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When the coronavirus began sweeping Alabama, infections surged in the state’s rural Black Belt, a region originally named for the color of its fertile soil that’s now known for its majority Black population. The Black Belt’s 16 counties, which stretch across the center of the state, include some of the poorest communities in the nation.

COVID-19 hits hard in these rural communities. “Every person that is stricken with the virus, you know them and you know them personally,” said Perry County Commissioner Albert Turner Jr. The county, which Turner calls the proud birthplace of the Voting Right Acts, has lost six of its 10,000 residents to the virus, and 493 to 540 more have been infected.

Yet when Turner looked to the state for help slowing the spread of COVID-19, he was stymied. Alabama had allotted local governments $250 million out of its $1.9 billion in federal Coronavirus Aid, Relief and Economic Security (CARES) Act funds for virus prevention measures — with a hitch. The cities and counties had to pay upfront and apply for reimbursement from the state.

“The expectation that these towns and counties will have access to monies to spend and then be able to wait for reimbursement means that they really cannot play the game,” said Felecia Lucky, president of the Black Belt Community Foundation, a philanthropic group that also offers organizational capacity building. “It also means that folks in these communities will be less protected than other communities, and that shouldn’t be the case because of your ZIP code.”

Corporations are getting involved in equity lens investing.

In response, the Black Belt Community Foundation teamed up with Hope Credit Union to set up a revolving loan fund providing Black Belt local governments access to the federal dollars by offering them recoverable grants to make the necessary purchases to protect their communities.

Seven corporate and other foundations are guaranteeing the loan fund with a $1.65 million loss reserve pool. It’s an example of how corporate foundations and corporations themselves are stepping beyond traditional grantmaking to address inequality in access to capital with impact investing tools such as loan guarantees or direct investments in community banks. But to be truly meaningful, such initiatives must align with a company’s business model.

“Corporations are getting involved in equity lens investing,” said Patrick Briaud, senior adviser with Rockefeller Philanthropy Advisors, which played a convening role in the Alabama initiative. “You’ll have corporates that move and others that want to participate for impact-oriented reasons but also to be competitive in this socially aware consumer era that we’re in.”

Inequitable access to capital

Structural racism in access to capital is “absolutely” an issue, and not just in Alabama, Briaud said. He cited, for example, the fact that 90 percent of investment decisions are made by white men. “So how do you diversify those who are participating in the decision-making and not just the beneficiaries or the customers of the grantmaking or investing that you’re doing?” Briaud queried.

Citibank’s recent report estimated that $13 trillion in business revenue was lost to the U.S. economy over the past 20 years because Black entrepreneurs did not have equal access bank loans. 

In Alabama, the state’s handling of the CARES funds for local governments was “one of the best and most recent [examples] of the role that structural racism plays in our region,” Lucky said. “… The Black Belt is accustomed to this model of operation.”

Turner and other Black Belt county commissioners appealed for a waiver to give a graduated level of reimbursement based off the poverty level of communities, Lucky said, but the state denied the request. “They had an opportunity to dismantle that system of structural racism, and also the system that’s based off of class and economics … so that everybody would have access to this money … but that did not work, and it makes me think it was done intentionally.”

How the Alabama program works

To help Black Belt communities access the CARES funds, Hope Credit Union extended a line of credit to the Black Belt Community Foundation, which the foundation uses to to make recoverable grants, in allotments of $50,000 or less, to the 97 local governments in the region. After the entities purchase their items, they submit receipts to the state for reimbursement, and then repay the foundation. As soon as the city or county repays a grant, it can apply for another one.

Grants are used for purchasing masks and gloves, automatic doors and plexiglass for government office, or for setting up e-government websites, although the program is also looking at using CARES money to help meet longer-term needs, such as updating aging HVAC infrastructure to increase air flow to minimize virus spread, said Kendra Keys, senior vice president of community and economic development at Hope Enterprise Corporation and Hope Credit Union.  

