Impact investing refers to “investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.” (thanks Wikipedia)
Impact investing can take on many forms. Thanks to our work with corporate reporting and corporate social responsibility programs, we’ve written a lot about impact investing of the stocks and bonds sort. But this post is going to explore a different kind of impact investing that nearly anyone can relate to: savings accounts.
Paladino leaned into impact investing in the wake of the protests for Black lives last summer. You can read about it here. Through our investment at Beneficial State Bank, we’ve had the opportunity to get to know Stacey Krynsky, the bank’s vice president and client treasury manager. In addition to her work for Beneficial State, Stacey is on a mission to support BIPOC communities through financial initiatives, and she welcomes you to her cause!
Tell us a little about your background, and what led you to the work you are doing today.
Spending the last 14 years of my career in finance, I have been deeply passionate about helping the nonprofit and HOA sector by helping remove roadblocks so they can support their mission. In my newest role, this allows me the freedom to hear clients’ needs, and truly find a solution that fits them. Whether it is helping a business find a new location to grow into, assisting with employee engagement, assembling volunteers, or just being the cheerleader for their cause, I revel in the opportunity.
I’ve heard you say that “banking belongs to all of us.” What do you mean by that?
Banks can’t lend money they don’t have. So, where do they get that money? Mostly, from all of us; they use our deposit dollars. Banking is the oldest form of crowdfunding. Banks pool our deposits and then lend against them, like leverage. A bank can lend up to $10 for every $1 we deposit, so it’s important that we choose a deposit institution that aligns with our values. And, thanks to transparency laws and FDIC reporting, it’s getting easier to determine what our hard-earned money is supporting while it’s in the bank. For example, if you are a human rights advocate, it would be desirable to select a bank that doesn’t finance private prisons—an institution that the Justice Policy Institute describes as, “… a system marked by racism, corruption, and inhumane treatment.”
What is impact investing, and how does cash play into it?
There are many good investment options for those who want their cash and investments to align with their values. Impact investors select values-based investments, such as environmental restoration or social equity endeavors. Check out the Global Impact Investing Network to learn more.
But, your cash is a passive investment, as well. Banks invest your cash when they lend it out. So, when you choose to bank with an institution that focuses on impact sectors, like social-impact nonprofits, clean energy, and regenerative food systems, you are, in a sense, an impact investor. You are entrusting your bank to do good things with your hard-earned cash.
What guidance can you offer about choosing a financial institution that aligns with values?
There are five questions that you can ask about any institution, and the answers you get will inform your decisions:
- Triple bottom line approach: Does the institution deliver benefit to communities and our planet, while being financially stable?
A lot of people ask me what I mean by “triple bottom line” – most businesses focus on a single bottom line – and that bottom line is profit. When an organization elevates other goals to be equal with profitability, they create additional “bottom lines.” In other words, they give themselves permission to prioritize activities that aren’t necessarily profitable. For Beneficial State, we prioritize People and Planet. And, because of our “Do No Harm” policy, we also cannot generate a profit at the expense of People and the Planet. Because, after all, that would just be undoing all the good we are investing in.
- Grounded in communities: Does the institution understand the needs of the people in the community it serves?
If you are grounded in your community, you’re focused on other people’s problems and how you can solve them. This can get messy, especially for control-minded banks, forcing them outside of their comfort zones and standard operating procedures. For example, maybe your bank wants to serve LGBTQIA communities, and your marketing reflects that. But when someone in that community needs to change their name during their gender transition, do you have the capability and infrastructure built to support that? Oftentimes, the answer is no, even for large, well-resourced entities. So, if you are truly “grounded” in your communities, you are holistically supportive of each target community, their journey, and the policies and practices that support them.
- Products for people and the planet: Are the institution’s products and programs designed and priced to meet the needs of customers while also safeguarding the environment?
Values-based banking is as much about how you deliver a product or service as it is about the product itself. We design our offerings, down to our needs analysis, relationship management structure, underwriting, and pricing, around the people and organizations we are trying to support.
For instance, nonprofits have unique challenges and needs. Their income is irregular. Their governance is often fluid. They are considered “high risk” by many banks, as profitability is not their bottom line. Banks that are committed to serving this sector must rethink how they assess and price for risk and consider providing support to their clients beyond just loans.
The pandemic made revenue generation and operations particularly challenging for many nonprofits. To support our nonprofit clients through that instability, Beneficial State brought our clients resources. This included PPP loans, planning support through our client-partner Mission Met, and strategy guidance through another entity, Altruist Partners. Offerings like this bring world-class business resources to smaller entities and foundations that might otherwise never be able to access them.
- Does the institution follow ethical employment practices?
