May 22, 2023

To Build Wealth in Latinx Communities Across the US, We Need to Invest More Time, Effort, & Money Expanding Access to Financial Education

By Sandra Guerrero, Advisor

For most of their lives, my mother and father worked in the services sector. Driven by their desire to leave a financial legacy for their children and grandchildren, my parents were motivated to learn new skills to acquire and grow wealth. They saved money, sought out learning opportunities, and ventured into real estate. Motivation plus access to financial education gave them the tools they needed to use their hard-earned money to build wealth.

My parents’ story is one of the reasons I believe that growing access to financial education can help solve persistent economic inequities within Latinx and Hispanic communities across the United States.

Financial skills are not born, they are taught. Without access to experienced peers or educational programs designed to teach how to understand and use financial tools, many Hispanic and Latinx families are less likely to grow wealth. Lack of financial education prevents people from using financial tools that can be used as a springboard to financial success.

I believe expanding access to financial education is one of the most powerful ways we can grow opportunities for financial success within Latinx and Hispanic communities in ways that will positively impact the lives of millions of individuals and families for generations to come.

Economic Challenges and Opportunities for Hispanic Americans

Hispanic Americans have been known to be the largest minority group in the United States since 2003.¹ The 2020 Census indicated that 18.9% of Americans identify as Latinx or Hispanic² and our numbers are growing.³ Despite our growing prominence in communities across the US, the Latinx community is too often left behind in terms of economic opportunity and wealth accumulation in this country.

Research from Urban Institute indicates that the average net worth of white families is approximately five times greater that of Latinx families.⁴ In terms of income, the average Hispanic or Latinx household earns approximately half the income of the average white household. About 70% of white Americans own their home, whereas for Latinx Americans, the homeownership rate is about 48%.⁵

In terms of wealth accumulation, Research from Urban Institute indicated that the average net worth of white families was approximately five times greater that of Latino families in 2019.⁶ Only about 6.5% of all businesses in the United States were Hispanic owned in 2020, with a majority concentrated in the construction, warehousing and transportation, and waste management and remediation sectors.⁷

Immigrants often come to this country driven by dreams of financial success and building a family legacy. In order to achieve their dreams, more Hispanic and Latinx Americans need more than motivation – they need access to both the training and the opportunities to make their dreams a reality.

Investing money in businesses led by Hispanic and Latinx entrepreneurs and in funds that invest in communities of color is one way to create opportunities for wealth building, but that alone will not be enough to narrow the wealth gap. We must also invest in programs that help people gain access to the education and experience they will need to harness the power of their motivation to succeed and be able to capitalize on expanded opportunities created through investment.

Examples of Programs to Support

If you are committed to the idea of building economic racial equity and growing wealth in Hispanic and Latinx communities across the United States, there are numerous programs you can support that are expanding financial literacy and teaching financial skills. Here are a few:

UnidosUS, the largest Latino civil rights organization in the US, has made Housing and Financial Empowerment one of their key issues. They offer a range of financial education programs, including workshops, online courses, and one-on-one coaching sessions. Their programs cover topics like budgeting, saving, credit building, and homeownership.
Hispanic Federation offers financial literacy workshops and counseling services to help Latino families become more financially stable. Their economic empowerment program offers financial literacy and skill building classes taught by bilingual instructors. topics including budgeting, saving, debt management, and retirement planning.
Operation Hope: This organization offers financial literacy programs to Latino and Hispanic communities. Their programs cover topics like credit and money management, banking, and small business ownership.

These are just a few examples of the programs that are expanding financial literacy and teaching financial skills in Latino and Hispanic communities across America. There are many other organizations and initiatives working towards this goal as well.

Sandra Guerrero is an Advisor in the San Francisco office of Veris Wealth Partners. She is passionate about helping individuals, families, and foundations have a positive social and environmental impact with their wealth. Sandra has more than 20 years of experience in the financial services industry. Full bio.

Sources

¹ https://www.nytimes.com/2003/01/22/us/hispanics-now-largest-minority-census-shows.html

² https://www.census.gov/quickfacts/fact/table/US/PST045221

³https://www.pewresearch.org/science/2022/06/14/a-brief-statistical-portrait-of-u-s-hispanics/

⁴https://www.urban.org/research-action-lab/projects/inclusive-recovery-insights/addressing-the-racial-wealth-gap-for-an-inclusive-recovery

⁵ https://fred.stlouisfed.org/series/HOLHORUSQ156N

⁶https://www.urban.org/research-action-lab/projects/inclusive-recovery-insights/addressing-the-racial-wealth-gap-for-an-inclusive-recovery

⁷ https://www.census.gov/library/stories/2023/01/who-owns-americas-businesses.html

The information contained herein is provided by Veris Wealth Partners for informational purposes only and reflects the opinions of the author’s which are subject to change without notice. Additionally, this document contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such third-party sources and take no responsibility therefore.

