At the end of January, I had the privilege of attending the Surdna Foundation’s Inclusive Economies convening. It is not unusual for me to attend an industry conference and leave without having any new tangible take-aways.
With this convening, I experienced the polar opposite: every conversation, every topic, every thought leader I met brought so much rich content, it flooded my mind with new ideas and my heart with new relationships.
Let me give you an example: while I’ve worked in the CDFI field for over a decade, the attendees here included film makers, policy leaders, data strategists, lawyers, activists, impact investors, and workforce advocates – all equally committed to creating an inclusive economy – the vast majority of whom I had never met. To say that this group was cross-functional would be under-representing what it was like to be there. Some of the language others were fluent in were new to me; the concept of operating with the quality of ‘ubuntu’ for example was something I had to look up (it is difficult to explain in English but often gets interpreted as ‘humanity’).
Connecting nature and economy:
More profound for me, however, was the direct link made between the world of finance and the world surrounding us in nature.
While I grew up going backpacking with my dad and even made a solo through hike on the John Muir Trail, I had never connected nature with finance. But there were several times during the convening where the inquiry went beyond using the commonly referenced term “ecosystem” and instead dove into concepts like what is the keystone species in our current system that we must evolve if we want to create a new, more inclusive economy?
It is no secret that our financial system is not working for all of our communities sufficiently, that is, after all, why ICA’s work is so critical, but I have not found a solid example of something to offer as an alternative. I have instead found myself driven to experiment and try new approaches hoping for different outcomes.
“It is no secret that our financial system is not working for all of our communities sufficiently"
So what does it mean to model community finance after mother nature and how does this impact our work at ICA? Well, interest rates and expected returns in impact investing are consistently tied to ‘market rate returns’ meaning, financial returns that mirror the established financial markets which typically range from low teens to mid twenty percent. But now I’m left wondering, is the financial market sustainable? Can it survive several hundred years if it’s getting upwards of 10% returns? After all, Sequoias live to be several hundred years old but only grow at ~4% a year.
The market is efficiently extracting value out of our communities and economies, but if we look to nature, what would be required to have the markets create and sustain value over the long haul? What kind of returns should we be targeting?
The biggest questions for me right now are:
- what are the factors that we are missing in our current financial calculations?
- Which factors, reflective of the long-term impacts, both intended and unintended, should be captured so that our financial markets can incentivize a truly sustainable economic ecosystem?
These questions stuck with me long after the Surdna convening. I have found some answers but many more questions remain open.
The common ESG lens which analyzes business impacts from the Environmental, Social and Corporate Governance perspectives, has much more research and established indicators around the ‘E’ and the ‘G’ then it does around the ‘S’ at the moment.
So what should go into the social metrics we track and value? ICA has led, alongside several others in the field, the prominent establishment of good jobs and what it means to create them, as well as to incentivize and invest in their creation as a metric / standard / aspirational goal, etc. We’ve also talked about economic freedom and wealth creation. These are all certainly important, easy to understand, and relate to when it comes to meaningful social metrics.
“Now it’s time to take this work further and figure out how we can capture the full ROI of investing in people through good jobs, yes, but also in terms of generating wealth for the businesses, the people and the community.
Now it’s time to take this work further and figure out how we can capture the full ROI of investing in people through good jobs, yes, but also in terms of generating wealth for the businesses, the people and the community. And by investing in people, we mean all people. Not just a subset that meets the criteria of a financial system currently used that was created by and for a certain demographic; namely white men.
At ICA we are working to create an economy that works for all and we are achieving this vision by accelerating great businesses through mentorship and investments to close the racial and gender wealth gaps. Every day we work with small business owners committed to this mission and every day with our partners and we are lifting up the bright spots in our economy. The companies we work with are already growing and through the work of our Accelerator or through our investments, they can flourish and scale.
Just as nature keeps a thriving, unique ecosystem for all of life we must also ensure that our financial system creates the opportunity for all people to thrive.
While we may not have all the answers, we feel confident that we are asking the right questions. And together with our esteemed partners in the field, and the inspiring entrepreneurs we work with, we are committed to finding them.
Allison Kelly is CEO of ICA Fund Good Jobs.