Are employees paid a living wage? Is the team representative of the communities it serves? The question of ethical employment practices is particularly near and dear to our hearts. It is no secret that nearly a third of bank tellers are on some form of public assistance. Can you imagine that? The people you entrust your money to don’t pay the people handling your money enough to live on. That is why we index to the living wage in each of our regions and target compensation levels at or above 150% of that index.
Not only does Beneficial State prioritize diversity within our staff, leadership team, and board, but our primary equity owner, Beneficial State Foundation, is writing the book on such practices. In collaboration with the National Community Reinvestment Coalition (NCRC), Beneficial State Foundation crafted a report asserting that diversity, equity, and inclusion should be a mandatory and regulated component of a bank’s operations. The Racial and Ethnic Representation and Investment Framework outlines nearly 200 banking standards and provides actionable recommendations to address issues such as under representation of minorities and women in upper-level management. The Foundation’s work toward equitable banking standards was featured in Nonprofit Quarterly.
Source: Equal Employment Opportunity Commission (EEOC)
5. How transparent is the institution about its impact and practices?
Do you know what kind of loans your bank makes? Does it publish its impact? Where can you find this information?
One of our values is “radical transparency.” As you can imagine, it takes a lot to get radical around such a mundane function. But, Beneficial State Foundation helps us get there. The Foundation audits every business and nonprofit loan we make, assessing it for inclusion and impact, identifying the benefactors and funds recipients. This helps us report on the impact sectors we are financing and the causes we are furthering. To take it one step further, this information is public, on our impact site. There you’ll find our prior impact reports outlining our goals and accomplishments, the Foundation’s values, handy impact snapshots, and our affiliations and certifications. I also encourage anyone who wants to explore impact banking to check out Banking for Good at https://bankforgood.org. They have a ton of great information.
What advice do you have for people and businesses who want to change up their approach to banking?
Set a goal and pick a place to start. A small bank will operate differently from a megabank institution. But remember that you don’t have to have an all-or-nothing banking solution. Mighty Deposits and the Bank for Good guide can help you find a bank that aligns with your needs and values.
Maybe you will keep your big bank credit card but place your savings elsewhere. Keeping even a modest savings account at a smaller community, nonprofit or BIPOC-owned bank can have an outsized community impact as those funds tend to stay local and get leveraged for lending. If you can, find a local Community Development Financial Institution (CDFI) for your checking, savings, or CD. CDFIs are private financial institutions audited and certified to offer responsible and affordable lending to low-income, low-wealth, and other disadvantaged people and communities.
What are some of the contributions that Beneficial State Bank has made to the community? How has your bank put money to use?
We’ve been busy! Our vision is of a new economy that is fully inclusive, racially- and gender-just, and environmentally regenerative. Our ownership model mandates optimizing (rather than maximizing) profit to achieve social and environmental impact. One hundred percent of distributed profits are redistributed to the community, rather than to private shareholders. Here are just a few things we’re especially proud of:
- As of December 2019, we have over $760 million outstanding business and nonprofit loan commitments, 81% of which directly serve our mission supporting a more socially-just and environmentally-sustainable world. None are counter to this mission.
- As a signatory and endorser of the United Nations’ Principles of Responsible Banking, we practice, uphold, and advance banking aligned in the public interest at a global level.
- B Lab acknowledged us as a 2019 Best for the World Honoree, for the sixth consecutive year, in recognition of our social and environmental impact in pursuing business as a force for good.
- The Federal Deposit Insurance Corporation (FDIC) issued an “Outstanding” overall rating for our Community Reinvestment Act (CRA) performance.
- Our Clean Vehicle Assistance Program has made $2.4 million in grants as of December 2019, helping 452 low-income Californians get access to hybrid or electric vehicles.
- Our collaborative policy advocacy efforts have prevented the loosening of important regulations that would otherwise cause harm, and we’re working to ensure government requires triple-bottom-line practices by all banks.
- Our field-building work, in coalition with broader campaigns, has empowered impacted communities to have a voice and a vote to drive prosperity for all.
- Our industry relations team works to call on, and sometimes call out, banks to work together on policies and practices that serve the public interest.
Why is sustainability important to Beneficial State Bank?
Our environment and our collective prosperity are intertwined. We often argue that sustainability is insufficient. In many cases, the problems we are trying to solve for—inequity, marginalization, resource destruction, discriminatory regulations—actually call for restorative and regenerative efforts. From our generous paid volunteer time for our staff to our mission categories and goals, we are going beyond simply trying to sustain. We know we can do better if we come together and make informed choices. And, we believe that as a result, we will all be healthier, happier, and more prosperous in the long run.
- Bank for Good
- Beneficial State Bank Impact Report
- Community Development Bankers Association (CDBA)
- Global Alliance for Banking on Values
- New Economy Coalition
- USGBC LEANS INTO SOCIAL EQUITY WITH NEW TOOLS
- FIVE WAYS YOUR SMALL BUSINESS CAN SUPPORT BLACK-OWNED BUSINESSES