Citi creates $1B initiative to close the racial wealth gap

Citi and the Citi Foundation today announced more than $1 billion in strategic initiatives to help close the racial wealth gap and increase economic mobility in the United States. Citi’s Action for Racial Equity is a comprehensive approach to 1) providing greater access to banking and credit in communities of color, 2) increasing investment in Black-owned businesses, 3) expanding homeownership among Black Americans, and 4) advancing anti-racist practices in the financial services industry.

To support these goals, Citi core businesses as well as the Citi Foundation are committing the following resources over the next three years:

  • $550 million to support homeownership for people of color and affordable housing by minority developers
  • $350 million in procurement opportunities for Black-owned business suppliers
  • $50 million in additional impact investing capital for Black entrepreneurs
  • $100 million to support Minority Depository Institutions’ growth and revenue generation
  • $100 million in Citi Foundation grants to support community change agents addressing racial equity

“Addressing racism and closing the racial wealth gap is the most critical challenge we face in creating a fair and inclusive society and we know that more of the same won’t do,” said Citi CEO Michael Corbat. “We are bringing together all the capabilities of our institution—our people, our lines of business, our balance sheet, and our philanthropy—like never before to combat the impact of racism in our economy. This is a moment to stand up and be counted, and Citi is committed to leading the way and investing in communities of color to build wealth and strong financial futures.”

According to the recently published Citi GPS report “Closing the Racial Inequality Gaps,” if the U.S. had closed key racial gaps for Black Americans in wages, housing, education and investment 20 years ago, $16 trillion could have been added to the U.S. economy. If these gaps are closed today, $5 trillion could be added to U.S. GDP over the next five years.

“We are in the midst of a national reckoning on race, and words are not enough. We need awareness, education and action that drive results,” said Mark Mason, Citi’s CFO and one of the industry’s most senior Black executives. “The commitments we are announcing today are just the starting point. By harnessing the central role Citi plays in local economies and the financial lives of Americans, we are determined to help close the racial wealth gap and help build an anti-racist economy and society.”

As part of Action for Racial Equity, Citi’s businesses are focused on four key outcomes:

GOAL #1: EXPAND BANKING AND ACCESS TO CREDIT IN COMMUNITIES OF COLOR

Why it matters:
Many communities of color lack access to traditional banking services that are the foundation of financial stability and thriving communities. Economic security is also hampered by insufficient access to credit, which makes it hard to qualify for affordable mortgages and small business loans.

What Citi will do:

  • Provide Minority Depository Institutions (MDIs) with up to $50 million in growth capital to strengthen their ability to serve racially diverse households and entrepreneurs.
  • Generate revenue for MDIs by inviting them into up to $50 million in loan participation opportunities between the Citi Community Capital division in the Institutional Clients Group and its clients to finance affordable multi-family rental housing.
  • Provide pro-bono technical assistance and training to MDIs—through a collaboration with Deloitte and others—to help MDIs navigate the changing economy, improve operational efficiencies and support talent development.
  • Partner with community organizations serving racially diverse households through Citi’s U.S. Consumer Bank to expand access to the Citi® Access Account Package, which includes low-cost checking and savings products and new digital financial education.
  • Alleviate one of the biggest barriers to banking by expanding the Citi ATM Community Network program that removes out-of-network fees at Citibank ATMs for customers of participating minority-owned banks and community development credit unions. Since 2016, Citi’s U.S. Consumer Bank has removed these fees for 440,000 customers of 28 institutions.
  • Put 1 million youth on the path to higher education by expanding the Citi Start Saving® platform—which initially was developed to power the City and County of San Francisco’s children’s savings program.

GOAL #2: INVEST IN BLACK ENTREPRENEURSHIP

Why it matters:
Black-owned businesses have long faced obstacles in obtaining loans. They are the most likely to apply for bank financing, but get turned down at twice the rate as white business owners. This financing gap is especially pronounced in the startup world, where studies show that Black entrepreneurs receive only 1% of venture capital funding.

