This Week in ESG and Impact Investing

The Federal Reserve raised interest rates by 25 basis points on September 16, increasing the federal funds target range from 3.50%–3.75% to 3.75%–4.00% . The vote was unanimous.  For Black and minority-owned businesses the consequences deserve closer examination. Following the Fed announcement, major U.S. banks increased their prime lending rate from 6.75% to 7.00% . Prime is particularly important to small businesses because many commercial lines of credit, working-capital facilities and SBA loans are either directly or indirectly tied to it. The result is straightforward: the cost of business capital just went up. Estimated Black/Minority Business Borrowing Costs Before and After the Hike The table below illustrates the immediate effect on small-business borrowing. These are not race-specific quoted rates—but lenders are known to have a separate unpublished “Black business rate.” The table below illustrates rates using common prime-linked financing products. For a minority-owned ...

On December 10, 2025, the Federal Reserve lowered its federal-funds rate by 0.25 percentage points , bringing the target range to 3.50%–3.75% . Federal Reserve The Fed cited slower job growth, a rising unemployment rate, and still-elevated inflation as factors — choosing to act now to support employment, while leaving open further adjustments depending on future data.  For Minority Business Enterprises (MBEs)— most of which operate as small businesses — this decision has potentially significant consequences. Why rate cuts tend to benefit MBEs 💸 Lower cost of borrowing and improved cash flow When the Fed cuts its benchmark rate, banks often reduce their prime and lending rates in response — which tends to make loans, lines of credit, and business-credit cards cheaper.  For businesses with variable-rate debt, this lowers monthly interest payments automatically; for those seeking new financing, access becomes more affordable.  For many MBEs, with thin margins ...

COST-SAVING OPTIONS FOR BLACK AMERICANS TO CONSIDER AS MORTGAGE RATES EXCEED 7%. William Michael Cunningham, an economist and owner of Creative Investment Research, says that though the 30-year rate has increased, it is still much lower than it was in October 2023, when it was about 7.8%. He says that means the monthly costs for today’s buyer on a $250,000 mortgage with a $10,000 down payment is $1,728 at 7.8%, as opposed to $1,613 on a 7.1 % mortgage. He says the difference would save a buyer over $41,300 over the life of the mortgage in payment and interest costs. “That’s four times the amount of the down payment than you placed on the home that you’re buying, giving you more money to buy another house if you decide to do so.” He says another cost-saving option Black homebuyers should consider is energy-efficient mortgages . See: https://www.blackenterprise.com/cost-saving-options-for-black-americans-to-consider-as-mortgage-rates-exceed-7/

According to   CNBC , with "turmoil in the financial sector and uncertainty ahead, the Federal Reserve will likely approve a 0.25 percentage point increase at this week’s policy meeting." This is probably incorrect. As the New York Times  noted, it has been "one year since the central bank began the current rate-raising cycle. Many economists expect central bankers to raise interest rates a quarter-point, to just above 4.75 percent, on Wednesday, continuing their fight against rapid price increases." We are not one of those economists. With uneven markets signaling a real risk of further bank runs, the safe strategy is to pause rate increases. This is supported by the fact that an important measure of inflation,  #CPI  , rose 0.4% in February and 6% from a year ago. This is down from 9% in June, 2022. A decline of this magnitude and an increase in tech layoffs both point to the fact that Fed policy is working, with no need for immediate additional pressure on bankin...

Our model of Federal Reserve policy estimates the probability that the Federal Reserve will increase interest rates. Our July 3rd Summary shows that the probability of the US Federal Reserve increasing the federal funds rate is 90.53%. While our model needs to be adjusted, as noted below, we remain confident in these results. The first forecast adjustment element are the previous hikes. Recall that in March, 2018, our model predicted a rate increase with a 92.3% probability . The rate increase following the June 12 – 13 FOMC meeting decreases the probability of subsequent rate increases, if only slightly (90.53% vs 92.30%). One precedent for the Fed raising rates in this manner came in 1994, during the Clinton Administration, when the Fed raised rates from February to May at a 25 basis point pace. Interest rates increased from 3.25% to 4.25% in 4 months (FED, 2018). Each successive rate increase adds less to policy impact. Given that the Fed has  raised interest rates two ...

On July 13, the Senate Committee on Banking, Housing, and Urban Affairs met in open session with the Chair of the Board of Governors of the Federal Reserve System, the Honorable Janet L. Yellen, for“The Semiannual Monetary Policy Report to the Congress.” I attended this hearing and this blog post shares my reaction as well as some analysis. Despite the fact that the hearing was supposed to be about monetary policy, the Senators mostly questioned Yellen about regulatory issues. Republicans have been pushing for widespread rollbacks of Dodd-Frank financial regulations, so this is not surprising. This regulatory theme was apparent from the beginning, with Sen. Mike Crapo (R-ID), the Chairman of the Committee, asking Yellen to affirm that she believes Congress needs to act on some areas of financial reform and that the Fed would work to make suggestions to the Committee, both of which Yellen readily agreed to. The ranking Democrat, Sen. Sherrod Brown (D-OH), quickly responded b...