Interactive Workshop (*Up to 40 Participants)
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Redefining “risk”: Dismantling systemic racism in the underwriting and due diligence process

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We know that although redlining is officially illegal, capital still does not flow equally in communities of color compared with white counterparts. Decades of disinvestment as a result of redlining have resulted in low property values that do not appraise to full project cost, further perpetuating the vicious cycle of disinvestment and disparity. IFF has offered non-appraisal-based lending since our founding in 1988 to meet unmet financing needs for those nonprofits serving lower-income communities. Though we did not use an explicit race equity lens in determining that appraisal bias was causing systemic injustice, in deconstructing the challenges that faced our nonprofit partners, we knew we had to construct a different underwriting and approval regimen. Despite this non-traditional underwriting approach, we have maintained a sterling financial record, which has taught us that we can evaluate risk differently and more equitably.

However, we also know that this is clearly not enough. Over the last two years, IFF has been on a journey to develop our values around racial equity, interrogate our policies and practices through a racial equity lens, and begin to put equity into practice. This has forced us to ask some very hard questions, especially in our core real estate lending business, about how our understanding of “risk” defines what we value:

  • Are we imposing additional burdens on smaller, grassroots organizations whom we perceive to be riskier?
  • What does it mean to expect a certain type of board composition?
  • Is power and influence too concentrated in a few individuals on the credit committee?
  • If we take more “risk”, what does that mean for our investment management track record, and how do we find funding partners who will help us share that “risk” while we learn?
  • How do we continue to ask critical, probing questions to ensure strong credit decisions while acknowledging the implicit bias that may be present in such questions.

In this session, we will first share examples illustrating the difficult conversations that happen in our credit committees, and hear from partners whose trust and engagement make this work possible, including from fellow CDFI partners and funders who are on similar journeys. Then in small groups, we will have facilitated discussions to explore what does it mean to change our perception of risk. How do we do so prudently and continue to attract capital? What else should we do to ensure that the systemic racial biases in finance are removed?

Confirmed Panelists

  • Representative from IFF, a Community Development Financial Institution headquartered in Chicago, IL serving nonprofits and their real estate financing needs across the Midwest. The specific individual is to be confirmed, but it will feature someone who is deeply embedded in both IFF’s credit decisions and racial equity work.

Unconfirmed Panelists

  • A funder/investor who is also committed to racial equity, and has partnered with IFF to structure their investments to allow for flexibility and experimentation in pursuit of improved ways of redefining risk that do not perpetuate systemic bias.
  • Two fellow national-level CDFI partners who are also wrestling with questions of equity and justice in their own internal underwriting processes.

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