Diversity, Equality and Inclusion in Impact Investment

Hetal Sheth3/30/22 2:42 AM4 min read

Can Impact Work Without Diversity Be Racist?

Social enterprises, nonprofits, and impact investors all share one mission: driving positive impact. Can impact organizations reinforce racial inequalities in their communities, doing more damage than good? The short answer is yes. This article discusses the challenge of diversity and inclusion within the social impact field and what organizations must do about it.

Diversity, Inclusion, and Impact
Connect to Communities You Serve
Lead by Example
Dig Deeper with Data

Diversity, Inclusion, and Impact

Let’s start with a simplified definition of impact. The impact is a program or intervention's positive or negative mid-to-long-term effects. All impact organizations seek to make a positive impact. But, yes, there can be unintended adverse effects as well. Unintentionally exacerbating racial and gender inequalities is one example of a negative effect.

The Problem

Regarding diversity and inclusion, impact investing and international NGOs have a long history of inequality. Impact investing diversity in the US remains low. Only 1.3% of funds are controlled by women or Black, Indigenous, and people of color (BIPOC).

In international development, a study from 2013 found that just 10% of board members of international NGOs are from Africa despite African countries being the recipient of the most international aid on earth. In the United States, the average board of directors for nonprofits is 86% white. In addition, a global monitoring organization of diversity and inclusion, Fair Share, found that out of 45 women-led organizations, just four were led by Black, Indigenous, and women of color (BIWOC).

The risk, without the proper representation, is that impact investing organizations perpetuate the diversity inequalities they are experiencing rather than improve them.

The Benefits of Diversity

Beyond social benefits, the business case for diversity and inclusion is clear. Studies from multiple sources confirm that more diverse companies perform better financially. That’s a bottom line that is easy to comprehend.

Lead by Example

The first thing an impact organization can do to improve equity and inclusion is start from within. Please look at the gaps in your diversity and do something about it. Being open and transparent with your organization’s demographics leads to greater accountability.

Look beyond staffing. Diversity in board leadership and executive management is critical. Organizations that serve a specific community must represent that community at the highest levels, not just at the program management level. Hire community members as staff in decision-making positions—re-tool job descriptions, so they don’t exclude BIPOC by default. Reassess your status quo expectations (likely based on colonialism-informed and racist ideas of professionalism).

Remember your impact focus. If your mission serves an unhoused population, what is more important: a bachelor’s degree or lived experience?

Connect to Communities You Serve

The formula for diversity isn’t just ‘add a woman and a person of color and stir.’ Organizations need to build solid and lasting relationships with their stakeholders. Community engagement is critical.

At the program level, a top-down approach blindly leaves stakeholders as mere beneficiaries of services rather than engaged in the process. Instead, stakeholders need to be part of their community's planning, decision-making, and implementation of programs and services. Organizations can do this internally (via hiring) and externally (by seeking stakeholder feedback).

Dig Deeper with Data

Data is critical to improving diversity and inclusion. Unfortunately, it can also be a manifestation of the problem. Insensitive data visualizations perpetuate misconceptions and can do further damage. Ensure your data's color choices, icons, and language are appropriate.

Regarding impact measurement and management (IMM), data must go beyond surface-level measures such as the number of women, BIPOC, etc. Disaggregated, multidimensional data gives a clearer picture. Just to remind you, data collection must be done with sensitivity by trained frontline staff. Also, I would like you to observe proper wording and respect for the self-identification of the stakeholders.

As we already know, IMM done right must also include the stakeholder’s voice. Feedback from the stakeholders answers the “why” and “where” of racial injustices in their community. Amplify stakeholder voices to speak honestly about the benefits and drawbacks of an organization’s programs and services. Given the blind spots of privilege, an organization will never know if there is racial bias in its program if they don’t ask stakeholders.

Diversity is an Asset

Whether it’s for a company’s bottom line or social justice, diversity and inclusion improve your work. For impact organizations, it’s critically essential to mirror the communities you serve in leadership and the workforce. Strong community connections and the correct impact measurement reduce harm and augment positive impact. Sopact is committed to revealing the stakeholder voice in IMM.

Photo: Unsplash

Hetal Sheth

The founder of Ektta, and co-founder of SoPact, Hetal holds a deep passion for establishing enduring impact management practices in the social sector to have built-in learning and accountability.