League of Community Health Centers to ramp up COVID-19 vaccine distribution in communities of color. It has provided nearly $200 million in financing for affordable housing in Greater Boston, resulting in 400 units.
As for investments in minority-owned funds, Bank of America announced last week that it will add another $150 million to the program because demand was so high.
Among those receiving an equity investment is Visible Hands, a year-old Boston venture capital fund started by three founders of color: Daniel Acheampong, Yasmin Cruz Ferrine, and Justin Kang. Bank of America became an anchor investor in Visible Hands’s first fund, which expects to hit its target of $10 million by year’s end.
Typically, a young VC initially relies on raising money from individual investors. Only later, when a track record has been established, do institutional investors like a Bank of America get on board.
Cruz Ferrine said having Bank of America come in this early has made it easier to raise money.
“Given how new we are in the market, they create a tailwind,” said Cruz Ferrine. “It signals to other investors that investing in diverse founders at the earliest stage is a market opportunity.“