Perry County received more than $40,000 for plexiglass installation and body temperature gauges, which it’s installing at the courthouse, jail and highway department. It’s seeking an additional $15,000 to develop an e-government website.

“We’re retrofitting the public buildings thanks to the Black Belt Community Foundation that has allowed us to expend money that we normally would not have had to prevent the spread of coronavirus,” Turner said.

The loan guarantee provided by the seven foundations — including Alabama Power Foundation, Regions Foundation and Medical Properties Trust — makes the whole deal work, Keys said. “But for the loss reserve pool, Hope would not have been able to make the line of credit available,” she said. “…There is a little bit of risk in these type of lending programs, even though the Black Belt Community Foundation is working very hard to mitigate that risk.”  

Other equity lens investing by companies

Seven foundations coming together in Alabama to create a loss reserve pool is innovative in the impact investing space, Briaud said, although the strategy is gaining steam. Earlier this year, the Kresge Foundation created the largest loan guarantee pool, securing more than $30 million in guarantees to support five times that in finance for promoting equity in small business, affordable housing and climate investing.

Companies are also moving some of their cash from traditional financial institutions to community banks that serve Black-owned businesses. Costco and Netflix each invested $25 million in the Black Economic Development Fund, which is deploying money as loans to Black-owned institutions serving low and moderate-income communities and Black community development corporations in the U.S.

We see so much green washing and impact washing, trying to do something small on the side but not actually addressing the core, say, supply chain inequities in a company,

Netflix has committed to invest $100 million overall for economic development in Black communities.

PepsiCo pledged to invest more than $400 million over five years towards racial equality through a combination of increasing buying from Black-owned suppliers, investment in Black-owned businesses and restaurants and community impact grants — as well as increasing Black representation at the company.

Aligning impact investing with your mission

As companies make these commitments, it’s important to not fall into what Briaud calls “impact washing.” Even though a legal firewall must separate a company from its foundation, public perceptions don’t separate the two.

“One of the most important messages of impact investing today is knowing what you own. We see so much green washing and impact washing, trying to do something small on the side but not actually addressing the core, say, supply chain inequities in a company,” Briaud said. A company “may be doing small loans to disadvantaged business but their basic business model is extractive.”

Some Alabama advocates, however, claim that Alabama Power Foundation may be doing just that.

“I would never want them not to do something good for a community, but the amount they’re spending on local communities never adds up to what [the company] is taking. It’s a drop in the bucket,” said Stacie Propst, executive director of Emerge, a nonprofit that supports women running for office. Propst said that the power company’s high electric charges “help keep people poor in Alabama.”

Alabama’s electric rates are average among its peers, but actual bills are second in the nation because Alabama Power, whose parent company is Southern Energy, does “next to nothing in energy efficiency programs for customers” and electricity usage is high, Michael Hansen, executive director of the environmental nonprofit GASP, told GreenBiz. At the same time, Alabama Power has one of highest returns on equity in the nation.

In response, Brandon Glover, strategic initiatives manager at the Alabama Power Foundation, said electric bills are high in part because electric space heaters and heat pumps are commonly used in the winter. Glover pointed to the foundation’s Alabama Business Charitable Trust, which provides energy assistance for low-income families and nonprofits, and other actions the company has taken as “a force in economic development for more than a century.”

To what extent Alabama Power Foundation may be serving as a force for good or impact washing, is beyond the scope of this article, but critics’ claims point to the importance of aligning company business models with impact investing programs.

Back in Perry County, Turner says the COVID-19 program has been a “lifesaver.” “I just want to encourage other counties … that this is the best thing that could have happened. The Black Belt Community Foundation was able to find a partner to be able to help save some lives in the Black Belt of Alabama. Otherwise we would be at the peril of the virus.”

As for Lucky, she said, “When the last of the money is spent, we would love for the headline to say that the 16 Black Belt counties that we’re serving accessed every bit of the $18.8 million that was on the table from the CARES Act.”