Funders Suggest Three Ways to Advance Economic Equity

Views expressed were those of the presenters and not of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

“I’ve done more for less,” has been the joke among colleagues at affordable housing nonprofit Cornerstone Corp. when they apply for something like a $1,000 grant, said Monique Thomas.

Community organizations are trying to solve entrenched problems with relatively small amounts of money, said Thomas, the executive director of Cornerstone, a community development corporation serving the West End neighborhood in St. Louis.

Thomas was one of three panelists at a June 4, 2024, Conversations on Equity event hosted by the St. Louis Fed’s Community Development department. The event included a focus on funding challenges and opportunities for community development organizations that are small to midsize and those with Black leaders. The discussion also covered philanthropic grant trends for these types of organizations.

At a June 4, 2024, event, Monique Thomas (right), executive director of St. Louis community development corporation Cornerstone, discusses funding with fellow panelist and keynote speaker Sherece West-Scantlebury, president and CEO of the Arkansas-based Winthrop Rockefeller Foundation.

Keynote speaker Sherece West-Scantlebury, president and CEO of the Arkansas-based Winthrop Rockefeller Foundation, and Elizabeth George, director of community investment for the St. Louis Community Foundation, weighed in with ideas for improving how organizations like Cornerstone are funded. Sydney Diavua, assistant vice president of the St. Louis Fed’s Community Development department, moderated the discussion. Nishesh Chalise, senior manager with the St. Louis Fed’s Institute for Economic Equity, gave welcoming remarks.

The panelists’ organizations are in the St. Louis Fed’s District, which includes Arkansas, southern Illinois, southern Indiana, western Kentucky, northern Mississippi, eastern Missouri and western Tennessee.

Conversations on Equity and St. Louis Fed Community Development Work

The Conversations on Equity speaker series is part of the St. Louis Fed’s community development outreach and engagement across the District.

The St. Louis Fed’s Community Development team focuses on low- and moderate-income (LMI) and underserved populations and how they interact with the economy, said Sydney Diavua, assistant vice president of the St. Louis Fed’s Community Development department, in starting the panel discussion for the June 4, 2024, event, “Making Sense Out of Community Development Dollars.”

The video below shows highlights from the keynote speech by Sherece West-Scantlebury of the Arkansas-based Winthrop Rockefeller Foundation and from the panel discussion, which featured West-Scantlebury, Elizabeth George of the St. Louis Community Foundation and Monique Thomas of Cornerstone Corp.

Transcript

Sherece West-Scantlebury: Do you want to maintain status quo, or do you want something different? That is the fundamental question.

Narrator: The St. Louis Fed hosts a speaker series featuring community leaders working to understand barriers to economic equity and promising practices to create an economy that works for all.

Elizabeth George: How much more powerful could the nonprofit voice be if we actually really supported that work?

Narrator: The “Making Sense Out of Community Development Dollars” [event] focused on recent trends in philanthropic funding.

West-Scantlebury: If you want to see change, you have to invest, not just dole out grants every now and again and, you know, you have to invest. When you don’t invest, then you don’t want the change. It’s that simple.

Narrator: Three key takeaways from the event:

One, it’s important for funders and nonprofits to understand each other’s expectations, understand how they work and how best to partner.

Two, building social capital is essential for driving change.

Three, organize and advocate for yourselves.

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West-Scantlebury: Do we want status quo, or do we want to get to a different future? Because it really is a choice.

As part of the St. Louis Fed’s community development work, the Community Partnerships and Investment team examines how capital flows to community and economic development organizations and to LMI communities, Diavua said.

Nishesh Chalise, senior manager with the St. Louis Fed’s Institute for Economic Equity, gave an example: the Community Development Funders Forum, which involves identifying key areas of need in the St. Louis region and bringing together local funders to align strategies and the flow of capital into those areas.

“But as the conversations happened, one thing that we realized is that we have no idea what the current state of philanthropic flow capital is in the region,” Chalise said.

