“That’s like saying, ‘Due diligence is dead,’” retorted Ron Homer, chief strategist, U.S. impact investing at RBC Global Asset Management. “Why wouldn’t you look at what a company does because it has geopolitical risks, it has government intervention risks, it has risks with its workers. All of these things are important tools to evaluate the ability of a company to generate cash, pay its bills, and survive.” 

The past year has seen a surge in legal challenges to grantmaking to diverse beneficiaries and impact investing in underrepresented communities. Notably, the August 2023 lawsuit against Hello Alice’s grant program for Black-owned small businesses and the subsequent lawsuits against the Fearless Fund, the Atlanta-based VC firm investing in companies founded by women of color. In September, a judge temporarily halted the Fund’s $20,000 grant program, calling it “racially exclusionary” and “substantially likely” to violate federal law prohibiting discrimination in contracting.

Needless to say, the intensifying litigation war over DEI and related efforts to rectify historical racial wrongs has not ceased. However, as companies and organizations—or, in this case, impact investors—navigate this new legal landscape, some are grappling with the long-held argument that terms like ESG and DEI need a marketing refresh.

That’s a point of contention among those in the DEI space, who claim that a rebrand is essentially kowtowing to opponents and, moreover, that those who are anti-DEI will still be anti-“insert new name here.”

Roy Swan, who heads the Ford Foundation’s mission investments team, is particularly fond of the term “patriotic capitalism.” Both words are imbued with such positive meaning for Americans, making the phrase much harder to weaponize than unknown terms like DEI or even “woke,” he told Fortune executive editor Lee Clifford.

“When we talk about patriotic capitalism in the context of impact investing, we think about investing with a few considerations in mind: country, democracy, and the common good,” Swan said. “Patriotic capitalism is essentially fairness.”

Homer said that simply using the term impact investing cuts through the semantics game. “It’s pretty clear. You have a social outcome and either want that social outcome or you don’t. And you have financial returns; you either make it, or you don’t.” What’s more, it allows each individual to define how they want to make an impact—whether it’s through healthcare, education, developing key communities, or promoting job fairness—and look for ways to make money by fulfilling those needs. In other words, doing financially well by prioritizing social good.

Last February, Ariel Alternatives, the private asset management firm affiliated with Ariel Investments, announced the close of its $1.45 billion Project Black fund, which seeks to invest in middle-market companies with an eye to those that are Black- and Latino-owned. “Our goal is to help close the racial wealth gap by creating minority-owned businesses of scale through access to both capital and customers,” Leslie Brun, cofounder and CEO of Ariel Alternatives, said at the time. Still, Project Black doesn’t consider itself an impact fund, said Lorenna Buck, managing director at Ariel Alternatives. “We often say we are capitalists with a capital C even though we expect to have an impact.”

Part of that rationale, she explained, is that making a societal impact is so fundamental to the fairness the fund is trying to drive. When thinking about where to invest, for instance, Ariel Alternatives considers which companies will create quality jobs in the U.S. and, by doing so, positively impact those who are least employed. “Who are the folks who need those jobs? It’s going to overwhelmingly be minorities who need to be uplifted if we’re going to get to a place where we have more equitable wealth distribution in this country.”

Ruth Umoh
@ruthumohnews
ruth.umoh@fortune.com

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