Deborah Frieze is an author, activist, and serial entrepreneur committed to the redistribution of wealth and reparations through finance. In 2001, Deborah left her job as a high-tech executive disillusioned by a corporate culture that cared more about short-term results than community. She became the co-president of The Berkana Institute, a nonprofit that strives to empower leaders and activists. That work inspired Deborah to co-author a book in 2011 with Margaret Wheatley called Walk Out Walk On: A Learning Journey into Communities Daring to Live the Future Now.
With a passion for place, Deborah returned to Boston in 2013, where she launched a community center created for grassroots groups and nonprofits advancing racial justice and equality. That same year, Deborah also co-founded the Boston Impact Initiative, a place-based impact investing fund that takes an integrated capital approach to building resilient local economies.
We caught up with Deborah to talk about systems change, impact investing, and 2020, and we had the opportunity to hear about what’s giving her hope for the future during these tumultuous times.
CNote: How did you feel when you walked away from the corporate world back in 2001?
Deborah Frieze: The dotcom boom and bust caused me to get disillusioned with everything that I had been taught about business and enterprise. It led me to look underneath what’s actually going on because we have a system generating behavior that doesn’t show humanity at its best. I believe that people are fundamentally good, so I wanted to know why it is that we behave so often in bad ways.
That led me to my mentor, Margaret Wheatley, an author who’s done leading thinking around complex adaptive systems. She’s helped me to understand that the world we live in is not causal, linear, and predictable, like a machine. Instead, it’s complex, emergent, and unpredictable, like nature. My work with Meg invited me to unlearn much of what I had been taught, and I came out on the other side with the question: How can we learn from nature about creating change? That question transformed my perspective on business and finance.
CNote: What led you to create the Boston Impact Initiative (BII)?
Deborah Frieze: As a person who managed to win resources in an inequitable system — through the bizarre dotcom moment and being in the right place at the right time — I wanted to know how I could invest those resources in a way that aligned with my values. And as I looked around at my impact investing options, I didn’t see financial products that did that. I saw a lot of ESG and SRI and so-called impact, but if you scratched under the hood, you’d find multinational pharmaceutical companies and banks and consumer packaged goods. I thought, ‘That can’t be it. There’s got to be something that’s aligned with what I care about.’
One thing I care about is my place. I’m from Boston, and when I looked at my place, where I saw the most difficulty was around the racial wealth divide. Doing all the impact investing in the world, at least the way it had been structured, wasn’t going to help that. That’s why I created the Boston Impact Initiative. I wanted to test the hypothesis that we could take an integrated capital or a blended finance strategy and deploy every tool in the capital toolbox to help close the racial wealth divide in my community.
CNote: Can you replicate the work you’re doing in Boston in other communities across the country?
Deborah Frieze: People sometimes say to me, ‘You’ve been really successful with BII, why don’t you expand?’ But what would I in Boston have to say about what should happen in Atlanta or Grand Rapids or Dallas? The old model of scaling up is about finding the best recipe and replicating it. To me, that is a form of colonialist imposition on a place. We’re trying to do the opposite, which is to welcome local conditions of people and place and history and heritage and ecology. So when people ask if BII can come into whatever city and do what we do there, I say ‘We can’t do it for you. We can share with you our process and our tools, but you need your own local investment thesis, and you need your own relationships with the community.’
CNote: How receptive are legacy philanthropic organizations to these ideas you’re talking about that kind of fundamentally challenge their existence as administrators and arbiters of funds? Do you get resistance, and how do you change thinking in that regard?
Deborah Frieze: That’s a great question, and yes, there’s resistance. However, I don’t try to change a lot of thinking. Instead, the model that Meg and I work with uses attraction rather than struggle. If somebody is in the dominant paradigm, they may not be able to hear what we have to say. But if somebody is already questioning the system and looking for another way, when they hear about the things we’re doing, they’re drawn and attracted to them. That’s happening more and more, where funders and investors are looking for us or for some of our cohort members.
The question is this: who is best suited to make decisions about the allocation of capital? Is it the professionals at foundations? Or perhaps is it the very folks that we say we’re trying to help? Maybe that’s who is best suited to making those decisions, in which case a foundation’s attachment to have control of resources in perpetuity might be flawed. What would the community create for itself if it had access to resources?
When we talk about the redistribution of wealth, we also have to talk about the redistribution of power and decision-making. In the absence of that, we are perpetuating the existing system where power is held by philanthropic institutions, and grants are given out with strings attached. I’m beginning to see a small number of progressive foundations start to experiment with shared-governance structures — participatory processes and democratic processes. That’s where the shift also has to occur.
