Treasurers get tapped to fulfil racial justice pledges

Since George Floyd’s murder in May 2020, many of the world’s largest public companies pledged nearly $50bn to increase opportunities for Black homeownership, entrepreneurship and education. But according to a thorough analysis by The Washington Post, 37 companies confirmed disbursing roughly $1.7bn of the initial pledge – just  three percent of promised amount. Increasingly, treasurers are getting tapped to fill the gap.

Cynics might look at these numbers and conclude that corporations are reneging on their promises. I don’t believe that is the case. What’s really happening is that corporations are finding out it is much harder than they expected to deploy billions of dollars into the right community financial institutions to deliver on their promises. That doesn’t mean they’re not trying – just the opposite.

Corporate treasurers are in the hot seat. They’re in a unique position to make good on racial equity promises by shifting corporate cash and investments to impact initiatives and they’re being tasked with doing that, but the work is well outside their usual job descriptions and there are no industry standards or guidance. Based on months of conversations with corporate finance leaders who’ve taken the lead on figuring this out, here are four strategies that can help treasurers move the approximately $50bn pledged into underserved communities:

1. Have a five-year+ plan. Making good on the billions pledged is going to require thinking critically and realistically about long-term solutions, with measured commitments over long-term horizons. Not every community financial institution will accept corporate dollars right now, for a variety of reasons including negative effects on the institution’s balance sheet and regulatory issues. Taking a long-term approach allows treasurers to forge relationships with community financial institutions that are aligned with corporate goals and achieve ongoing positive impact.
2. Invest beyond who you know. We all “know a guy,” right? A former classmate, colleague, or fellow conference attendee we can call or email about placing a deposit or investment. Treasurers will need to push back against that urge, though, to get the impact their companies want. There’s a growing asset gap between white-led and minority-led community development financial institutions that’s partly fuelled by our “who you know” culture and reliance on what organisations show up first on an internet search. It can feel more comfortable to invest in large, well-known community financial institutions. However, if treasurers don’t also invest in, and support, smaller community banks, they risk perpetuating disparities. Taking a “who you know” approach to impact investing can widen our country’s wealth gap.

One organization working to ensure that investment dollars find their way to smaller community financial institutions is Appalachian Community Capital (ACC), an intermediary CDFI that provides capital to 16 member CDFIs focused on creating jobs, revitalizing communities, and developing small businesses in Appalachia. From a corporation’s standpoint, partnering with an intermediary CDFI like ACC is easy and efficient. Instead of directly investing in a dozen or more individual CDFIs, a corporate treasurer can funnel money through ACC or similar organizations, which will distribute that capital to smaller CDFIs that aren’t as easy for investors to reach.

3. Use technology to make recurring, large-scale impact investing easy. I don’t want to oversimplify impact investing, but I also don’t want to perpetuate the myth that impact investing must be hard. A growing suite of tools and technology platforms is available to help treasurers efficiently, sustainably and intentionally move money, generate impact reports and evaluate risks. Corporations don’t need to hire a boutique consulting firm or a team of lawyers to make recurring, large-scale investments.
4. Consult your peers. You’re not the first corporate treasurer tasked with making good on a social equity commitment. You have peers out there whom you can learn from and strategise with. People like Alfred Kibe at Mastercard and Tony Glasby at PayPal have successfully invested tens of millions of corporate dollars through impact deposit platforms. Starbucks treasurer Peter Filipovic has been investing in CDFIs for years, channelling hundreds of millions of investment dollars into federally certified financial entities that are 100 percent dedicated to providing responsible, affordable lending to historically underserved borrowers.

Over the past year and a half, a vanguard of treasury leaders has stepped up to the moment and seized the opportunity to redefine how corporations align their dollars with their values. They’ve paved the way by modelling partnerships and supporting impact platforms that allow any corporate treasurer to safely and efficiently invest in underserved communities, further racial justice, shrink the wealth gap and meet or surpass those pledges.

Danielle Burns is vice president and head of business development at CNote and leads the Wisdom Fund research project, which focuses on increasing access to capital for women of colour.