Insights
Insights
At Momentus Capital, we believe that residents from all walks of life should have equitable access to the things that contribute to their health and wealth. This is especially vital for underestimated communities that often have a harder time accessing resources like good jobs, affordable housing, accessible health care, and more. When these things are present in communities, local and global economies become more prosperous and resilient.
Our CEO Ellis Carr recently spoke about building community resilience at the Yale School of Management (SOM)’s Economic Development Symposium. This annual student-run conference brings together senior thought leaders, practitioners, and investors from academia, government, NGOs, and the private sector to discuss the latest issues in economic development.
His speech tackled a few areas:
Read Ellis’ speech below to learn more about how organizations and other stakeholders can foster community resilience by helping community members leverage the individuals, associations, and institutions within them to generate economic opportunity, social cohesion, and safety nets.
I’m honored to be here and grateful to the Economic Development Club for the invitation.
Let me orient you a bit to who I am and why I am here by saying a few words about our work at Momentus capital.
Momentus is a family of mission-driven organizations – including Capital Impact Partners, CDC Small Business Finance, and Ventures Lending Technologies – that operate with a common purpose: to help build inclusive and equitable communities by providing people access to the capital and opportunities they deserve. With loans, investments, training programs and more, we support the entrepreneurs, builders, and community leaders that the for-profit financial sector leaves behind. By doing so, we help communities across the country build health, wealth, and agency to determine their own future.
More specifically, we provide three important types of capital:
These three types of support combine to form a continuum of capital that we can provide our partners. Our goal is that no matter where you are on your journey – from a start-up business to a major community developer – we can provide something to help you succeed.
Our organizations have been around for over 40 years, and yet we see ourselves as innovators. We formed the Momentus family over the past three years because we believe that communities need new types of support and advocacy.
The theme for our event today is resilient communities: What they are, how they form, and how we can support them.
Resilience has always been important in our communities, but it might be taking on special importance recently. It seems that our present moment has more than its share of threats and crises that communities need to weather and respond to. In the face of these challenges, being resilient has never been more important. And it may not surprise you that I believe that communities that are inclusive and equitable are also more resilient. This is no accident.
Inclusive communities are more likely to leverage the individuals, associations, and institutions within them to generate economic opportunity, social cohesion, and safety nets for the most vulnerable. And that shared prosperity and interconnectedness provides a strong foundation and deep resources in the face of crises and setbacks.
At Momentus, we recognize that the fortunes of a community are often set by a complex set of social factors: the social determinants of health.
These factors – like economic security, community ties, access to healthcare, education, healthy food, and housing – are the ingredients that can make or break the health and prosperity of a community. Communities with robust access to key social determinants will be healthy, thriving, and resilient; communities where these social determinants are weak or lacking often struggle.
In these communities, it is hard to build resilience on a faulty foundation. One of the most essential – and most elusive – social determinants is economic security.
In many communities, this is the first domino that has fallen, making it harder to gather and sustain other resources. But it is no accident that so many of our communities across the United States struggle with economic security and therefore resilience.
There are many fault lines of economic inequity that divide our communities and separate us from one another. Unfortunately, the most salient of them remains inequality along racial lines. And as we celebrate another Black History Month, the obstacles facing our Black communities are at the forefront of my mind.
There are many labels that people give to these communities that are on the short side of the racial wealth gap: marginalized, disinvested, vulnerable, disadvantaged.
I prefer a different framing. To me, these communities are and have been underestimated.
Underestimated communities across the country are full of vibrancy, intelligence, creativity, and courage. As they say, talent is evenly distributed, but opportunity is not. Inclusive development is the practice of not forgetting that. And to do this type of development well, we cannot forget the history that led to the present state of affairs.
So, I want to do a few things. I want to go back and remind us how we got here – through a mottled history of law and policy that, on the whole, have deliberately excluded and underestimated communities of color. I want to discuss where things stand today as we head into 2023. And I want to suggest a vision for the future, including a handful of things that we can do, together, to support the growth of healthy, inclusive, equitable, and resilient communities.
A clear-eyed view of the past is always a helpful tool for understanding the present. When we look at the economic growth and progress of our country over the past four centuries, we see a mixed record.
On the one hand, we see a long and tortured track record of exclusion, not inclusion; of measures that promote weakness in our communities, not resilience; of decisions that concentrate prosperity, rather than share it.
