During the past year, nonprofits have set their sights on an enormous influx of federal infrastructure dollars aimed at developing clean-energy projects and repairing roads and bridges. Philanthropy has responded by providing the resources these groups need to apply and qualify for grants. But they shouldn’t stop there.
History shows that disrupting business-as-usual government and private-sector practices is the best way to ensure funds are distributed equitably and avoid the exclusionary practices that too often leave out and harm communities of color. Those practices continue to influence policy and governing, including the way federal dollars are administered.
Most of the infrastructure funding, for instance, will be dispersed through mechanisms such as block grants, which give state and local governments control over how the funds are used. This can exacerbate long entrenched inequitable practices favoring projects that serve business interests over the interests of persistently underserved communities. Adding to these challenges, the recent Supreme Court ruling against affirmative action appears to be having a chilling effect on loans to Black-led organizations.
Thankfully, the financial innovations in the Inflation Reduction Act’s clean-energy and other infrastructure provisions have the potential to change this scenario. For the first time, tax credits for developing clean-energy projects, accessible transportation, broadband access, and more aren’t limited to businesses, so both local government and nonprofits can benefit. This opens the door for communities that have faced decades of disinvestment to qualify for these funds and shape the transition to a green energy economy.
Philanthropy can make this moment different and ensure that a diverse set of ideas are heard and valued.
To change the old ways, though, grant makers need to consider several factors, including who benefits, who bears the environmental impact, and, most important, who is at the decision-making table. In the past, only the federal government and business leaders had a voice in the process, leading to freeway construction that has flattened and divided neighborhoods and heat zones that are only getting hotter.
A Rare Opportunity
By zeroing in on strategies that help groups in low-income areas compete on a level playing field, philanthropy can make this moment different and ensure that a diverse set of ideas are heard and valued. Here are three concrete strategies that could have significant payoffs:
Provide capital for project development to neglected communities and nonprofits. Most community organizations don’t have the upfront capital needed to develop alternative energy projects, such as solar farms and microgrids. This makes it difficult to compete with for-profit developers who have financing cash on hand.
Philanthropy can bridge this gap by offering that upfront capital for project development, helping to shift the alternative-energy market to more community ownership and encourage sustainable development in low-income neighborhoods. Funding can come in the form of direct investments by grant makers in local governments and nonprofits or by giving to nonprofit Community Development Financial Institutions that can provide bridge financing for eligible projects with funding gaps.
Directly underwrite community projects. The same community-based groups that struggle to turn their promising ideas into shovel-ready projects also struggle to meet the underwriting criteria of lenders for project financing. This is a particular challenge for community-based organizations that have a limited track record with such financing — a problem that is compounded by the effects of historically racist lending practices on Black-led groups.
Unfortunately, the Supreme Court decision ending affirmative action in college admissions, despite its narrow scope, has made private banks more fearful about lending to Black-led organizations. Donors can help by providing what’s known as risk-reduction capital, which serves as a form of collateral for projects that are considered riskier investments. Many philanthropic institutions have a built-in advantage of long-established trust with banks and lenders. They should redistribute that advantage to groups that have been denied it.
Advocate for governments to distribute funds equitably. Local and state governments have considerable ability to shape the outcome of these investments. Philanthropy needs to hold them accountable to equity goals.
Governors, for example, can issue executive orders detailing equity standards for infrastructure projects, ensuring affected communities have a voice in the process and that issues such as potential displacement of residents are central to any decisions. Philanthropic institutions that can do so should directly advocate and lobby these officials to uphold standards of equity as they administer infrastructure funds. The infrastructure equity standards developed by my organization, PolicyLink, offer a helpful framework to get started.
But direct lobbying isn’t the only way to exert influence. Foundation board members and executive teams can also deploy their social capital and connections.
For example, foundations fund local and state governments, which creates opportunities for influencing community development policy and practices. And because they hold accounts with national and regional banks, that influence often extends to major players in the community-development finance arena as well.
Philanthropy should also support local organizing and advocacy efforts to advance this work, especially when state legislatures attempt to restrict the ability of local governments to develop equitable infrastructure projects.
Failing to take this final step is conceding to the same old pattern of distribution of benefits that created the crumbling infrastructure communities are contending with today.
Philanthropy needs to use its influence, connections, and resources to help repair the harms of the past and chart a path toward a better future. That requires investing, planning, and advocating for equitable development that can finally remake a system that continues to benefit some at the expense of others. This could be a first-in-a-generation opportunity to transform our nation toward equity, instead of the once-in-a-generation opportunity many are calling it. Let’s use our power to make that happen.
