Legal and business insights for impact-driven changemakers
May 11, 2020 - Funding - Financing, Resources

Restorative Investing: How the Impact Investing Model Could Be Used to Support Vulnerable Communities in the Time of COVID-19

For the second time in a little over a decade, the United States is facing an economic crisis on a near-unprecedented scale, while simultaneously battling the worst pandemic in over a century. To date, over 80,000 people have died in the United States from COVID-19, and more than 33 million Americans have filed for unemployment benefits since the beginning of the shutdowns across the country. The impact of COVID-19 on the human and economic well-being of Americans and people across the world will undoubtedly leave few, if any, unburdened in its wake.

However, the data is revealing that low-income communities and communities of color are disproportionately impacted by infections and fatalities[1] and also stand to suffer the most from the economic fallout.[2] As recovery efforts progress, it is not only critical that the needs of these communities are brought to the forefront due to the disparate economic impact they are likely to face, but also that alternative forms of support and investment are considered in order to build a more equitable economy.

As with prior crises, Americans look to the government and philanthropy for aid to meet their basic needs of survival. However, funding under certain federal programs has already been depleted, and less than 20% of the CARES Act was apportioned for small businesses.[3] Additionally, a report by the Center for Responsible Lending estimates that “upwards of 90% of businesses owned by people of color have been, or will likely be, shut out of the Paycheck Protection Program.”[4] Nonprofits, while receiving an influx of donations, are stretched thin due to increasing demand for their services on already-limited budgets, and, if 2008 is any indicator, charitable-giving will likely decrease as we enter a recession.[5] While the government and philanthropy are the primary sources of relief, it is necessary to ask what role the private sector can and should play, both in the immediate crisis and in the long-term.

In August 2019, a group of nearly 200 chief executives from various companies, including several Fortune 500 companies, asked a similar question on the role of corporations. The group issued a statement arguing that the role of corporations should be redefined from solely maximizing shareholder value to also “invest[ing] in their employees, protect[ing] the environment and deal[ing] fairly and ethically with their suppliers.”[6] The New York Times noted that until “investors start measuring companies by their social impact instead of their quarterly returns, systemic change may prove elusive.”[7]

In response to this challenge, some groups focused on impact investing—investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return—are pioneering an innovative approach called restorative investing. Restorative investing, based in part on the principles of restorative economics, seeks to address systemic injustices that extract from and penalize communities of color, the poor, and the working class by making investments that “generate community wealth, produce governance structures that benefit the whole, and build community power.”[8]

An example of restorative investing in action is the Boston Impact Initiative (BII), a place‑based impact investment fund that is committed to investing in communities that have been impacted by racial, social, and economic inequality. The Ujima Fund is another Boston-based economic development and community-organizing collective that is co-designed, governed by, and grounded in working-class communities of color. BII, the Ujima Fund, and other restorative investing approaches are building on the following principles developed by the nonprofit, Transform Finance: (i) engaging communities in design, governance, and ownership, (ii) adding more value than you extract, and (iii) fairly balancing risk and return among investors, entrepreneurs, and communities.[9]

These principles highlight that, while investing capital in underserved communities is important, equity is also about power and that too often impact-investing initiatives fail to include the beneficiaries who may better understand the problem and potential solution.[10] As Rodney Foxworth, CEO of Common Future, emphasizes, restorative investing recognizes “the urgent moral, economic, and ecological imperative to share and redirect power and promote collective well-being and social equity,” and such urgency will only be heightened by the current crisis.[11]

Coming out of the 2008 recession, wealth inequality grew along racial and ethnic lines,[12] and, in 2016, wealth inequality between upper-income families and lower and middle-income families reached the highest levels recorded.[13] A similar outcome stemming from this financial crisis threatens a potentially untenable environment, which is why some companies and investors are looking to promote a new approach to impact investing. If ever there was a need to strengthen and support our local economies, specifically communities of color, now is the time in order to avoid the recovery disparities of the 2008 recession and to support a more equitable economy.





[5] Rob Reich, Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better (Princeton University Press, 2018), 72.


[7] Id.


[9] Morgan Simon, Real Impact: The New Economics of Social Change (Bold Type Books, 2017), 98.

[10] Anand Giridharadas, Winners Take All: The Elite Charade of Changing the World (Dell, 2018), 151–152.