On Wednesday, Citigroup, the nation’s fourth largest bank by asset size, pledged more than $1 billion over the next three years to address the widening racial wealth gap and increase the economic mobility of Black Americans.
“The pandemic is a health crisis with severe economic implications and it’s led to an unveiling of the systemic racism that has existed in this country for far too long,” says Citi’s CFO Mark Mason, who’s part of a small cadre of prominent Black executives on Wall Street.
Citi’s announcement follows that of Bank of America’s in June pledging $1 billion to advance racial equality and economic opportunity over a four-year span.
The coronavirus pandemic and subsequent demonstrations against the killings of Black people have placed a searing spotlight on existing racial disparities in the U.S., bringing them to the fore of the business world’s conscious.
“It has been a catalyst for many companies to really try and get after this in a substantive way, and for Citi, it’s certainly caused us to take a step back,” Mason says.
CEO Michael Corbat, who encouraged employees in an internal memo to do their part to create a “truly equal and just society.”
As protesters rallied across the country, reigniting a national conversation about race, Corbat challenged his executive reports to conceive a strategic initiative that would address key factors of economic racial injustice and deliver meaningful impact to the Black community.
Those executives swiftly assembled a team of business leaders throughout the firm to devise what would later form Citi’s $1 billion commitment to help advance racial equity and allay the financial drag Black people experience in the U.S.
The funds will be directed toward expanding access to banking and credit building in communities of color, investing more heavily into Black-owned businesses, promoting the growth of Black home ownership and strengthening Citi’s antiracism policies and practices.
Nearly half of the three-year investment will be meted out to boost homeownership for people of color, which has historically been one of the primary drivers of wealth creation in the U.S., and support affordable and workforce housing projects by minority developers. Just under $400 million will go toward procurement opportunities for Black-owned business suppliers while $50 million will go toward additional impact investing capital for Black entrepreneurs.
Citi is allocating $100 million to support the growth and revenue generation of Minority Depository Institutions, which play a critical role in fostering the economic viability of the communities they serve, by supplying them with $50 million in growth capital. The bank’s philanthropic arm, Citi Foundation, will receive the remaining $100 million to provide economic opportunities for young people in underserved communities.
Citi is also scrutinizing some of its own longstanding policies. The bank says it will develop standards for inclusive software design that eliminate bias, expand Citi’s capital market activities with minority-owned broker dealers and increase the representation of people of color on Citi accounts and within their leadership teams.
Mason says that weeding out a company’s underlying and often deeply rooted biases requires a thorough probe and heavy introspection. “It’s not until you take a hard look at those things—the screening processes that exist, the age-old criteria that’s been designed—and are challenged to see who they’re inadvertently leaving out or boxing out, that you can then change them in a way that helps to eliminate those obstacles.”
The bank’s financial commitment comes on the heels of a new Citi-sanctioned report that puts a numerical figure behind the economic cost of Black inequality in the U.S. Published on Monday, the analysis found that nearly $5 trillion could be added to U.S. GDP over the next five years if four key racial gaps for Black people—wages, education, housing and investment—were closed today, a .4% annual increase to U.S. GDP growth. Closing those key racial gaps 20 years ago could have yielded a $16 trillion gain to the U.S. economy, according to the report.
“Addressing racism and closing the racial wealth gap is the most critical challenge we face in creating a fair and inclusive society,” Corbat, Citi’s CEO, said in a press release announcing the bank’s pledge. “We are bringing together all the capabilities of our institution…like never before to combat the impact of racism in our economy.”
Citi will establish a council of senior leaders from across the company to assess its performance and hold businesses accountable to the bank’s racial equity commitment.