But we also see moments of progress, where choices were made that promoted the health, wealth, and agency of the many, not the few.
Of course, the roots of our racial wealth gap are rooted in over 200 years of legal enslavement and exploitation of African Americans. And though we rightly celebrate emancipation as a major step forward, we also need to understand the history of discriminatory actions – in law, policy, and personal practice – that have maintained and amplified inequality.
Shortly after the Civil War ended, the government’s promise of ‘40 acres and a mule’ to each emancipated family was reversed when Andrew Johnson’s administration returned the land to former slaveholders. This trapped many emancipated citizens in a cycle of economic dependence, relying on their former enslavers’ for land and income.
Into the 20th century, government law and policy continued to deliberately exclude people of color. Federal housing policy like the National Housing Act of 1934 guaranteed home loans to white families while refusing them to Black Americans. This legislation and policy encouraged banks to exclude Black neighborhoods from their mortgage lending, leading to the famous phenomenon of ‘red-lining.’ The maps that led to the practice of redlining in the private lending market. The maps that these banks used continue to shape the geography of opportunity in our cities today, nearly 100 years later.
Another major piece of legislation was designed to promote the prosperity of the white mainstream while deliberately excluding Black Americans. The Social Security Act of 1935 excluded types of employment, like farmworkers and domestic workers, that were majority-Black.
The Fair Labor Standards Act of 1938, established a minimum wage for many, but again neglected majority-Black industries. The G.I. Bill of 1944 launched a generation of veterans into higher education but mostly excluded Black veterans.
And though the 1960s and 1970s saw substantial progress in advancing civil rights for Black communities, we are all familiar with the modern-day policies that perpetuate and widen these gaps:
This list can be pretty discouraging. But luckily, there are bright spots in our history too, moments when the values we hold today – inclusivity, equity, diversity – were championed.
The heroes of the civil rights movement set the standard for grassroots progress, leading a campaign of conscience that led to the gains codified in the Civil Rights legislation of the 1960s and 1970s.
Decades later, the creation of Community Development Financial Institutions – or CDFIs – in the 1990s was a recognition that many underestimated communities – people of color, low-income communities, and others – were not being served by the traditional financial system.
Today, there are over 1000 CDFIs – including Capital Impact Partners – that provide vital financial services to individuals and businesses that mainstream finance leaves behind.
More recently, there has been a broad recognition that traditional shareholder capitalism has costs that our communities should not have to bear. This has led to the widespread shift toward socially responsible business – in word, if not always in deed – that emphasizes a more balanced approach to value creation.
And since 2020, we have seen two important developments in the movement toward a more inclusive and economic system: the first is the acknowledgement by many that structural racism exists and shapes our economic and social outcomes; the second is the new approach to economic stimulus that the federal government has embraced in the COVID era – one that prioritizes cash support for individuals and businesses over supply-side intervention.
While it is too early to see the full effects of these changes, I believe they are positive signs for the people and communities that make up our nation.
So then, as we stand here in 2023 and look backward, we see a historical record with both progress and retreat; wins for inclusivity and equity alongside discouraging defeats. And the result of that history is…our present moment. So where do things stand today?
Despite the bright spots and signs of progress, we are still in a tough spot as a country. The racial wealth gap is a frustratingly familiar fact. And as it is currently configured, our economy becomes even more inequitable as it grows.
These numbers, unfortunately, are no longer surprising to us:
Members of the Latino community and other people of color across our country face similar inequities. And though we talk often about wealth disparities, the situation is no better when we focus on community health.
Consider the following:
Of course, like our history, the present isn’t all bad news. Last year, the National Association for the Advancement of Colored People (NAACP) and the Brookings Institution unveiled their Black Progress Index. This interactive tool highlights cities and metro regions around the country where measures of health in Black communities are improving. By examining life expectancy data by place, the index gives us a picture into the factors that are contributing to longer life expectancy for Black Americans.
Access to data like this and the insights it provides are themselves a sign of progress. But none of us should be celebrating yet. The disparities in health and wealth that we see are burdens not only on the Black community, and not only on other communities of color, but on the entire country.
Limited wealth in Black communities means that whole generations of entrepreneurs never have the financial security to take risks on themselves and their ideas.
