Annie McShiras Self-Help CU - GreenMoney

Make Every Dollar Count: Is Your Cash Sleeping with the Right Partners?

By Annie McShiras, Investment Associate, Self-Help Credit Union

Impact investing has emerged as a major force in philanthropy. Last year the Global Impact Investing Network conducted a survey showing that the estimated value of the impact investing sector doubled between 2017 and 2018, increasing from $114 billion to $228 billion in assets under management.[1] The rise of impact investing signals a shift from a “do-no-harm” approach to a demand for investments that actively produce measurable positive social and environmental outcomes.

With the growing commitment to impact investing, investors are beginning to set a higher standard for all of their funds—including cash. Socially-conscious investors want every dollar to align with their mission and values. Who or what are their funds supporting when they aren’t directly deployed for projects or grants? What is the impact of their entire portfolio?

These aren’t easy questions. For individual investors, “looking under the hood” of investment vehicles can be confusing and time-consuming. Even for foundations and institutional investors, the challenge is daunting. Under federal law, foundations must distribute at least five percent of their endowments each year. For most, the bulk of their funds are “sleeping,” typically in Wall Street investments, bank accounts and other funds. That means, for example, that foundations could be directing their grant dollars toward fighting climate change while the majority of endowment funds — including their cash — are funneled to the worst polluters.

Move your Money!

The Dakota Access Pipeline is an example of a fossil fuel project that spurred people to think not just about where they invested but also where they banked. Opponents of the pipeline were very concerned about its environmental and human impact. When many realized they were keeping their money in banks that supported the pipeline developers, they were galvanized to launch a divestment campaign. That campaign resulted in divestment from banks estimated at $4.4 billion.[2]

The FB Heron Foundation, a private foundation that fights poverty, faced this kind of scenario head-on. A few years ago, Heron’s board members were dismayed when they discovered that, unknowingly, their investments were supporting a large corporation that runs private prisons — an industry notorious for abuses, and certainly not aligned with Heron’s mission.[3]

Heron responded by conducting a meticulous screening of their entire portfolio to assess every dollar for mission alignment. As a result, they now have moved over $150 million of their funds to impact-screened investment products.[4]

Another example is the McKnight Foundation, one of the country’s largest private foundations with $2.3 billion in assets. Driven by their commitment to address climate change, McKnight is also examining its entire portfolio, and they report that one-third of all their funds has verifiable mission alignment. According to The Chronicle of Philanthropy, no other foundation of its size can make that claim.[5]

Making More Impact with Mission-Aligned Partners

A significant part of screening for impact is taking a hard look at where your liquid cash spends the night — and more often than not, it is sleeping at a bank. Traditional banks do make essential loans for individuals across the country, but their obligation to outside shareholders means that community impact typically plays little or no role in their lending decisions.

The same is not true for community development financial institutions (CDFIs), which include banks, credit unions and nonprofit loan funds specifically certified by the U.S. Department of Treasury to focus on serving low-income and historically underserved communities. We represent the Self-Help family of credit unions, which is a Community Development Credit Union — one type of CDFI.

Nationwide, there are approximately 1,130 community development financial institutions of all kinds. Although Community Development Credit Unions (CDCUs) represent only 27 percent of that group, they hold the largest share of assets at 52%.[6]

Like all credit unions, CDCUs are not-for-profit cooperatives owned by their members. And like banks, they provide a wide range of services and offer federal insurance on deposit accounts up to $250,000. CDCUs are distinguished by their mission focus; namely:

  • Affordably priced loans, including to members with imperfect, limited or no credit history;
  • A focus on lending to strengthen all members, especially communities of color;
  • Financial education and counseling for members; and,
  • Products, services and support that can help members free themselves from high-cost and predatory debt, and achieve economic mobility.

When investors make deposits at CDCUs, they can be confident that they are helping to fund projects for the community good. Deposits translate directly into impacts like affordable home loans for first-time buyers; small business loans; loans to underserved markets including people of color, women and immigrants; and loans that support clean energy and projects that promote sustainability. Beneficial State Bank, based in Oakland, and the national Clean Energy Credit Union are two examples of mission-aligned banks and credit unions that have a particular focus on environmental justice.

