Five Insights from Align Impact's Webinar - Building a More Equitable Society Through Shared Ownership
By Ali Motroni
Client Experience Director, Align Impact
There’s an exciting movement building that drives greater access to wealth-building and has the power to further racial equity in our society. Impact-driven investment funds, companies, and other organizations are exploring the use of shared ownership structures as an additional layer on top of advancing their primary operational and/or impact goals.
This is a topic that is deeply personal to me, as I am from the southeast which feels like it has largely been left behind from the economic growth we’ve seen on the coasts over the past decade. It is also personal to our team at Align Impact. As Align continues to evolve, we’ve been thinking beyond who we invest in and what we invest in, but are also considering how we can more rapidly change the face of finance and address wealth and opportunity gaps. Shared ownership is one such way to do this.
Align is proud to have recently invited three women in our organization to become equity owners in our business. This is part of our commitment to ensuring that our employees continue to be prominent stakeholders in our success. So as of today, 30% of our employees have some type of ownership in Align, and we’ll continue to grow this in the years to come.
Shared ownership is a highly compelling solution to address wealth inequity. For this reason (and because I’m personally thrilled about the evolution of this conversation), Align recently hosted a webinar featuring thought leaders in the field. You can watch the webinar here. I know sometimes it can be tough to find time to watch a full webinar (even though this one is 100% worth it), so in the meantime, I’d like to share 5 key takeaways from the discussion.
Shared ownership matters!
As Phil Reeves at Apis and Heritage notes, ‘It shouldn’t be that hard to have a good retirement and live the American dream, but it’s out of reach for many.’ One piece of the puzzle that’s historically been missing is a proper recognition of the power of shared ownership structures. To build wealth today, it takes owning something, whether that’s real estate or a piece of a company. As we are all aware, it’s becoming harder and harder to own real estate in the United States, and on the company ownership side, we’ve only seen this broadly in early-stage, venture-backed companies that most Americans can’t take the risk to work at. Shared ownership is about bringing more employees into the ecosystem of ownership, many of whom don’t own other assets. These structures can facilitate a more equitable distribution of wealth and unlock pathways to intergenerational wealth.
Shared ownership can be a powerful way to create greater racial equity.
First, it’s important to understand the data around race and wealth in the US. According to studies done at RAND, the median Black household in America has around $24,000 in savings, investments, home equity, and other elements of wealth, while the median White household has around $189,000, a disparity that has worsened in recent decades. Jonathan Welburn, a researcher at RAND and the author of their wealth gap study, said “Yesterday's segregation is today's wealth gap. We like to pretend that we live in a race-neutral, merit-based society now, that this is all in the past, but you can't erase history. It shows up in our wealth. For many, it shows up in the lack of wealth.”
To date, most shared ownership models have been implemented in the tech sector and other sectors where people of color have historically had low representation. As a result, they’ve been left out of these opportunities.
But what about other middle-class careers? An electrician? A nurse that comes in to take care of your elderly parents? What about a commercial cleaner? Shared ownership models can help address the racial wealth gap and cyclical poverty by giving workers the ability to transcend the wealth bracket they were born into.
Good policy is synergistic with your impact portfolio and can even scale it.
We know that policy plays an important role in scaling solutions. Or, as Jack Moriarty put it, “If you don’t have policy that is specifically designed to enhance scale on an impact-oriented portfolio, there will be a ceiling on that portfolio.”
Jack and his team have been hard at work getting new legislation, The Employee Equity Investment Act (EEIA), introduced in Congress (and hopefully passed sometime later this year) to address this opportunity. EEIA is a piece of bi-partisan legislation that was introduced in Congress a couple of months ago and is fundamentally designed to make employee ownership strategies more attractive to more investors and to ultimately catalyze the number of funds that are operating in this market, the size of those funds, and the return profile of those funds.
Why is this important? This type of legislation can drive further adoption of employee ownership models. As adoption increases, companies and funds can begin to view these strategies as a competitive advantage for employee engagement and retention. Legislation can be leveraged to subsidize adoption until a solution becomes more mainstream.
There are many ways to integrate ownership strategies into a portfolio.
Smitha Das, who recently coauthored this toolkit, explained that it’s possible to consider ownership as a lens across an entire portfolio. Some of the investments she’s looked at are in commercial real estate, some are in mezzanine debt, and others are in private equity. It can apply to all sorts of investment types, like LP equity investments, direct investments into cooperatives, or debt financing. There are more creative solutions as well, such as using a dividend model or non-voting preferred stock as a pathway to invest in a shared ownership structure.
When it comes to impact outcomes from shared ownership structures, you can meet investors where they are.
Shared ownership opportunities are so multifaceted (and still developing!) that you can find ways to invest regardless of your impact and financial goals. There are ways to engage whether you are focused on addressing the wealth gap, equitable governance structures within companies, racial equity, the future of work, and more. This is one more innovative tool you can access as an investor by deciding to show up to your investment portfolio consciously and with intentionality. We’re happy to be a resource at Align as you think about how to engage with shared ownership structures in your portfolio.