Today, management consulting firm McKinsey & Company announced a $15M impact investment in the Black Economic Development Fund (BEDF). Indeed, this initiative is managed by the Local Initiatives Support Corporation (LISC).
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Moreover, the BEDF is part of LISC’s Project 10X, which is a $1bn strategy to address racial gaps in health, wealth, and opportunity.
McKinsey & Company on helping to breach the gap
Accordingly, McKinsey & Company’s contribution has helped the fund hit its goal of raising $250M. Particularly, the contribution helped the fund to invest in Black-owned financial institutions. Also, businesses, real estate developers, and anchor institutions across the US.
Indeed, the BEDF recently announced its first projects; all of which include building capacity at Black-owned banks and making loans to community-based real estate developers. Therefore, these investments will help support economic opportunity in Black communities and close the racial wealth gap.
For instance, in Columbia, South Carolina, the fund will be making a $4M deposit in the century-old Optus Bank. Currently, this bank invests 90% of its loans in under-financed communities and minority-owned businesses. Moreover, Optus has a strategy to build $100M in Black wealth over the next ten years.
Similarly, in Pittsburgh, the fund will provide short-term pre-development financing of $1.5M. As a result, this investment will help support Bridging the Gap’s mixed-income 171-apartment development on one of the largest housing sites in the city.
Finally, in Houston, BEDF will make a $3M deposit to Unity National Bank, the only Black-owned bank in Texas. Particularly, this funding will help the bank grow its small business investments and pursue partnerships in affordable housing. Besides, the fund expects to announce as many as 20 additional project investments by December this year.
The importance of investing in equal opportunities
In this sense, Eric Kutcher, McKinsey’s senior partner and chief financial officer, said, “The BEDF identifies and invests in minority-owned institutions and their communities, creating economic opportunities, developing housing, and improving quality of life.”
Besides, “this critical financing allows them to turn a corner and grow,” continued Kutcher. Notably, “by laying the groundwork for other investors and organizations to follow.”
According to McKinsey & Company’s research, community context is a critical factor in closing the racial wealth gap. Indeed, the firm acknowledges that 65% of the Black population is concentrated in 16 states that rank below the national averages. For instance, in areas such as economic opportunity, employment, healthcare access and quality, and broadband access.
Thus, “The BEDF’s targeted financing can energize Black businesses and communities and create a multiplier effect,” Eric added.
Therefore, “this partnership is part of our broader commitment to fight racism and social inequity, as exemplified in our ten actions to combat racism announced last year,” continued the CFO. So, “we will draw on our strengths and expertise to help advance racial equity and social justice within our firm and throughout our communities.”