How to make an impact with cash
Reflections on a panel discussion of experts
ESG integration in equity investments is becoming mainstream and the ESG bond space is rapidly developing, but “the ESG of cash” is less understood. Additionally, many individuals are interested in making an impact with their assets but don’t have the funds or the risk tolerance to invest. On November 12th 2020, I moderated a panel event hosted by the Impact Capital Forum called “Making an Impact with Cash.” The panelists explored the full scope of making an impact with cash from institutional investment portfolios to an average consumer’s savings account. The panelists provided their insights on ways to make an impact with cash, risk considerations, and how to measure and report the impact, all within the context of the many crises facing us today.
The level and scale of impact with cash
Panelist Cathi Kim uses a variety of strategies for connecting capital to certified development credit unions (CDCU) through her work as Director of Capital at Inclusiv, an organization that helps strengthen CDCUs double bottom line of financial growth and helping lower-to-moderate income communities achieve financial independence. During our discussion, Kim lent her systems perspective and explained the level and characteristics of impact made with cash investments in CDCUs. She explained that throughout the pandemic, investor interest and engagement has only increased as the need for projects funded by their investments has intensified. The need for small business payment protection skyrocketed and more institutional investors realized the opportunity they could help support. Inclusiv has launched a digital platform serving as a CD marketplace to make such investments easier and more scalable than ever before.
Communicating the impact made with cash
Panelist Ebony Perkins helps investors and philanthropists make smart and strategic investment decisions as the Investor & Community Relations Manager at Self Help Credit Union, a socially-responsible financial institution that supports communities of all kinds, especially those underserved by conventional lenders. Self Help is uniquely positioned because of their credit union status. They are not a bank driven by shareholder needs for a profit, but member-owned and dedicated to making an impact. Just by opening up a savings account, individuals’ cash can support the community-focused projects that Self Help finances. Yet Perkins stressed the importance of being able to tell the stories of how this cash makes a direct impact. Self Help tracks quantitative metrics for individuals who seek measurable results of impact, but they also do a great deal of storytelling for those who wish to understand the human side of their impact. By doing this, Self Help is demonstrating their commitment to inclusion. Investors who want to quantify their impact by issue can filter for such metrics, and those who are compelled by the humanity behind their cash can hear, read, or watch those firsthand accounts.
Technology makes it easy to put your cash towards impact
Three-time entrepreneur and panelist Catherine Berman has experience building scalable business, and is currently CEO of impact investment platform CNote. CNote delivers competitive returns by investing in women, people of color, and low-income communities. Impact-oriented institutions or corporations can only have up to $250k federally insured at any single credit union, but they typically have far more than that to allocate to cash. Rather than splitting their cash across many individual credit unions, CNote’s Promise Account is a fully insured cash management solution for institutions or corporations looking for a convenient way to move their cash into impact. For individual investors, their Flagship Fund democratizes impact investing by offering a no-fee, no minimum account offer 2.75% interest and 100% social impact by pooling funds for CDCUs.
Limits to making an impact with cash
It is a challenge to consider fully-liquid, risk-free cash as impactful since many of the solutions offered above are CD-equivalents with fixed duration terms. Individuals can consider their deposits in a savings or checking account as impactful if they are supporting a financial institution with such a mission, but there is no direct impact associated with each dollar. Panelist Leah Wood (Fuhlbrugge) has experience in both equity research and institutional asset management, and is currently Director of Client Service & Business Development at Impax, an asset manager with a focus on the risks and opportunities arising from the transition to a more sustainable global economy. To make as much impact as possible, Wood believes it is important to think beyond cash and consider impact bonds and cash equivalents that invest in community development financial institutions. As active managers, fund portfolios do include a cash position, but there are challenges to integrating impact criteria especially while rates are so low. To learn more about the importance of fully integrating impact across a portfolio, check out my piece about fully integrating ESG.
Making an impact in 2020
Impact carries so much weight in today’s context, from COVID-19 to racism and civil unrest. The panelists were eager to discuss how their impact is more important than ever, and engagement in this topic is helping to contribute to solutions. The resounding agreement and message for the investor community is that there is no longer an excuse to avoid putting your cash towards impact — there are so many options available, opportunities for engagement, and solutions that actually make it easy. It was inspiring to gather a group of such talented and purpose-driven individuals. I hope that others found it informative and actionable, so much so that they apply these insights to their work with cash — and put that cash to work.
