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|Date: 2022-07-05 Page is: DBtxt001.php txt00020531|
FINANCE & INVESTMENT Corporate Treasurers Get Serious About Shifting Cash to Communities
There’s been some skepticism regarding the announcements of big corporate investments in CDFIs and minority deposit institutions — are these one-offs just to generate a press release or first steps on long-term commitments?
Shareholders increasingly want to know how their companies are investing in diversity, equity and inclusion — both within the enterprise and in the communities where they operate. Employees are asking that question, too — often enough to make meaningful investments an important retention and recruitment factor. A talent pool that cares deeply about addressing disparities that the pandemic year laid bare will not be satisfied with pretty CSR reports and a few one-time grants.
In recent conversations with two corporate leaders — one in tech and one in banking — both characterized moving deposits and investments into visible community institutions as a way they could lead in addressing shareholder and employee demands. And I’m hearing similar observations from a widening circle of Fortune 1000 chief financial officers and corporate treasury leaders.
Tracking the trend
Data is just starting to accumulate on corporate investments in response to these market drivers, but what we have backs up the anecdotal evidence. CNote recently completed a survey of community development financial institutions (CDFIs) focused on their capital needs and found that 37 percent said they’ve seen increased inquiries from corporations.
Looking at publicly available reports, one of our analysts found that at least 15 corporations have invested or committed $500,000 or more to CDFIs, most of them in the past six months. The majority are banks, as you’d expect, but five are tech companies; and Starbucks recently committed $100 million to a multi-city initiative.
Answering the skeptics
There’s been some skepticism regarding the announcements of big corporate investments in CDFIs and minority deposit institutions — are these one-offs just to generate a press release or first steps on a long-term commitment? It’s hard to say at this point, but enough corporations are pursuing multi-year efforts that this qualifies as a real trend.
Companies that are serious about diversity and inclusion are integrating initiatives throughout their business operations; and many see their cash management and community investments as the next step. Mastercard, for example, has been a consistent and vocal supporter of women-led businesses through its Start Path accelerator, and is now working to move $20 million in deposits into underserved communities.
Another common question is about the value of shifting corporate investments and cash to communities: Do community deposit institutions even need liquidity in this environment? The answer is yes — and both timing and partnerships matter.
Corporate investments, including secondary capital and corporate deposits into mission-driven credit unions and banks, can be a critical driver of impact for low-income communities for years to come. This is not the time for corporations to press pause: Now is the time to get engaged.
Finding a frictionless path forward
One large corporate partner told us they’d been wanting to work more with CDFIs for years. But the time it took to do due diligence on, execute and report on investments in a largely manual and decentralized industry made acting on that desire time- and cost-prohibitive. And while community investing is exciting and meaningful work, it’s not the treasury department’s day job, and most teams don’t have the staff resources to do it.
Now, though, new technology platforms are unlocking investments in CDFIs that corporate treasurers used to find too complex to pursue — and offering insured options that mitigate the risk.
Impact reporting is another key piece of the puzzle that’s coming into place. The level of public scrutiny on what impact is and how companies are measuring it has dialed up considerably over the past year. The metrics on investments in low-income-designated credit unions and CDFIs are clear: They have to meet the needs of underserved populations to earn their designations from the federal government.
Feeling pressure to perform
I recently spoke with a senior executive at a major bank who had environmental, social and governance metrics and the bank’s disclosures front and center in her mind. She’s particularly interested in climate justice and how technology can make it easier for the bank to invest in climate initiatives within low-income communities. She said she feels a time crunch around walking the walk and not just talking about diversity and inclusion as a corporate value — she’s looking to take action.
More and more of her peers are going to be joining her as companies face rising expectations related to their ESG performance. In this light, managing cash for impact by moving a fraction of it into insured community deposit programs is low-hanging fruit. It’s like building a diverse board: It reflects a commitment to equity and it contributes to a better competitive position. That’s a big reward for one small, low-risk step beyond business as usual.
CNote Finance & Investment Walking the Talk Creating Shared Value Diversity, Equity & Inclusion Meaningful Connections Systems Shift
Published May 6, 2021 8am EDT / 5am PDT / 1pm BST / 2pm CEST
CATHERINE BERMAN CEO CNOTE
Catherine Berman is CEO of CNote — a fintech impact platform that helps corporations, foundations and banks deliver on diversity and inclusion goals by moving cash and investments into CDFIs and minority-led deposit institutions.
Published May 6, 2021 8am EDT / 5am PDT / 1pm BST / 2pm CEST
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