How treasurers can lead their company's impact investing | Greenbiz - GreenBiz

When you think about who makes the greatest social and environmental impact with corporate dollars, you probably think of the head of ESG or the chief investment officer, not the treasurer. Today’s corporate treasurers, however, are redefining their role beyond risk mitigation, and they’ve become a surprising source of impact within their organizations, moving millions of dollars of cash and investments into low-income communities.

Corporate finance departments haven’t historically been positioned to create impact within their organizations, but an ever-increasing amount of attention on ESG; diversity, equity and inclusion (DEI) and racial justice initiatives has led C-suite executives to look holistically at their business practices for opportunities to innovate. That’s led corporate leaders to recognize that they need new tools to advance change, demonstrate corporate leadership and be good corporate citizens.

According to the philanthropy research organization Candid, following the police killing of George Floyd in May 2020, American corporations emerged as the leading funding source for social and racial justice initiatives. And because many of these ESG and DEI initiatives are directly tied to money movement, whether it’s cash or investment, corporate treasurers are an often hidden but essential driver of social impact within an organization.

There’s such an opportunity today for treasurers to redefine how corporations align their dollars with their values.

So, first and foremost, we need to recognize the great work that many treasurers already are doing in terms of aligning corporate dollars with impact initiatives. Let’s not forget that this probably isn’t part of their job description. Instead, treasurers who are being intentional about impact investing are going above and beyond what they’re paid to do and, more often than not, they’re learning as they go. Until recently, there was no playbook for this.

With that in mind, here are four key learnings that corporate treasurers may want to consider when thinking about how they can leverage their position within an organization to create tangible impact.

1. You don’t need to reinvent the wheel. The most common approach I hear from corporate treasurers trying to create impact is this: They call up a few mission-focused banks and try to move in millions of their deposits. What these treasurers eventually realize, however, is that this isn’t a scalable strategy. Indeed, too much capital actually can be a bad thing, negatively affecting the capital ratios these organizations must maintain.

That’s not to say that you need to hire a boutique consulting firm that takes two years to put together a roadmap and deal plan for you, or that you need to hire a team of lawyers to pull this off. The low-friction approach is to take advantage of technology platforms created to help you efficiently, sustainably and intentionally move money, generate impact reports and evaluate risks. There’s a common myth among corporate treasurers that this is really hard, but remember, you’re not the first one to do this  and you definitely don’t have to invent anything from scratch.

2. Invest in long-term partnerships. I’ve heard from a lot of treasurers that they reached out to a minority depository institution, or MDI, which turned down their corporate deposit. It’s important to remember that this doesn’t mean that deposit programs are a bad idea. Instead, that rejection likely indicates a mismatch in either timing or scale (or both). That Black-owned bank might not need your deposit tomorrow, but they would likely take it sometime in the future. Partnering with impact deposit platforms such as CNote can help resolve the need-supply mismatch in a scalable, authentic way, while empowering corporations to foster deep, direct relationships with those same institutions.

If the timing is not right with an MDI, it isn’t necessarily a reason to walk away in frustration. Instead, when thinking about generating impact through your corporate finance department, be prepared to forge partnerships built with the future in mind. A long-term approach to these capital programs will increase the positive impact your organization’s funds have on underserved communities.

3. Don’t fall victim to analysis paralysis. For risk-minded treasurers, there's definitely the friction of identifying who to work with and where to channel cash and investments to create impact. Some treasurers view community investments through the same risk framework that they use for all of their investments, while others acknowledge that it makes little sense to apply those same risk standards to low-income communities. It can be hard to know where to strike the right balance.

If you’re feeling stuck, I suggest reaching out to a peer at another corporation who’s experienced success. For example, Alfred Kibe, the corporate treasurer at Mastercard, is a passionate champion of leveraging deposits for impact, and he’s an approachable leader in this space. Similarly, Peter Filipovic, Starbucks’ treasurer, has been investing in community development financial institutions (CDFIs) for years, funneling hundreds of millions of investment dollars into federally certified private financial entities that are 100 percent dedicated to providing responsible, affordable lending to historically underserved borrowers. These include low-income households and business owners, women, minorities, unbanked borrowers, first-time homebuyers, nonprofits and tribal organizations.

Others like them are doing equally effective work. You probably know one, so consider tapping your network of peers to test ideas and share best practices.

4. Look beyond the obvious targets and leverage your networks. Many high-impact organizations need long-term capital partnerships. Asking the people you know and offering to make a multimillion-dollar deposit in their MDI may seem the quickest path, but it doesn’t necessarily ensure that your deposit will reach the communities that would benefit most. For example, more than 1,000 CDFIs in the United States are investing in everything from minority-led small businesses to affordable housing projects to gender equality. Because investors can invest both thematically and geographically in CDFIs, consider the full spectrum and diversity of impact opportunities out there, and remember that the people you’ll need to work with likely won’t show among your LinkedIn connections.

There’s such an opportunity today for treasurers to redefine how corporations align their dollars with their values. We’re seeing treasury leaders step into this opportunity because they recognize that there’s massive potential to invest in underserved communities, further racial justice and shrink the wealth gap in our country. And by doing so, corporate treasurers are demonstrating that impact investing isn’t risky business. It’s smart, it’s human, it’s achievable and it’s the future.

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How treasurers can lead their company's impact investing | Greenbiz - GreenBiz
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