After nine months of viral contagion and economic wreckage, inequality is ballooning while economic mobility is in free fall. The prosperous are financially unaffected amid the most unequal “recovery” in US history. Both illness and fiscal damage are concentrated among the lower half of the income distribution, as well as among women, mothers ages 20 to 34, and people of color—especially African Americans and Latinx communities.
Some suggest that modest economic policy changes may be sufficient to yield a more inclusive prosperity. Others insist that radical prescriptions are required. The results of the November election point to prescriptions aimed squarely at inclusive prosperity.
What if financial markets—the ultimate capitalist tool—incentivized the social impacts the nation needs while delivering risk-adjusted returns? Investments and loans fuel companies to expand markets, create products, develop technologies, and add workers. Social impact investors also factor in social outcomes such as better job quality, diversity and equity, and support for families and communities. In this crisis, many impact investors are focusing their attention on expanding opportunities for those too long left outside the economic mainstream and on businesses’ treatment of workers, including worker protections in a time of layoffs and permanent job cuts.
Aspen Institute initiatives use an array of tools to tackle these worker and social impact issues. The Aspen Partnership for an Inclusive Economy, launched with the support of the MasterCard Center for Inclusive Growth, links programs across the Institute to develop new proposals, integrate strategies, and gather leaders to drive solutions and impact.
The pandemic presents an existential threat to small businesses. More than 100,000 have permanently closed—cutting jobs, thwarting the dreams of dedicated entrepreneurs, and depriving communities of key services. The Business Ownership Initiative within the Institute’s Economic Opportunities Program joined this fall with the Microfinance Impact Collaborative to create the Entrepreneur Backed Assets Fund. The EBA Fund buttresses the capacity of community-based financial institutions to lend to small businesses in low-income communities and those owned by people of color. The fund assists community-based lenders by buying existing loans and offering capital for new lending. Already, $2 million in loans have been bought—79 percent were issued to entrepreneurs of color, 36 percent to women entrepreneurs, and 85 percent to businesses in low-income communities. The fund’s goal is to buy $50 million in loans from the six Microfinance Impact Collaborative members and then to expand purchases to include other community-based lenders.
The Aspen Finance Leaders Fellowship inspires a network of fellows to work toward increasing trust in the global finance industry. In 2019, the fellowship welcomed a visionary leader, Rodrigo Garcia, who as deputy treasurer and chief investment officer for the Illinois State Treasurer directs a combined $35 billion investment portfolio, $300 billion in related banking operations and financial services, and a $3.2 billion agency budget and financial services unit. For the fellowship, his team is tackling mounting student debt with an innovative approach. In this decimated job climate, more people may benefit from education—yet the resulting debt could thwart their prospects for decades. Garcia’s approach makes college more affordable for future students and the millions already holding debt. This three-pronged strategy will leverage the state treasury’s financial and administrative resources to create new low-cost, consumer friendly financial pathways for under-served Illinois students to complete their studies or refinance their student loans after graduation. If successful, the program could drive down student loan costs. The Illinois State Treasury lends at lower rates while offering acceptable returns, which can trigger other financial institutions to lower their rates, too.
The Good Companies/Good Jobs Initiative, also within the Economic Opportunities Program, facilitates measurement, benchmarking, and reporting of businesses’ social impacts with a focus on frontline workers. With Working Metrics, its forprofit partner, the initiative is commercializing a cloud-based software system to benchmark job quality as well as diversity and inclusion. The service operates as an intermediary between investors or supply chains and smaller to middle-market companies to convey insights on job quality for frontline workers. Data and analytics on worker retention, pay increases, number of jobs, benefits, and diversity and inclusion rigorously gauge each firm’s impacts on its workforce. The results are also material to assessing the firm’s prospects for sustained business performance. The demands to address systemic racial and gender inequality are finally heightening attention to workplace diversity, equity, and inclusion. The initiative’s software shows firms their diversity in these categories as benchmarked to businesses in the same sector at the local, state, and national levels. Job-quality variance by gender, race, and ethnicity are also highlighted. And work is underway to generate new DEI analytics, infographics, and firm-level ratings.
Economic- and labor-market conditions suggest the country is mired in a K-shaped recovery—income and wealth continue to be concentrated in the top 5 percent while tens of millions confront the dire consequences of too little food, evictions from homes and apartments, and too much month with too little money. The debate over public fiscal and monetary response is key. More attention, however, must go to the underlying incentives for businesses and financial systems to address social impacts along with returns on investment. Shaping the influence of money in business to attend to social impacts is good for business and essential to achieve a more just, fair, and equitable society.