In recent years, companies have increasingly acknowledged that addressing persistent economic inequities, in particular the racial wealth gap, is both a moral and business imperative. Many corporations continue to focus on access to financial education and services and entrepreneurship support as a way to enhance income, savings, and capital. At the same time, companies are recognizing that improving access alone is not enough; it is imperative that they help build individual and community wealth.
Coming into 2024, we are observing three key opportunities for corporate foundations and social impact teams:
1. Use your company’s full set of tools to drive financial inclusion and wealth building.
We encourage companies to explore all available avenues for promoting financial inclusion and wealth building, spanning their products, services, supply chain, talent strategies, and corporate philanthropy. For example, leading financial institutions such as Paypal have leveraged their products and services, such as their Working Capital (PPWC) loan, which employs alternative credit assessment methods to eliminate factors traditionally influenced by race. Corporate philanthropic arms such as the Truist Foundation are investing in ways that complement the core business, investing in CDFIs that provide loans to entrepreneurs in low wealth communities. We are also seeing companies – even those outside of the financial sector – actively work to bolster community wealth in a way that aligns with business needs. To support their supply chain, Abbott has invested $25M, including $12.5M as loans, in partnership with LISC to grow diverse small businesses in the healthcare supply chain. Finally, companies – particularly those with significant frontline employees – have designed policies to help their employees during personal emergencies that often exacerbate financial instability. Home Depot’s Homer Fund receives donations from over 93 percent of company employees and provides direct grants to help employees in the time of an emergency.
Considering the vast resources, influence, and reach of companies, we encourage cross-functional leaders, including but not limited to philanthropy teams, to ask themselves how they can innovate and actively contribute to financial inclusion and wealth creation.
2. Link financial inclusion to your climate strategy.
Climate change is deeply intertwined with economic insecurity. Low income communities are hit the hardest by the impacts of a changing climate. We’ve all seen how home insurers started removing natural disasters from policies as climate risks grow, putting certain communities more at financial risk. There are very limited financial products and services developed to support the climate adaptation and resilience of poor and vulnerable people.
Given this inherent link, we urge CSR and philanthropy leaders focused on financial inclusion/ economic development to get in the same conference room (or zoom call!) with their sustainability, product, and talent colleagues and co-create a shared strategy for impact.There is an opportunity to ensure households in high-risk communities have access to affordable capital to both prepare for and respond to climate events – for example, by adapting low-cost, energy efficient cooling products in warming communities. Companies can also play a critical role in proactively identifying and communicating how jobs will change given a greening economy. Finally, it will be pivotal for companies to fund efforts to ensure the experiences of communities are centered in upskilling programs.
3. Prioritize inclusion while embracing technology.
Digital financial services have offered the promise of including 1.6 billion more people in the financial system and a $3.7 trillion boost to GDP by 2025. Digital payments reduce dependency on cash and reduce conventional barriers to financial services by building transparency in the financial system. In 2024, banks will continue the rush towards investing in AI technology as it promises significant savings, operational efficiency, and customized services for its customers.
However, the adoption of AI also carries the risk of exacerbating biases, such as those affecting loan or credit approvals, and widening the gap for individuals with limited access or comfort with technology, including the elderly, those living in rural communities, and people who are unhoused.
As we ride the AI wave in 2024, we hope corporate social impact leaders can use their influence and expertise to be a core part of conversations on AI and technology within their company. This might involve questioning how AI models are built and ensuring inclusivity in the process, investing in research to understand its implications, establishing safeguards to harness technology for good, and investing in initiatives to reduce the digital divide.
At FSG, we have long believed that it is possible for companies to increase long-term profitability to drive progress on societal problems and in particular address financial insecurity and the wealth gap. We believe that companies have an incredible array of tools for supporting financial inclusion and wealth building, and we are excited to see the ways in which the private sector will lead in this arena.
This blog is part of a series written by FSG leaders on opportunities for corporate philanthropy in 2024. Read the full series with pieces on health equity, environment, education/workforce development, and financial inclusion here.
