Corporations, nonprofits, and other organizations: how to bank for impact
Mighty Deposits Guide, 2023 Edition
There are countless opportunities for mission-oriented organizations to bank with mission-oriented banks. Corporations, foundations, and other organizations are increasingly utilizing banking as a tool to advance social equity. The movement towards intentional banking — sometimes called mission deposits, impact banking, impact deposits, transformational deposits, socially responsible banking, or justice deposits — has been picking up traction as organizations both reckon with their role in addressing social issues and respond to growing consumer demand for socially responsible business practices. For organizations looking to make a positive impact, taking action through banking choices is a tangible first step with no/minimal downside. As the Harvard Business Review noted in their coverage of the mission-driven banking trend, moving money between banks “comes with near-zero opportunity cost, given the universally low-interest-rate scenario we are in — and zero risk thanks to the FDIC insurance.”
Types of investment into impact-oriented banks
Though cash deposits are an easy first step into a relationship with a new bank, organizations seeking to maximize impact should consider all types of relationships with banks.
Cash deposits - move a percentage of cash holdings to a CD, savings, checking, or money market account (this is an easy first step that allows organizations to get to know a new bank)
Loan financing - take out a next business loan or refinance a current loan with a values-aligned bank
Switch entire banking relationship – move all business accounts to a new bank
Equity investment – banks need to maintain capital requirements, so equity investments allow community banks to grow their impact (learn more in ImpactAlpha: “Corporate deposits in CDFIs are good. Equity investments would be even better.”)
Quick facts about safety and cost
There are 10,000 banks and credit unions with federal deposit insurance, meaning deposits are 100% safe up to $250,000
Many banks offer insurance on amounts larger than $250,000 through a program called CDARS (See all banks that offer CDARS)
Though interest rates are low across the industry, small and midsize banks on average offer higher interest rates on deposits than the biggest banks in the U.S.
Impact Pro-Tip:
Adding impact to your banking portfolio is about reaching out to impactful banks and credit unions whenever your organization needs anything from a bank (cash management, credit cards, loans, other financing, etc.). It's not just a one-time "donation" deposit, which can actually be costly for banks to accept. This is because banking is structured and regulated as an activity that people and organizations do ongoing, and not as a one-time, stagnant “donation.”
At the same time, of course, a one-time deposit (checking, savings, CD, or money market) is how organizations can take a first step into building a relationship with a community bank. Because of this, banks and credit unions will typically not turn a new deposit (and its relationship potential) away.
Keep in mind that impactful banks are full-service banks; make impactful banks an ongoing part of how your organization banks. There’s more they can do for you than you may have considered.
Examples of organizations banking for impact
From technology companies and universities to small businesses and local non-profits, organizations of all sizes have taken a range of impact banking actions. Here’s a sampling:
CORPORATE DEPOSIT -- Paypal -- $50 million deposit into Optus Bank
CORPORATE DEPOSIT & INVESTMENT -- Netflix -- $10 million deposit into Hope Credit Union and $25 million into the Black Economic Development Fund, which injects capital into Black-led financial institutions
CORPORATE DEPOSIT -- NerdWallet made a $2 million dollar CD deposit in Self-Help FCU and a call for other tech companies to join NerdWallet in taking similar action through Inclusiv’s Social Impact Deposit Platform
UNIVERSITY DEPOSIT, MULTIPLE BANKS -- University of Chicago -- deposited $1 million across four community banks in Chicago
RELIGIOUS ORGANIZATION DEPOSIT -- Community Christian Church -- moved $500,000 into Broadway Federal Savings Bank
SOCIAL ENTERPRISE DEPOSIT -- Paladino & Company (a sustainability consulting firm) -- made a $20,000 deposit into Beneficial State Bank
COMMERCIAL LOAN, MULTIPLE BANKS -- Atlanta Hawks -- refinanced a construction loan for their stadium with several Black-owned banks
ENTIRE BANKING RELATIONSHIP, SMALL BUSINESSES, COMMUNITY ORGANIZATIONS, IMPACT LEADERS -- Examples of people and community-based organizations that have chosen community-focused banks for their money & values’
A platform for corporations to place CDs with community development credit unions
Community Development Financial Institution (CDFI) credit unions are credit unions that direct the majority of their financing into low-income communities and communities of color. A new Social Impact Deposit Platform from Inclusiv, a nonprofit organization representing CDFI credit unions, makes it easy for corporations, nonprofits, and other depositors to place CDs directly with one or more CDFI credit unions and secure deposit insurance, up to millions.
Compare the community lending and place-based focus of all 300+ CDFI/low-income credit unions across the US, here.
How to find a bank that matches the values of your organization
When choosing a bank partner for ESG reasons, organizations can look at a variety of metrics and certifications. Depending on their stakeholders, values, and business activities, organizations may explore a range of impact-oriented banking options. Though many banks will have a lot to say about their efforts to give back to the community, pay attention to the most impactful aspect: where/how a bank lends and invests. To search the database of all banks in the U.S. and filter by all impact areas, click here. Here are some starting points:
Lending-based and values-based certifications
Community Development Financial Institution (CDFI) banks: these banks are certified by the treasury for targeting at least 60% of financing to low-and-moderate income communities and/or communities of color.
Sustainability-focused banks: these banks have prioritized sustainability via B-Corporation certification and/or membership to the Global Alliance for Banking on Values
Ownership-based certifications
Banks owned or led by Asian Americans, Black Americans, Hispanic Americans, or Native Americans: these banks are certified by the FDIC for being Minority Depository Institutions (MDIs). MDIs are depository institutions where (1) 51 percent or more of the voting stock is owned by minority individuals; or (2) a majority of the board of directors is minority and the community that the institution serves is predominantly minority.
Place-based or local economy banks
For organizations looking to keep their money circulating in the local economy through a bank with local decision-makers, consider:
Banks focused on specific geographies: enter locations of interest into this search tool to find banks with a large percentage of operations based in any zip code, city, metro area, or state
Looking for introductory guides to socially responsible banking, eco-friendly banking, or Black banking?
Other ways to support impact-focused banks
Businesses and organizations can offer banks technical assistance, marketing and media assistance, and other capacity-building support.
Examples:
NerdWallet is lending its expertise in technology and media to support CDFI credit unions (see case study)
Google supports First Independence Bank to improve the bank’s digital experiences for customers (see press release)
An easy first step: speak with a mission-driven bank to discuss the needs and aims of your organization
Click on any image to get started, access the bank website, and/or set up an opportunity to speak with a banker. Below are banks that have opted to add more transparency and contact information to their Mighty profile.
Need additional help or ideas? Email us.
Since 2016, Mighty Deposits has been helping people and organizations advance their values through their banking. We can help you, too. Contact us.
Related Coverage:
https://www.protocol.com/tech-investing-black-owned-banks
https://hbr.org/2020/12/could-gen-z-consumer-behavior-make-capitalism-more-ethical