Limited health in communities of color means that leaders, parents, and residents will always deal with the daily distraction of sickness, pain, and depression.
The limits that these communities face limit us all. We will never reach our full potential as a nation, as a society, until every American – every American – has the health, wealth, and agency they need to realize their dreams.
That is the work that lies ahead.
So let’s go there next. What does that work entail? What does inclusive community development look like? And what role can we all play?
We’ve looked back at history to better understand the present.
Now, we are going to turn our attention to the practices and policies at work in our communities. Let’s talk about three levers that community development practitioners can use in their work.
Let’s start with the public sector. Although we discussed the effects of government policy earlier, public actors have tremendous potential to encourage the development of inclusive and resilient communities.
One way the federal government can do that is by increasing its support for CDFIs. CDFIs come in all shapes, sizes, and business models, from nonprofit loan funds like Capital Impact, to banks and credit unions. But despite this diversity, most CDFIs are united in their commitment to providing financial products and services that meet people where they are. And as we saw during the pandemic, as $3 billion of funding was enacted by Congress to support CDFIs who proved to be more effective than mainstream finance at getting dollars to the people and communities that were hurting the most.
Support for CDFIs is support for inclusive development, and there are two things that the federal government can do to increase the effectiveness of CDFIs:
The first is to protect and increase resources for the CDFI Fund. Like many parts of our country’s budget, Congress decides each year how much is appropriate for the CDFI Fund. The good news is: for FY 2023, Congress appropriated $324 million for the CDFI Fund, the highest number in history. The bad news: since Congress makes this decision annually, the organizations that depend on this vital funding are left in the dark, unable to plan for the future as they wait for the results of the budget process. One of the most impactful things that Congress could do to promote inclusive development is to increase annual funding for the CDFI Fund to $1 billion.
The second way that the federal government can support inclusive community development is to follow through on their commitment to modernize the Community Reinvestment Act in ways that help close the racial wealth gap. This law, first passed in 1977, requires banks and other financial institutions to invest in their local communities with a particular focus on low- and moderate-income communities. It was inspired by the civil rights movement and was intended to extend credit and financial access to communities of color. A revision to this act is long overdue, and we have to get it right. Current proposals from the regulators fail to acknowledge the importance of race and ethnicity in evaluating a bank’s activities.
Luckily, community development actors, including our policy team at Momentus Capital, continue to push for improvements to this revision which would make the law a much more effective tool at closing the racial wealth gap.
So supporting CDFIs and holding banks accountable are two ways that the public sector can strengthen its commitment to inclusive development.
What about the private sector?
To their credit, many companies have made large commitments to invest millions or billions of dollars into socially impactful projects on climate, inclusion, and racial equity. Unfortunately, many of these commitments still only exist on paper. Try as they might, private sector actors are learning that it is hard to source investments that are truly impactful at the size and scale they seek. What is needed is an intermediary that can help aggregate projects and assets from across the fragmented community development sector and package them in a format that the traditional capital markets can understand.
Today, a retail investor might want to support affordable housing development in her community. On the other end of the spectrum, a university with a $40 billion endowment might be looking for a similar investment at a larger scale.
As it currently stands, it is easier for these investors to support a public corporation like Exxon Mobil than it is to fund projects that enrich our communities. And so despite ample investor appetite for socially-beneficial investments, the friction involved in sourcing and making those investments keeps billions of dollars in ‘responsible’ capital on the sidelines.
Imagine if that were not the case.
Imagine if our investors, retail and institutional, could easily support the types of projects that build community wealth and resilience.
This is not an easy puzzle to solve. but I believe that creating an intermediary like this would be a dramatic systems-level change. And the private sector has the knowledge, resources, and ingenuity to solve it. With the right nonprofit and community partners, they could support an intermediary to sit between community development projects and the capital markets, helping to match money with investable, impactful opportunities.
If done well, this could enable billions of dollars to flow more efficiently into communities across the country, allowing them to grow and benefit from the accumulated wealth of the capital markets.
So we’ve discussed the public sector and the private sector. My final call to action is one that we can all do, no matter where we sit.
The most important thing we can do to support inclusive development and resilient communities is: listen. We need better ways of listening to the people we are supporting.
