Companies across America have committed tens of billions of dollars to racial equity. The promises by corporate giants last year were part of a big-picture move to fight concerns about systemic racism after the police killing of George Floyd and subsequent Black Lives Matter protests. By far, the biggest vow came from JPMorgan Chase last October after the nation’s largest bank pledged $30 billion over five years to help diminish the racial wealth and opportunity gap.
The oath is huge, accounting for a hefty chunk of the combined commitments by U.S. companies overall. It marks the largest pledge by the New York-based bank ever to help Black American individuals and entrepreneurs achieve economic parity and racial equality. All in all, the pledge could boost Blacks’ ability to build new wealth, buy homes, start or expand businesses, and benefit from the philanthropic efforts.
Simultaneously, the commitment is clearly needed. Numerous reports show wealth for Black American families remains much lower than for their White peers, a longtime trend. Black businesses have been hit harder by revenue loss and closures than other racial groups. That has been largely true recently amid COVID-19 as minority firms struggle to gain traditional bank financing and other types of capital.
“Black, Latinx, and women entrepreneurs face historic challenges to accessing the capital and other resources needed to keep their doors open during the pandemic and ultimately have the opportunity to grow long-term,” said Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co.
“Now more than ever, business has a responsibility to help solve societal problems. We’re pulling together our business resources, philanthropy and policy expertise to address the racial wealth gap, give underserved small businesses the support they need to grow, and build a more inclusive economy.”
In its march to help, JPMorgan is making good on its Path Forward commitment by implementing some tangible actions to jumpstart the massive commitment.
The latest is a $350 million, five-year global commitment to grow Black, Latinx, women-owned and other underserved small businesses, helping close the racial wealth divide and create a more inclusive recovery from the COVID-19 pandemic.
Over 40% of the pledge will be low-cost loans and equity investments, removing a critical barrier for Black, Latinx, women and other underserved entrepreneurs. Further, the bank is introducing data-driven policy solutions to boost capital access for historically underserved entrepreneurs.
In another undertaking, part of a collaboration with Local Initiatives Support Corporation (LISC) and a network of Community Development Financial institutions (CDFIs), JPMorgan Chase is investing $42.5 million in low-cost loans and philanthropy to expand the Entrepreneurs of Color Fund. The fund now operates in five U.S. cities. The pledge will scale the fund to reach new U.S. cities in 2021. The action includes a goal to create a nationwide program providing low-cost loans and technical aid to minority-owned small businesses through CDFI partners over time.
An additional move is pledging support to Minority Depository Institutions (MDIs) and diverse-led CDFIs.
Specifically, JPMorgan Chase is launching Empowering Change in partnership with the MDIs and CDFIs to provide economic opportunity to underserved communities. The program will introduce a new money market share class to be distributed solely by the Harbor Bank of Maryland, Liberty Bank and Trust, M&F Bank and Unity National Bank. Those firms are on the latest BE Banks list of the nation’s largest Black-owned banks. The ability to distribute J.P. Morgan’s money market funds could help the Black banks generate new sources of revenue from institutional clients. And tech giant Google is the anchor investor in the program, with a commitment to invest $500 million in the Empower share class.
Plus JPMorgan Chase has committed to an annual donation of 12.5% of revenue gained from the management fees on Empower share class assets that will be used to support community development. Further, JPMorgan plans to invest $50 million in Black and Latinx-led MDIs and community development financial institutions. The bank just confirmed it has already invested $40 million in the parent companies of four Black-owned banks: Carver Federal Savings Bank in New York City and Broadway Federal Bank in Los Angeles, along with Liberty Bank and Trust and M&F Bank. Carver Federal and Broadway Federal also are on the BE Banks list.
By mid year, JPMorgan Chase expects to boost its investments in MDIs to include Latinx-led institutions. All told, the investments and commitments could bring access to as much as $500 million in community lending nationally. JPMorgan says the capital will help MDIs create wealth in communities and grow local businesses. Plus the funding could be used by Black banks for several other purposes, including to supply more loans to consumers and businesses, expand operations and open branches to serve more communities, and invest in new technology.
The bank’s investment also comes when many minority businesses, including Black banks, are still reeling from the effects of the so-called pandemic economy and trying to conquer those challenges.
“The COVID-19 pandemic has only exacerbated the racial inequalities in the U.S., which puts a strain on families’ economic mobility and impedes the continued growth of our economy,” said Brian Lamb, Global Head of Diversity & Inclusion at JPMorgan Chase. “We know these crucial institutions create lasting change for Black and Latinx families and we hope our support will help uplift the people and businesses that are the backbone of our local economies.”
In a game-changing move, JPMorgan Chase reports it is co-investing up to $200 million with Ariel Alternatives to form a new class of Black and Latinx entrepreneurs in the middle market space. It will occur through Ariel Alternatives’ Project Black initiative. Chicago-based Ariel Investments just launched Ariel Alternative as a private asset management firm. The fund seeks to invest and scale minority-owned businesses to close the racial wealth gap. It marks the first time in the first Black-owned mutual fund’s 38-year history that such an effort was started. Ariel Investments is No. 1 on the BE Asset Managers list.
On the housing front, JPMorgan Chase just expanded its grant program to $5,000 to help more customers cover closing costs and down payments when buying a home in 6,700 minority U.S. neighborhoods. Eligible customers can get another $500 by completing a certified education course. Part of Path Forward, the drive includes helping an additional 40,000 Black or Latinx families buy a home over the next five years.
The bank declares the grant is geared for the 6,700 communities identified by the U.S. Census as majority Black as that is where the lowest homeownership rates are. The Black homeownership rate in 2019 fell to 42.1%, the lowest among all minority groups. JPMorgan Chase contends it will continue to expand its programs to help increase homeownership nationally.