Veris WP

March 31, 2021

A Much Needed Equitable Growth Era for Community Wealth Building

By Michael Lent, Roraj Pradhananga, & Casey Verbeck

Community wealth building solutions aim to help address racial and gender discrimination and spread prosperity while ensuring sustainable economic growth in historically marginalized and under-resourced communities.

Tragically, the COVID-19 pandemic has exacerbated the inequalities and inequities faced by our most vulnerable communities. The poorest populations, both here in the U.S. and globally, have been the hardest hit in terms of disproportionately worse health outcomes and in loss of income, jobs and educational opportunities.¹ The World Bank projected in 2020 that extreme poverty and income inequality for low-income and emerging economies, especially communities of color would rise because of the pandemic.²

These impacts have brought more attention to, and growing demand for, community wealth building solutions such as Community Development Finance institutions (CDFIs) and other private market solutions that help economically distressed communities meet their basic needs.

CDFIs play a crucial role in building community wealth by providing capital that supports businesses that create quality jobs, pay living wages, provide food security solutions, and broaden access to affordable housing options. By offering access to aligned, patient and lower cost capital to small businesses and entrepreneurs in under-resourced communities, CDFIs aim to help reduce the wealth gap equitably.

What We are Doing to Help Meet the Challenges of Today

At Veris, Community Wealth Building is one of our core investable themes. We have consistently sought out and invested in companies and funds that support communities that have been systematically excluded from mainstream economic success. CDFIs have been a particular area of focus for us ever since our firm was founded. Today there are 10 institutions and 13 community loan funds that are part of the Veris Investment strategy.

While CDFIs and specific loan funds have historically addressed broader issue areas and catalyzed transformative changes in under-resourced communities around the country, their focus has shifted as a result of the pandemic.

2020 – 2021 Targeted Issue Areas

Immediate infrastructure response to COVID-19
Continuing to support hard hit businesses
Forbearance and working with borrowers to help them stay in their homes
Administering PPP funds to underserved communities

The CDFI Fund, an agency of the US Department of Treasury that provides financial assistance to CDFIs, awarded $204.1 million to 397 CDFIs in 2020.³ We support Opportunity Finance Network’s demand for an additional $1 billion in appropriations for the CDFI Fund in fiscal year 2021. Thankfully, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021⁴ provides $1.25 billion for CDFIs to help communities impacted by the COVID-19 pandemic. The CDFI Fund will award these dollars through a new program called the CDFI Rapid Response Program (CDFI RRP).

Beyond CDFIs, we are paying attention to other innovative approaches that help historically marginalized communities build wealth including new ownership structures such as Employee Stock Ownership Plans (ESOPs), financial inclusion solutions for those who lack credit history, new climate justice influenced affordable housing options and education and upskilling solutions for non-traditional students.

At Veris, when we are constructing portfolios that align with our clients’ values, we may employ a variety of approaches to support community wealth building including:

Place Based Investing
Social and Racial Justice
Economic Viability
Access to capital

Asset allocation supporting these efforts are identifiable in our fixed income and public equity strategies and alternative assets.

Let’s Shift Focus from Surviving to Thriving

As we seek to tackle the pandemic and its terrible impact on low-income communities, Veris will be expanding our focus from recovery to building back better. In the pursuit of economic stability, we believe it is crucial to contribute to narrowing the wealth gap. All small businesses and all communities deserve equal opportunity to build wealth and thrive.

Even with the recent additional relief effort from Capitol Hill, we need to see substantial capital flows from private investors in the U.S. in order to address the challenges faced by our most vulnerable populations. Many small businesses in these stressed communities have already shut down or are on the verge and it is likely that we have many months in front of us before we will see a dramatic recovery.

As we look to the future, the impact investor’s mindset must shift from a focus on supporting stability to aligned and equitable growth that ensures households and communities have access to the resources they need to succeed. As a field, let us help people move from surviving to thriving.

In the near future, Veris will be releasing a thought piece further exploring Community Wealth Building.

DISCLAIMER

The information contained herein is provided for informational purposes only, represents only a summary of topics discussed, does not represent personalized investment advice or recommendations, and simply reflects the opinions of the author’s, which are subject to change without notice. Investing involves risk, including the loss of all amounts invested, and readers should be guided accordingly. Additionally, certain information contained herein is sourced from third parties. While we believe such information to be accurate, we make no guarantees as to the accuracy or completeness of such information and make no representations to that effect.