At the beginning of my speech today, I mentioned the Momentus Capital mission statement: we help build inclusive and equitable communities by providing people access to the capital and opportunities they deserve.
To me, the most important word in that phrase is the last one. deserve.
All too often, community development is conducted as if the practitioners are doing the residents a favor. This is a similar mindset to the traditional financial sector, where people have to demonstrate they are worthy – with a great pitch or excellent credit score – before they can access capital or other resources. If we are going to be truly committed to authentic inclusive development, we must flip this dynamic on its head.
The assumption that everyone deserves capital allows us to see that we have a responsibility to get it to them. And in every case, community members can tell you clearly and without hesitation what it is they need.
Our historical record of exclusive development is full of examples of people making decisions on behalf of underestimated communities – without giving those communities a voice in those decisions.
Instead, we should listen to what the communities are saying that they need. We should do everything in our power to help realize the vision they have for themselves.
We succeed at inclusive community development when the Venn diagram of “who benefits” and “who decides” is as close to a circle as possible.
This practice of authentically listening to communities is something that all of us can incorporate into our work. It requires commitment and a willingness to accept that we don’t have the answers. But together, in conversation, we can find new and innovative ways to support underestimated communities – so that they gain access to the resources that they deserve.
So far, we’ve discussed the history of our country, the ups and the downs that have created the map of opportunity we inherited from our parents; we’ve taken an honest look at the present moment, and noted the discrepancies in health and wealth that persist as a result of that history; and we’ve discussed ways in which we can promote inclusive and resilient development starting today.
And because I’m someone who believes in accountability, I’m going to end by telling you a few things that we are doing at Momentus Capital to help build the future that we want to see.
First, we ground our work in values. Over the past year, we have re-established a set of company core values that we bring to life in our work.
Whether we are working with community partners or institutional investors, we use our values as a foundation, we strive to be:
These values define how we show up in communities. They remind us that every community we support has significant assets, vibrant cultures, and social bonds. Most of all, these values remind us that all residents need agency to determine their own paths and define what they want for themselves.
To demonstrate these values in our work, I want to tell you about our place-based approach to community development in the city of Detroit.
We have been at work in Detroit for 10 years, and I think it provides the best demonstration of how our values help promote inclusive community development.
First, we are dedicated to providing multiple types of capital to entrepreneurs and developers, and others in Detroit. Over the past 10 years, we have lent and invested over $300 million to Detroit-based businesses and projects.
But we are more than just a lender – we strive to be a part of the local community. We have taken the effort to develop partnerships with local organizations, letting them set the agenda and listening to them as we consider where to put our resources. For instance, when we did an early retrospective on our work in Detroit, we realized that many of the real estate projects we funded were run by white developers, based in the suburbs – rather than Black residents of the city that we were aiming to support.
In response, we launched the Equitable Development Initiative, a training program to help more developers of color enter the field, building wealth for themselves while also expanding opportunities in their communities. Over the past five years, this program has trained dozens of developers and expanded to four other cities.
Here is another example. We brought our small business lending to Detroit just a few years ago, and were initially surprised. Our Community Advantage loan, a product backed by the Small Business Administration and designed to support new businesses in underestimated markets, wasn’t taking off the way we expected. We investigated the reasons why and learned that for many businesses in Detroit – especially Black businesses – even the Community Advantage loan was too stringent. So we set out to design a product that would meet the needs of Black entrepreneurs in Detroit.
The result is our Activate Detroit loan product, which includes enhanced flexibility and – crucially – has no credit score minimum. Rather than reducing the applicant to a simple number, we have taken the time to get to know our borrowers and understand their journey. Often the negative marks on their credit score have reasonable explanations. These marks from the past should not impact a person’s future. Since launching Activate Detroit, we have funded over 30 small businesses, putting over $2 million into the hands of Black entrepreneurs.
After 10 years of intentional support, we have supported multiple communities in Detroit.
Though we operate as a national organization, many of our partners in Detroit see us as a local organization. And that allows for more open and honest conversations about what the city really needs to thrive.
There are many other organizations working in cities and towns across the United States taking similar approaches. In their work, and in the success of the communities they support, we see the first signs of a new, more inclusive approach to development.
As you encounter new ideas and discuss new strategies for economic development, I invite you to keep a few key questions top of mind:
If we keep those questions in mind, I am optimistic about the future of our communities.