• Democratizing Finance

Tilsen was one of the prime forces behind Thunder Valley Community Development Corporation, which launched a dozen initiatives in the poorest place in America, Pine Ridge Reservation, in ten years. “People don’t think impacted people can do this work,” he said. But they are wrong. To democratize finance, “fundamental power and capital has to be let go. Unless we have people-of-color-led institutions, our communities are going to get left behind,” says Tilsen. Native America, he says, doesn’t need saving. “We need partnerships,” which build at the speed of trust, he says. So, we have to get moving to building relationships and partnerships. The conversation needs to shift from starting by looking only at risks to thinking about how to make change happen, because the need for change is urgent.

Another way ordinary people can make a difference is through their 401(k)s, said Rob Thomas, President, Social(k). Most 401ks currently have no environmental, social or governance (ESG) screens, and most 401k money is flowing into index funds. (Total assets under 401(k) are estimated at $5.6 trillion[1].) “We have to broaden where money goes, and make sure money flows not just to Fortune 500 companies.” Instead of investing in Fortune 500 companies, what if you could invest in your community with your retirement funds (through CDFIs, community investment notes, and direct public offerings)?

Megan Thompson, Mission Investments Officer, Mission Investments at Ford Foundation, believes that philanthropy can bring grant and investment capital to underserved communities. One challenge, she says, has been the lack of cognitive diversity in the investment thesis. Asset managers coming from the same lived experiences and the same schools make investment decisions from similar perspectives, which lead to overlooked opportunities.  And, she says, the rise of ESG shows what is possible. When the term ‘ESG’ was coined in 2005, there was a lot of pushback.

Managers asked whether they could fulfill their fiduciary duty if they considered anything besides shareholders. But now they have changed their tune. “Last year 85% of Fortune 500 companies released some kind of ESG report, up from just 20% in 2011,” Thompson said.

As moderator, Don Chen, President of Surdna Foundation, asked plenarists what barriers stand in the way of truly ‘democratizing finance.’ Thompson replied, “The challenge is so large, and that can be daunting. There is a perception that women and minority managers might not be as good as the typical prototype.”

“What are the risks,” Chen asked, “if we don’t succeed in democratizing finance?”

“I do not sit with failure,” said Lampkin. In fact, “We sit in an optimistic place. We have to try . . . Do not give into outdated, traditional models around economic development.”  Thompson agrees. “Inequality in our system did not happen by accident,” she says. “We can make decisions to counteract that.”

“It is easy to sit there and look at a project purely by the balance sheet and then talk about impact,” says Tilsen. But investors must look at how their investments will impact people’s lives. “We are willing to risk everything, because we believe in nothing but the capacity of our people to transform their own communities,” said Tilsen.

An audience member perfectly summed up the discussion by invoking the initial spirit of the discussion:

“We have inverted the relationship between that which is sacred and that which is instrumental. Capital is a tool, markets are a tool. What is sacred is human life and labor, the earth, water, air. You ought to use a tool to enhance what is sacred.”

They went on, “Unfortunately, somehow we are willing to use up people, human life and labor to enhance capital. Many investors hold capital and capital expansion as sacred. Let’s put capital back in hands of people stewarding the earth and communities.”