Do we know how much capital flows to Black communities in Canada?
6 min read · March 7, 2023
New Power Labs
The short answer: Not really. We have limited and insufficient data. From the data we have, it is clear that Black communities are underfunded across the capital spectrum. Our collective work to address this gap needs to extend beyond Black History Month.
Reporting and data on capital flow in Black communities in Canada is limited and challenging to access. While some research has explored this issue, we still lack comprehensive data for a number of reasons: a lack of standardization in data collection and reporting, how research is funded, the fact that data collection specific to race and ethnicity in Canada is limited, and a lack of open and honest conversations specific to race.
Without comprehensive data, it’s difficult to get an accurate picture of the state of capital flow in Black communities, to track trends and changes over time and thus, to map how intentions are translated into action.
Despite these challenges, there is increasing recognition of the importance of creating these datasets, with many advocates calling for the collection and analysis of data specific to the economic status of Black Canadians to inform policy and support equitable access to opportunities. We have seen an increase in investments in research, including the recent launch of the Black Entrepreneurship Knowledge Hub (BEKH), and ongoing investment is required.
As Canadians, we often perceive our society to be more inclusive relative to the US, but can we learn from our neighbours south of the border? In the United States, there is a more comprehensive system for collecting data on race and ethnicity. This provides a better picture of the state of capital flow and allows for more robust reporting of economic opportunities within Black communities. The US also has numerous research institutes focused on capital flow in Black communities, and these have reported on discrepancies in capital flow, with Black founders being able to access less capital and with funding often much more restricted.
From what we do know, Black communities in Canada continue to be underfunded across the capital spectrum.
According to the report Inclusive Entrepreneurship: Exploring the Barriers Facing Black Entrepreneurs in Canada by the African Canadian Senate Group and Senator Colin Deacon, 76 percent of surveyed Black entrepreneurs stated that systemic racism affects their success as entrepreneurs. And it’s not just entrepreneurship. There is still lots of work to do across the capital spectrum:
Philanthropy: Only 0.03 percent of funds were disbursed to Black-led organizations and 0.13 percent to Black-serving foundations from the top 10 foundations, with an asset representation of approximately $10 billion between the years 2017 and 2018. (This despite Black Canadians representing 3.5 percent of the total population, according to 2016 StatsCan data). In comparison, in the US, Black and Latinx leaders received about 4 percent of funding although they make up approximately 10 percent of nonprofit leaders (data from 2010-2014) and 13.6 percent of the population identify as Black or African American (2021).
Impact Investing: As highlighted in our In the Dark report, data specific to impact investing in Black leaders does not exist in Canada. Here, given varying definitions of impact investing, we consider both investing in Black leaders building ventures that drive intentional social or environmental impact and investing in the creation of wealth in Black communities (predominantly in private markets). There may be an overlap in this category with traditional venture capital.
In the US, these figures merge traditional venture capital and recently, there has been a growing conversation about Black economic mobility in this context. Since 2020, addressing racial inequity has become a top priority for public and private sector organizations. As a result, companies have committed to investing nearly $350 billion in Black communities between 2020 and 2022.
Venture Capital: No data exist in Canada: “Quantifying how much less funding Black business owners are receiving is tough because such metrics are seldom tracked in Canada, but entrepreneurs and investors estimate it to be on par with — or even worse than — the U.S.” In the US, Black entrepreneurs have historically faced disparities in securing VC funding and typically receive less than two percent of overall dollars annually. Recent data showed that VC funding for Black-founded startups dropped from 1.5 percent in 2021 to only 1.1 percent in 2022.
Bank Financing: Seventy-four percent of Black Canadians have high-interest debt, including ongoing balance on credit cards or payday loans. In addition, Black Canadians are least likely to report being able to access products from their primary financial institutions compared with other groups; for example, 63 percent of Black Canadians reported being able to access financial products and services, compared to 79 percent of white Canadians, 71 percent of Indigenous people and 72 percent of non-Black people of colour. In the US, Black families have been historically underserved by financial institutions, too; for example, 14 percent of Black households reported having no bank accounts compared to three percent of white households.
It's clear. We need more data.
Data, if used ethically, can inform policies and programs aimed at addressing persistent racial disparities and supporting equitable access to capital and economic opportunities.
We have seen important advancements - new funds, foundations and programs - launched in the last two years. BKR Capital, for example, raised an $18.5M first fund in 2021. Recently, the federal government announced a historic $200M Black-led Philanthropic Endowment Fund, administered by the Foundation for Black Communities, to provide long-term sustainable funding and self-sustaining resources for Black-led organizations to serve Black Canadian communities.
These targeted approaches are part of the solution.
Another piece of the puzzle is re-examining and updating how we fund and who we fund across our larger portfolios. Race is one of the most reliable predictors of life outcomes, including the ability to access resources and capital. By collecting, analyzing, and reflecting on data disaggregated by race for your portfolio you can understand and assess assumptions and biases that may be limiting diversity across your portfolio. This will provide a foundation to shift your processes and norms and set goals to flow capital to Black communities across Canada.
While there are some efforts underway to promote greater equity in capital flow and investment specific to Black communities in Canada, there is still a great deal of work to be done to address systemic barriers to access and opportunity. It is important that these efforts are consistent and ongoing, and not limited to Black History Month each year. The work to promote equity and inclusion requires sustained effort and commitment to ensure economic systems work for all.
“We must open the doors, and we must see to it they remain open so that others can pass through.” — Rosemary Brown, the first Black Canadian woman to become a member of a provincial legislature and the first woman to run for leadership of a federal political party.
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