Endnotes

¹ https://www.bloomberg.com/news/articles/2021-03-10/covid-pandemic-made-racial-income-inequality-much-worse

² https://blogs.worldbank.org/voices/what-covid-19-can-mean-long-term-inequality-developing-countries

³ https://www.cdfifund.gov/programs-training/programs/cdfi-program/award-announcement

⁴ https://www.cdfifund.gov/impact/84

Authors:

Michael Lent, Chief Investment Officer, Partner
Roraj Pradhananga, Senior Research Analyst
Casey Verbeck, Managing Director of Marketing and Business Development, Partner

Veris WP

August 6, 2018

Opportunity Zones

By Lori Choi, Partner

“Opportunity Zones” are a hot topic in impact investing these days, but what are they and why might they be important for investors?

Embedded in the new Tax Cuts and Jobs Act signed into law, December 2017, are provisions around “Opportunity Zones.” They ask governors of all states and territories to designate up to a quarter of low-income census tracts as investible zones. The aim is to attract investment to these distressed communities by allowing investors to defer, reduce, or potentially eliminate capital gains taxes over time.

Why is this program important? According to Rockefeller Foundation President, Rajiv Shah, Opportunity Zones represent “the single biggest tax incentive to invest in low-income communities across America that we’ve seen in 100 years.”¹ While impact investing champions are cautiously optimistic about the amount of dollars that could flow to low income communities, this new policy is also exciting in its potential to draw more mainstream investors into impact investing. According to the U.S. Impact Investing Alliance “there are currently trillions of dollars’ worth of unrealized gains in the capital markets. If even a portion of those gains are moved to invest in distressed communities, it could have a transformative impact.”²

Investors must invest in Qualified Opportunity Zone Funds within 180 days of selling an appreciated asset to receive the tax benefits, although the number of investment funds being created is still limited. Several of Veris’ impact investing partners are looking into forming Opportunity Zone Funds. We look forward to keeping you updated about how these may or may not be appropriate for your situation and goals.

Investors in Qualified Opportunity Funds will get to benefit in three ways:
• Taxes due on capital gains deferred until December 31, 2026, at the latest.
• Capital gains will be reduced by 10% for investments held 5+ years and 15% for 7+ years.
• Capital gains will be permanently eliminated for investments held 10+ years.

Impact investing champions like the Kresge Foundation³ have come forward to support the creation of Opportunity Zone Funds.

¹ https://impactalpha.com/getting-ready-for-the-opportunity-and-peril-in-opportunity-zones/
²
³

Veris Wealth Partners

July 16, 2018

What’s Next In Community Wealth Building and Social Equality

By Luke Seidl

The past 12 months have been a big opportunity for investors interested in Community Wealth Building and Social Equality.

Judging by the growing number of product offerings, there will be many new ones in the next 12 months.

In this blog, we highlight a few of the opportunities. To see our full analysis, please click here.

Focus on Income Inequality
Almost 19 million renters and homeowners are “severely cost-burdened,” meaning they pay more than half their income toward housing. Growing evidence points to housing as a main driver of wealth disparity in America.

In response, Community Development Finance Institutions (CDFIs), Credit Unions and banks, private equity and real estate fund managers are raising capital to increase the supply of affordable housing.

Inclusive economic growth should be aided by a new program in the Tax Cuts and Jobs Act of 2017 that incentivizes long-term investments in distressed communities designated as “Opportunity Zones.” The Act will enable investors in qualifying funds to defer, and in some cases, reduce taxes on realized capital gains.

Human Rights and Justice
Sustainable investors continue to intensify pressure through shareholder activism to eliminate conflict minerals, human trafficking, child and slave labor in supply chains, and to protect indigenous rights.

In the wake of the Parkland, Florida shooting, more investors are divesting not only from gun manufacturers and retailers, but also the banks financing them. Meanwhile, the newly mobilized Investors for Opioid Accountability (IOA) coalition is working to address companies’ role in America’s latest public health crisis.

Assets invested with a Gender Lens, which are focused on companies empowering women and girls, reached $2.2 billion deployed through 70 public and private equity and debt fund vehicles. Several funds have raised money to focus on broad-based employee ownership or quality job creation in sectors and communities impacted by automation.

The possibilities are growing for impact investors to complement the work of governments and NGOs in creating a more equitable, prosperous and sustainable planet. The arc of history can bend toward justice, but not without the collective intent to make sure it does.

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Veris is grateful to its ongoing relationship with Envestnet and Investopedia.com, where this commentary first appeared.

Veris Wealth Partners