Morgan Stanley backs minority-owned impact investing firm

Damien Dwin launches firm to fund sustainable housing, small businesses, women-owned firms and diverse populations.

Private credit veteran Damien Dwin has launched social-impact driven investment firm Lafayette Square Holding Co. with backing from Morgan Stanley.

The minority-owned firm will focus on flexible capital investments in sustainable housing and small businesses that provide jobs to local communities, as well as seeding general partners run by women or diverse populations.

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Dwin had been mulling the launch of an impact-focused firm for some time, with the idea crystallizing during the COVID-19 outbreak in the U.S. in March. It accelerated following the killing of George Floyd and subsequent protests, including one in Washington’s Lafayette Square steps from the White House, where President Donald Trump ordered protesters to be cleared out with tear gas before taking a photo in front of a church.

The firm’s name took on “new and unexpected meaning” after that day, Dwin said.

“The onset of the pandemic and social unrest has elevated ESG in the conversation, and it is my hope and expectation that we will move from rhetoric to action,” said Dwin, who is Black. “This is personal and professional.”

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Inequality that already existed in the U.S. has been exacerbated by the pandemic, which has hammered small businesses, cost jobs and imperiled housing, especially for people of color. While policymakers unleashed unprecedented fiscal and monetary support to stimulate the economy, Dwin said minority populations that have been “chronically under-served” were left behind.

Lafayette Square will focus on providing housing, jobs and financial inclusion to diverse communities. Dwin said the firm’s focus was influenced in part by a response to nationwide race riots in the late 1960s, which were linked to a lack of economic opportunity.

Morgan Stanley has provided $100 million of financing to launch Lafayette Square, according to a statement Tuesday. Dwin, who co-founded private credit firm Brightwood Capital Advisors and has previously worked at Credit Suisse Group AG and Goldman Sachs Group Inc., will serve as chief executive officer.

Employees own over 90% of the firm’s equity, with Capricorn Investment Group’s Sustainable Investor Fund and Schusterman Family Investments among holders. Lafayette Square’s first investment came late last year in Factory_OS, which creates affordable modular multifamily housing, according to its website.

Dwin says Lafayette Square has a “very ambitious growth plan” against a backdrop of increased focus on impact in credit. It launched with 17 employees and expects to grow to 65 by 2022, according to the statement.