Chalise thought that sounded like a research question the team could look into and answer, he said. “So, yes, that’s what we did.”

The Grants in the Gateway report and infographic were the result.

Why and How to Support Black-Led Community Development Organizations

Black-led nonprofits bring a unique and vital perspective to community organization work, West-Scantlebury said in her speech. That work includes advancing economic equity and addressing affordable housing, small business support and health care access. But their work is often hindered by a lack of adequate and equitable funding, she said.

Black-led nonprofits had unrestricted net assets that were 76% smaller than those of white-led nonprofits, and white-led nonprofits were also more likely to receive corporate donations than those led by people of color, according to an August 2023 article in Candid’s Philanthropy News Digest that pointed to reports from 2020 and 2022.

So what can grantmaking organizations do to close the gap for Black-led nonprofits as well as those that are small to midsize?

In the panel discussion and West-Scantlebury’s speech, participants shared their views on what would help, including to:

• Make it easier to apply for funding
• Give grants without strings attached
• Invest for the long term

Make It Easier to Apply for Funding

Diavua previously has worked at nonprofits. In discussing her first experience with philanthropy, she said that getting a grant takes “stacks and stacks of paper.” But that wasn’t the most difficult part of applying, she said.

“The hardest part was just figuring out who to contact because phone numbers and email addresses weren’t on the website” of potential funders, she said.

Some “equity-focused grantmaking” stemmed from the COVID-19 pandemic and the civil unrest of 2020, West-Scantlebury said in her speech. Some funders have pulled back, but others still are prioritizing equity, including by “changing their application process to be more inclusive and less burdensome, recognizing that smaller organizations just need the money and the capacity to navigate,” she said.

Give Grants without Strings Attached

George contrasted financing for nonprofits with for-profit business financing.

With nonprofits, donors may require that their donation be used only for certain purposes. But with for-profit businesses, investors don’t buy stock in a company and then say they only want their stock to go to a particular product, George said.

“I hear all the time, ‘Well, if nonprofits only worked like for-profit businesses, they’d be way more successful,’ and my response is, ‘If we funded nonprofit businesses the way we fund for-profit businesses,’” they would be, George said.

In her keynote address, West-Scantlebury asked how many attendees, who included nonprofit development directors, had requested operating support, funding she described as allowing nonprofit leaders to “make the decision of how best to invest those dollars” in their organizations.

“There is nothing in the IRS regulations that says that, yeah, there should be strings attached to your grant,” she said.

Invest for the Long Term

Sydney Diavua (left), assistant vice president of the St. Louis Fed’s Community Development department, moderated a panel discussion June 4, 2024, that included Elizabeth George, director of community investment for the St. Louis Community Foundation.

Unless investors in for-profit companies are day traders, they don’t say, “‘I’m in for a year and then I’m going to rethink, and then I’m going to go somewhere else because I don’t want you to get too dependent on my stock,’” George said.

That approach keeps nonprofits as “charities with their hands out,” instead of thriving businesses with a mission-based bottom line, she said.

Offering general operating support is the least funders can do, West-Scantlebury said. “The most you can do is make an investment in the organization for the long term.”

The Winthrop Rockefeller Foundation has some grantees who have been grant recipients for well over 40 years, like Southern Bancorp, which the foundation helped found, she said. Southern Bancorp is now one of the largest community development organizations in the U.S., according to its website.

The foundation is currently working on “pretty large and significant” enterprise capital grants that organizations can count as balance sheet assets that would help if they wanted to apply for a loan or a line of credit, West-Scantlebury said. But they also could use the money in other ways—to buy their buildings or match employee contributions to 401(k) retirement accounts, for example.

Such investments can set nonprofits on a path to futures in which they own their own buildings, are able to pay good wages and have operating reserves, she said.

“It’s just a way of just changing, thinking and innovating,” West-Scantlebury said. “And working with community to do so.”