What Citi will do:

  • Allocate an additional $50 million to the Citi Impact Fund exclusively to support businesses owned by Black entrepreneurs. Citi kicked off the fund in January with $150 million in capital for businesses that are developing solutions to social and environmental challenges.
  • Increase Citi business procurement spend with certified diverse suppliers from $700 million to $1 billion annually, including $250 million with Black-owned firms.
  • Launch a new program called Citi Start CreditSM, which will work with Community Development Financial Institutions (CDFIs) to help underserved entrepreneurs increase their credit scores and access more affordable credit.

GOAL #3: INVEST IN AFFORDABLE HOUSING AND PROMOTE THE GROWTH OF BLACK HOMEOWNERSHIP

Why it matters:
Homeownership is a key way to build wealth and equity, and safe, affordable housing is an important platform for financial stability. However, Black homeownership is at its lowest level since the 1960s. In addition, rental housing in many urban areas across the country is scarce and too expensive. Compounding this crisis is the near-absence of minority-owned real estate developers in the affordable housing industry.

What Citi will do:

  • Expand the U.S. Consumer Bank’s community lending team and its network of correspondent lenders to increase access to Citi’s mortgage products and services among minority borrowers in low- and moderate-income neighborhoods.
  • Provide $200 million of equity and preferential financing through Citi Community Capital to affordable and workforce housing projects by minority developers who either are the sole equity owners or are in a joint venture with meaningful equity participation. Some of this funding also will be invested in minority developers to build their capacity and allow them to compete for larger affordable housing projects.

GOAL #4: STRENGTHEN CITI’S POLICIES AND PRACTICES IN ORDER TO BECOME AN ANTI-RACIST INSTITUTION

Why it matters:
Advancing racial equity requires a more intentional focus on the challenges faced by communities of color and a commitment to becoming an anti-racist institution. Citi is taking a hard look at its own policies and practices to actively identify potential bias to help level the playing field for communities of color.

What Citi will do:

  • Strengthen due diligence processes for project-related financing to address environmental justice and social impacts on communities of color.
  • Develop standards for inclusive software design that eliminate bias and help deliver equitable outcomes to the communities Citi serves.
  • Expand Citi’s capital market activities with minority-owned broker dealers, assisting with their business and franchise development.
  • Work with marketing, communications and legal partners to establish guidelines that increase representation of people of color on Citi accounts and within their leadership teams.
  • Establish a council of senior leaders from across the company to develop additional product innovations, assess performance gaps and hold businesses accountable for Action for Racial Equity commitments.

In addition to Citi’s business commitments, the Citi Foundation is making a new $5 million grant to Living Cities to provide U.S. mayors with access to technical expertise, training, and seed capital for pilot initiatives that address racial wealth and income gaps. The Citi Foundation also is expanding employability and entrepreneurship efforts serving Black youth as part of a new three-year $100 million investment in its successful Pathways to Progress initiative.

“Citi is going beyond talking about discrimination by implementing concrete strategies to address longstanding inequities in communities of color,” said Kristen Clarke, President & Executive Director of the Lawyers’ Committee for Civil Rights Under Law. “Citi is charting a course that we hope will be replicated throughout the sector. We look forward to continuing our partnership.”

Over the past decade, Citi and the Citi Foundation have invested nearly $100 million in programs and partnerships aimed at closing the racial wealth gap. In 2020, with renewed attention on racial equity in the U.S. and around the globe, Citi donated an additional $10 million to Black-led organizations fighting for racial justice. Citi is also working to increase representation of Black employees in the U.S., especially in senior roles, and encourage a stronger awareness of the legacy of racism and discrimination in the workforce and the industry.

Certain Action for Racial Equity commitments, including portions of Citi’s investments in minority developers and in Minority Depository Institutions, will require approval from the Office of the Comptroller of the Currency.

For more information on Action for Racial Equity, visit citigroup.com/racialequity.

-Black Press USA