Leslie Cornell, Vice President and Deputy General Counsel at Social Finance, co-taught a course in Spring 2023 at Georgetown University Law Center in Washington, DC. The course touched on the intersection of law and topics across social entrepreneurship and impact investing. Law students in the course were asked to write a research paper related to a course topic. The following is a selection from one student paper.

For most Black people in the United States, economic mobility has remained elusive despite years of government and private solutions intended to serve as a charitable panacea. George Floyd’s murder in May of 2020 brought this issue to the forefront of the public discourse, evoking crucial conversations about structural racial and economic inequities in the U.S. These conversations thrust the economic plight of Black people into the social consciousness, spurring official commitments to action from both corporate and civil society. However, mere commitment has not been enough.

The recent attacks on affirmative action and economic-based diversity initiatives have once again elicited these tough conversations about racial inequities. In the wake of these attacks, key players in the fight for economic equity must not only revitalize their efforts to remain at the forefront of educating the general public about the dire need for these initiatives—they must also boldly lead the charge to prioritize equitable and restorative access to capital. The answer to economic mobility for the majority of the Black population may lie not in the current charitable approaches to poverty eradication, but in targeted and localized economic empowerment through social entrepreneurship and impact investing.

Social Entrepreneurship in the Black Community

Business ownership and entrepreneurship has been a bedrock of the Black community for years. Many of these entrepreneurial pursuits have been steeped in faith and religion, and importantly, the general desire to serve and impact local Black communities. Studies show that Black women in the United States are the fastest-growing demographic of entrepreneurs, with nearly 2.7 million businesses nationwide. Forty-eight percent of these businesses are concentrated in the health care and social assistance industry and are disproportionately located in economically disadvantaged Black neighborhoods. However, Black social entrepreneurs continue to face unique structural barriers that prevent them from scaling and sustaining these crucial ventures.

Impact Investing As a Tool for True Economic Advancement

Intentional, specific, and direct investing for localized impact in Black communities could  enable true economic mobility and advancement. Social enterprises are ideal conduits because unlike typical mainstream businesses that seek to capture the value they create by controlling a substantial portion of the industry value chain, social enterprises generally use empowerment to capture the value they create through socially optimal outcomes in the various local communities they serve. As a result, focused, localized impact investments may help improve the current economic system by making it more inclusive – returning it to its original intent of economic empowerment and shared prosperity.

For these investments to be effective, however, the risk and reward profiles of impact investors and Black social entrepreneurs must be aligned. To that end, the ideal impact investing model aligns with the ethos, purpose, and risk profile of the social enterprises it seeks to enable. Specifically, the ideal model embodies three key features: patient capital, measurable impact, and some financial return.

Patient Impact-First Capital

Patient capital eschews the quick profit and returns required by traditional capital sources. It is the crucial element in helping provide a safe environment for Black social entrepreneurs to focus on fortifying and scaling their business operations to make true transformative impact. The ideal patient, impact-first capital model will have a higher risk tolerance than traditional capital, will not have a fixed investment period, and can be deployed across all stages of the business lifecycle—especially the critical early stage. Ideally, patient capital will be deployed over ten or more years to support social entrepreneurs in creating a sustainable model of growth. Rather than maximizing immediate returns, impact-first capital focuses firstly on helping maximize positive social impact and then receiving some financial gain.

Measurable Impact

The ideal impact investment for Black social entrepreneurs will also prioritize measurable impact. Measurable impact in this context refers to the investor’s commitment to measure and report the performance and progress of the social enterprises she has invested in. The investor’s goal here is to ensure transparency and accountability. Both the investor and social entrepreneur’s definitions of what constitutes impact should be aligned. Investors should also map out the theory of change of the entrepreneur’s business. This helps both parties arrive at a definition of impact as the change that is occurring in Black communities or the systems in which they exist. It also helps investors focus on the systemic impact that is required for true transformative development, instead of individual outcomes. Impact investors like Acumen Fund go through this process by addressing the question of “how much and in what way has someone’s life changed?”. This should be the question behind the impact measurement of every Black community-focused impact investment.


Finally, the ideal impact investment will target a rate of return in line with the stage, risk profile, and market context of the social enterprise it seeks to enable. The risk of misalignment of interests between the investor and social enterprise can be mitigated by thorough due diligence, an in-depth theory of change process, and detailed discussions of the risks and expectations of both parties. This is especially important for impact investors who choose to focus on Black economic empowerment. Many Black social entrepreneurs are unable and may generally not be interested in generating a market rate of return. As a result, impact investors targeting these businesses will have to be concessionary—sacrificing the potential for more returns by agreeing to below-market investment terms.

Impact Investing in Action: Blackstar Stability

Blackstar Stability is one successful social enterprise that has demonstrated an effective pathway to economic mobility for Black people. Created on the heels of the global financial crisis in 2007, Blackstar is a real estate investment firm focused on high-impact single-family housing strategies. Their mission is to help stabilize families and neighborhoods by preserving affordable single-family housing, enhancing equitable ownership, and attacking predatory lending practices.

As a result of limited home-ownership financing options available to many people of color and low-income individuals, many of them turn to contracts for deeds (CFDs) instead of traditional mortgages. CFDs create an illusion of a path to home ownership but are easily used to the detriment of home buyers who do not own legal title until the final payment is made.

Blackstar purchases and restructures these CFDs and mortgages on homes facing foreclosure, enabling families to remain in their homes and begin to build home equity.  Blackstar is currently working with 181 single-family properties across 18 states with a projected and targeted IRR of 11-13% and an impact on more than 10,000 families. So far, Blackstar’s measurable impact can be seen in its achievement of average monthly and principal payment reductions of approximately 40%; average equity of $40,000 transferred to families; and a more than 10 times increase in the participating families’ net worth.

By using focused, targeted, and localized impact-first investments to enable a critical mass of Black social enterprises like Blackstar, impact investors can break through the stagnation and move the needle on the economic advancement of Black people.

Toye Oyewole graduated from Georgetown University Law Center in May 2023 and will join Cooley LLP in January 2024.


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