Bringing Socially Responsible Finance to Scale
The challenges that community development banks are tackling all over the country echo the challenge that SRI as a whole faces: how to expand to mainstream investors without straying from the movement’s values?
The SRI in the Rockies conference is always one of the highlights of my year. It’s a pleasure to see my colleagues in the SRI community, hear from the creative, passionate people leading the way to expand and strengthen the industry, and share news from the Twin Cities, where my family’s three community development banks – University Bank, Park Midway Bank and Franklin Bank, known together as Sunrise Community Banks – are based.
Much of the buzz around the 2006 conference in Colorado Springs centered on a vital goal: bringing SRI to mainstream investors without straying from the values that have helped the movement succeed. With so many opportunities to make a difference – global warming and economic development, for example – we now must prioritize our work so we will not only address the pertinent issues facing society, but also attract the greatest number of newcomers to the SRI sphere.
While the notion of “scale” typically focuses one’s attention to the topics of standardization, capitalization and infrastructure, I see the need for innovation in the Socially Responsible Investing industry.
To some, this may seem like Don Quixote’s quest, – an “impossible dream.” But as I’ve learned in my work with community development banks in the past 12 years, nothing is impossible. In fact, the challenges that community development banks are tackling all over the country parallel the broader challenges of the SRI community.
And while we mainly focus on banking products and services rather than investments, we are successfully implementing scalable initiatives that not only increase deposits and loans, but also spur community development to reach the underserved.
Community development banks, such as University Bank in Saint Paul, Southern Bancorp in Arkadelphia, Arkansas, and ShoreBank in Chicago, have forged new avenues for growth where many larger institutions have come up short. Like our counterparts in the SRI industry, we believe the innovative strategies listed below are putting us on the right path to help socially conscious customers achieve their goals while staying true to our own values.
Adopting the latest technology raises appeal. By taking advantage of the latest technological advancements, community development banking becomes an attractive option for a variety of customers. For example, in 2007 University Bank plans to introduce an innovative service that will allow customers to receive text messages detailing their transaction amounts (deposit or withdrawal) and their account balances, all within seconds. After all, the first line of defense in preventing financial fraud and avoiding budget woes is awareness.
Users can also turn the functionality of their debit cards on and off to prevent unwanted access. While this service is especially interesting to people who have traditional bank accounts and are worried about financial privacy, it also has excellent applications for people who have difficulty staying on a budget or who primarily use cash as their transactional medium (the unbanked). It will also appeal to a mass-consumer audience that is growing more tech-savvy every day. And people who have never considered a community development bank before may now be inclined to become customers to take advantage of this groundbreaking money-management tool and participate in community investing.
Financial value is still the key. For socially responsible products to enter the mainstream, they must offer customers a financial value that rivals the traditional alternatives. The success of established products, like the Socially Responsible Deposit Fund (SRDF) that the three Sunrise Banks offer, has increased tremendously because they have demonstrated that socially responsible deposit products can offer competitive interest rates and positive social impact. The growth of these funds also allows participating banks to strengthen their brands as gateways for small-business development, affordable-housing initiatives and not-for-profit organization sustainability.
Reach out to campuses. In addition to their local base of individual and small-business customers, the Sunrise Banks have reached out to colleges and universities that echo our commitment to community investment. While our banks’ bottom lines benefit from large deposits from these customers, we also get a boost in creativity as we develop new business strategies to serve the surrounding campus neighborhoods while involving students, faculty and trustees in the process. Meeting the neighborhood challenges of colleges and universities constantly keeps us in an innovative mindset that benefits all.
Plan for the next generation. A monk once told me that a monastery’s tenure is measured in 300-year increments. While society’s current issues seem increasingly urgent, we must not set aside social legacy planning. At the Sunrise Banks, we’re looking ahead to the next 40 years to ensure that this family of banks will have the infrastructure and capital in place to handle unexpected downturns and capitalize on market opportunities. But just as important, our efforts now will help future bank leaders preserve the Sunrise’s mission to be “The Leader in Improving Our Urban Communities.” I know that the Reiling family values of community investment, social responsibility and philanthropy will continue to steer the banks’ development for many years to come.
Community development banks are making terrific progress in spurring neighborhood-improvement projects and helping low-income people strengthen their futures with home and business loans. But to consistently serve customers in the most effective way, we must never rest on our laurels. Changing economic conditions, state and federal regulations and technology demands that we constantly find new ways to meet the needs of bank customers.
This challenge should sound familiar to the SRI community because it wants to be seen on par with the traditional choices in the market. And by making a similar commitment to innovation, the growing SRI industry can successfully integrate into mainstream investment opportunities.
I’ve seen the industry take many steps in the right direction recently. Continued progress will only solidify its position as the choice for socially conscious investors.
Here are some ideas:
Recruiting top talent to lead and inspire the SRI community is essential to its long-term viability. I was encouraged to see the Social Investment Forum hire Lisa Woll last year as its first chief executive officer. With years of experience in government and non-profit organizations, Lisa will bring the professionalism and knowledge necessary to direct the movement at its most vital moment.
Companies that wish to boost their SRI profile should look for leaders of Lisa’s caliber – visionaries with proven records of running effective, forward-thinking operations that set new standards of excellence. To stay on top of the game, organizations need to identify these talented individuals both in and beyond the current SRI network.
Your future CEO probably doesn’t know that a career in SRI is in store for him because he’s working in an entirely different field, but that doesn’t mean he isn’t qualified. On the contrary, he may be better suited for this role because he can bring the best – and be aware of the worst – aspects of the mainstream market to the SRI table.
Make SRI more tech-savvy. In a country where computers and electronic gadgets become obsolete almost as soon as they roll off the assembly lines, the SRI community needs to invest in new electronic marketing tools and technology that will make socially responsible opportunities available to the increasingly tech-savvy society. Traditional marketing channels and devices aren’t dead, but their importance decreases with every new technology.
Think your website is the be-all and end-all of your electronic marketing efforts? Think again – blogs, virtual marketing campaigns and text messaging should be part of the picture. Also, take a look at how you can improve the speed and ease of account management and social-issue awareness for your clients. A new wireless (or paperless) technology, or a software game designed to bring alive a specific social issue may be what you need to break out from your competitors’ shadows.
Outreach should be a priority. Outreach to large corporations, several of which attended the past SRI in the Rockies conference, should be a priority throughout the industry. These companies’ employees clamor for socially responsible options for their retirement and long-term investment funds. Since many employees manage their portfolios by merely checking the box labeled “conservative” or “aggressive” on their enrollment forms, why not give them another choice – “positively screened”? The move involves very little effort on the part of the investor, but it could reap benefits for SRI firms.
Keep an eye on mainstream investment trends and adapt them to fit the SRI model. Though the overall real estate market has cooled in the past year, demand for “green” (a.k.a. LEED certified – Leadership in Energy and Environmental Design) buildings grows exponentially each year. Educating your community on green real-estate opportunities could bring new customers to knock on your door – people who have never considered SRI products.
Moving beyond the comfortable niches that the SRI community has established won’t be easy. But getting the SRI movement off the ground wasn’t a walk in the park, either. Community development banks are in step with the SRI community at large in our efforts to grow and to reach more consumers without deviating from our values.
Just as we had to create new depository and loan products to serve our low-income communities’ banking needs, we are now creating products and services to address broader community issues. The SRI community will continue to thrive as long as that innovative spirit that founded the movement continues to blossom and evolve.
David Reiling is CEO of Sunrise Community Banks, a family-owned group of community development banks in Minneapolis and Saint Paul, Minn.