CNote: What are some practices Boston Impact Initiative has adopted that you think could serve as an example to others?
Deborah Frieze: First of all, we need to change the profile of who’s making decisions. We need fund managers of color and women to be in positions of power, making decisions about who gets capital and who doesn’t. We also need to eliminate racialized structures for access to capital. For example, BII never does credit checks or takes personal guarantees. Those are ways of embedding structural racism into lending practices. We do what others call character-based lending. So we don’t need to deal with credit scores, we’ve never done that, and it’s never been a problem in terms of our default rate.
CNote: How has COVID changed the dynamic of the racial equity gap and your work to eliminate those divides?
Deborah Frieze: COVID is both shining a light on and accelerating inequities throughout our healthcare system, our education system, and our economic system. This past summer, the New York Fed reported that 41% of Black-owned businesses had permanently closed compared to 17% of white-owned businesses. We also know that every time there’s been a massive government stimulus — whether it’s now, the Great Recession, the New Deal — it’s amplified inequality. A pittance of stimulus dollars go to the bottom compared to the big winnings that go to the top. So COVID-19 is really a massive amplifier right now of something that was already heading continuously in the wrong direction.
CNote: Given that, what advice do you have for individual investors?
Deborah Frieze: First of all, everybody go vote. Then, move your money. If you have investments and savings, ask yourself where is that money invested? Are you invested in companies that work against your values? Where are you banking, and whom does your bank serve? Is there a community bank or a credit union that’s aligned with your values? Imagine the difference it would make if your money were doing good things in your community.
CNote: What’s your take on ETFs and funds that label themselves as socially responsible?
Deborah Frieze: SRI, ESG and impact investing have started to get conflated. Though it’s going against the tide these days, I believe impact investing should meet the criteria of additionality, which means making investments that conventional investors might not make. I think impact investing should also be direct. When you buy a public equity, your money isn’t creating any goods or services. It’s exchanging shares with someone else. It’s trading. I know it’s a narrow definition, but I think that impact investing dollars should be directly tied to the production of goods and services.
CNote: Given everything that’s happening today— the COVID-19 pandemic, social unrest, sharp political divisions — what’s your take on our country’s future?
Deborah Frieze: There’s a light and a shadow side of what’s happening. We all know the pain of this moment, but what’s also happening is that people are stepping forward and saying, ‘I can’t sit and be complacent anymore. I want to help. I want to move my money. I want to make a difference.’ Every one of the 11 communities that we’re working with in our Integrated Capital Fund-Building Cohort — all of whom are led by people of color and women — are getting calls and inquiries that they’ve never gotten before. As are we. We’re getting unsolicited calls for the first time saying, ‘How can I help address racial inequality through investing?’ Those calls are coming from individuals as well as big institutions.
I don’t know what will happen next. Institutional folks will go through their decision-making processes, and it’s hard to know where that will lead. But there is definitely a reckoning happening right now. We are going to be a New Majority country in 20 years or so, so is there a bigger wake-up call coming. As our demographics shift, will we go down a path of becoming an economic apartheid state, where a white minority controls all the wealth and power? Or will we shift the way we organize ourselves for real this time? That fork in the road is revealing itself, and many people, particularly younger people, are very clearly saying which of those two paths we want to walk down.
CNote: Is there anything you’re seeing right now that’s giving you some hope?
Deborah Frieze: Some really extraordinary coalitions have emerged out of this moment. Boston tends to be a very competitive environment, but right now, people are working together so beautifully: coalitions of small businesses and capital providers and grassroots groups and policy folks. Those relationships are being forged in a very intense moment, they’re becoming more personal, and they feel like they’re creating stronger ties than they would under ordinary circumstances.
That’s what’s being forged in this moment: strong ties in a place across stakeholder groups, trying to work to create inclusion and stability, and prosperity for all. That’s what gives rise to systems change. And as we look ahead at the uncertainty of November and December and the new year, I think these relationships have a chance to outlast this chaos. In crises, people show their generosity first, and then the bureaucracy tamps down on it. So if the bureaucracy really continues to fail, does that create the opportunity for people’s generosity to rise up above the bureaucracy? That’s an interesting question.
CNote: How can others get more involved in the kind of work you’re doing?
Deborah Frieze: My number one thing would be to have people connect with those that are building integrated capital funds to close the racial wealth divide that might already be in their backyard. We can always use philanthropic support here in Boston, but if you don’t live in Boston, maybe we can help you find folks in your community who need your investment and support. If this work isn’t happening where you live, then get in touch with us because we’re happy to share what we’ve learned.