Debra Schwartz, Managing Director of Impact Investments, discusses the need to elevate leadership committed to justice as we invest in climate solutions.
“This decade is the critical, decisive decade for the future of humanity and the planet.” Speaking these words in 2020, the diplomat and climate leader Christiana Figueres sounded the alarm about the need for strong action to avoid the worst impacts of the climate crisis. Since then, many others have echoed her “decisive decade” message, usually emphasizing what we should do. But how the world takes action on climate change, including the vital role that impact investors have to play, will prove decisive too, creating pathways and constraints that shape our lives and opportunity for generations to come.
Today in the U.S., massive new government programs are rolling out with laudable urgency and good intent. But our ambition for this decisive decade cannot be limited to the bold ambition of a clean energy transition alone. Leaders across the public, private, nonprofit, and philanthropic sectors also must strive to build a more equitable and inclusive future for all, even as we fight the existential threat of climate change.
To meet this critical moment, widespread changes and decisions must happen with exceptional speed. In the U.S. over the past three years, the federal government has authorized more than $3 trillion for infrastructure, technology, training, and other critical investments. This new investment promises transformational impact across our economy, including real estate, transit, utilities, jobs, and more. Ideally, historically marginalized people, people experiencing poverty, and underserved communities should benefit greatly from a “just transition.” Unfortunately, history tells us that we cannot assume this will happen.
Cautionary History
The U.S. government’s redlining policy began in the early 1930s in response to the Great Depression, perpetuating and expanding racist lending practices in the private sector. Both the Home Owners Loan Corp. and the Federal Housing Administration systematically blocked access to mortgages for communities with residents who were mostly Black or people of color. Despite positive outcomes generated by these agencies for many White homeowners, redlining caused tremendous harm and disparities that have persisted for over 80 years. The author, journalist, and MacArthur Fellow Ta-Nehisi Coates cites redlining and its legacy as a key element in his case for reparations. As I discussed in a recent article, many of the earliest U.S. Community Development Financial Institutions (CDFIs) arose in response to redlining, helping affected communities reverse their long history of disinvestment.
Sadly, many other federal policies and programs over the years also caused or worsened segregation and disadvantage for people of color and low-income communities, but construction of the interstate highway system may be the most important, cautionary example to consider today. The federal government’s investment in the highway system, which began in 1956, contributed in many ways to the strength and growth of the U.S. economy. But choices made by public officials responsible for building new roads also caused egregious harm.
The new highways cleaved thriving Black and low-income communities, decimated commercial and residential areas, and, in many cases, made access to jobs much more difficult. This monumental infrastructure investment also cemented our nation’s dependence on cars at the expense of mass transit—a policy choice with widespread and longstanding ramifications, from land use and climate to racial equity and inclusion.
Impact Investors Have a Role to Play
While these chapters of U.S. history may seem distant, their lessons are clear: how we implement infrastructure investment and policies matters. If new programs, even well-intended ones, are carried out in an unjust or poorly conceived manner, their harm will endure. As this decisive decade continues, through public and private sector action, we will decide whether our society will be more just, equitable, and inclusive.
Realizing the unprecedented potential of new government investments will take intention and leadership from every sector. It also will take impact investors engaging with urgency around the implementation of these new government programs, investing in targeted and specific ways to realize these programs’ promise.
This could mean providing working capital loans and other support to smaller contractors and developers led by entrepreneurs of color, enabling them to compete for major government contracts. It could mean collaborating regionally and nationally to ensure that new government programs harness the capacity and experience of longstanding, locally grounded community development organizations. And it means elevating the leadership and voices of historically marginalized communities with the most to gain or lose from the energy transition ahead.
Leadership Is Key
We need leadership of all kinds to advance an unwavering commitment to equity and inclusion as we fight climate change. The entire field of impact investing must recognize and respond to the critical importance of this moment. That is why MacArthur plans to deepen our commitment to equity and inclusion across all aspects of our impact investing work, including support for the revolution in energy and climate solutions now underway.
Looking ahead, as we begin the 40th year of our impact investing practice, we will continue seeking out and supporting the next generation of mission-driven leaders, institutions, and innovations. Above all, we will prioritize leaders who are from and share power with communities that will be most affected during this decisive decade and beyond.
These are the leaders we need now and for the future. These are the leaders who will hold other public and private sector leaders accountable to the values of equity, inclusion, and sustainability. These are the leaders who will help build a more just, verdant, and peaceful world.
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