Solar panels installed at Kent Corner, a Durham project funded by Self-Help, generated over 131,000 kilowatt hours of power since April 2016. Left to right: Brika Eklund (Self-Help’s Director of Real Estate); Chuck Wilson (CT Wilson, general contractor); and Melissa Malkin-Weber (Self-Help’s Director of Sustainability.)

For us at Self-Help, both philanthropic investments and individual deposits have been crucial to our work. In 1998, we were able to expand our impact significantly when the Ford Foundation backed our program to provide affordable mortgages nationwide. Leveraging their grant funds as a primary source of support, we have been able to work with partners to create home ownership for over 50,000 low-and middle-income families.[7]

Since then, we’ve broadened our work with foundations to accept Program Related Investments (PRIs) and Mission Related Investments (MRIs), so that our philanthropic partners can draw from their 95 percent endowment for both mission alignment and financial return. For example, we remain grateful for the Central Valley Community Foundation, which deposited $2.6 million in our small Fresno, California branch office. For our members, that deposit directly translates into 20 mortgages or 175 car loans.[8]

In October 2017, Fresno-based Central Valley Community Foundation announced a $2.6-million deposit into Self-Help Federal Credit Union’s Fresno branch, making this community foundation the branch’s largest single depositor.

Day-to-day, we depend on deposits at our 50 branches from a growing group of 150,000 individual and institutional members. In addition to affordable checking and savings accounts, we offer term certificates (CDs) to support loans aimed at helping women and children, place-based lending programs, and green initiatives: solar farms, land trusts, and businesses focused on sustainable foods, recycling, and ecotourism.

We are proud of our work, but very aware that we are not working alone. There are approximately 300 CDCUs across the nation, all focused on expanding economic opportunity for more families, and all offering a great place to put “sleeping” funds to work.[9]

Practical Ways to Take Action with Your Cash

Know your values, and then move your sleeping money in-line with your values!

Individual investors: If you have cash or fixed-income investments, find out where those funds are spending the night and research options that align with your values.

Financial advisors:  Give your clients the cash investment and savings options that are aligned with their sustainability goals.

Foundations and Institutional Investors:  Look at your liquid assets and consider moving a portion of those cash investments into a local community bank or credit union that advances your social or environmental mission with zero risk.

 

 

Article by Annie McShiras, investment associate at Self-Help Federal Credit Union, one of the fastest growing community development credit unions in the country with 150,000 member-owners nation-wide. For 39 years, Self-Help and its affiliates have provided $8.5 billion in financing to help over 158,000 low-wealth borrowers buy homes, start and build businesses, and strengthen community resources. Passionate about creating the change we seek, Annie has been promoting movements and cultivating resources for economic justice, the solidarity economy, and systems change for the past decade. Annie has worked in organizations on issues ranging from worker cooperative development to homelessness prevention to impact investing. Prior to joining the Self-Help team, Annie served as Director of Development and Strategic Growth at The Working World and as Development Director at the Responsible Endowments Coalition. 

Article Notes

[1] Global Impact Investing Network https://thegiin.org/research/publication/annualsurvey2018

[2] Reference: DeSmog https://www.desmogblog.com/2018/12/03/dakota-access-pipeline-concerns-cost-energy-transfer-investors-billions

[3] Yes! Magazine, “Foundations Have a Not-so-Charitable Secret,” by Chris Winters (Nov. 27, 2018) https://www.yesmagazine.org/issues/good-money/your-favorite-charity-has-most-of-its-money-in-wall-street-20181127

[4] https://www.heron.org/enterprise

[5] Chronicle of Philanthropy, “Climate Change Spurs McKnight to Go Big on Impact Investing,” by Marc Gunther (January 8, 2019) https://www.philanthropy.com/specialreport/good-returns/191

[6] https://www.newyorkfed.org/medialibrary/media/outreach-and-education/2017/CDFIs-Impact-Investing.pdf

[7] “Affordable Home Loan Secondary Market”

www.self-help.org/what-we-do/we-learn-and-innovate/secondary-mortgage-market

[8] Next City, “Moving Community Foundation Dollars from Wall Street to Main Street,” by Oscar Perry Abello (June 25, 2018) https://nextcity.org/features/view/moving-community-foundation-dollars-from-wall-street-to-main-street

[9] To find a community development credit union in your area, check out the national Community Development Credit Union trade organization, Inclusiv – https://www.inclusiv.org

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