Each year, we celebrate you as the original and most important “crowdfunders.” You haven’t often been recognized as such but that’s what you are! Banks are allowed to recruit deposits promising FDIC protection along with the prevailing interest rate. We then take those deposits and lend them out to borrowers. Of course, we must always have enough liquidity to return deposits when they are needed by you, but your “idle cash” is working hard when you don’t need it. And those borrowers, at least in our case, fulfill a reciprocal role in crowd funding by creating the new economy — one that is fully-inclusive, racially just and environmentally sound. Bank crowd funding is especially powerful in the economy due to the leverage it enjoys — we are allowed to collect about $9 of deposits for every $1 of equity we bring to this social enterprise.
We believe therefore that banks should compete for your deposits on the basis of their impact, not just on the interest they pay. So what are we offering you, as evidenced in this Annual Beneficial Banking Report? First, we make sure that your deposit funding is going toward loans that provide benefit to all, harm to none. We keep at least 75% of loan dollars outstanding in the hands of transformative sectors of the new economy. We also warrant that the remaining dollars are not lent to contra-mission activities. While all banks produce some benefit, this “harm to none” distinguishes a small segment of banks from all others, those of us not willing to fund ecological disaster or human misery.
Second, we recruit both seasoned values-driven banking talent as well as promising young people to learn the crafts of underwriting, engagement, and data driven analysis. All of those skill sets are essential to running a bank that is accountable to its “crowd” and borrowers, positively impactful through prudent lending, and protective of the FDIC insurance fund that enables those depositors to entrust their savings to us in the first place. Increasingly, we need also to adopt technological advances that allow our banks to better fulfill mission.
Lastly, we mandate our banks to reveal the full measure of their activities. Through chronic assessments like those we do for BCorp, GABV, JUST, and our annual internal GHG/landfill/water footprint analysis, we strive for corporate practices that are assuredly sustainable and just. Of course, we can always improve but we target better results each round and “better is good.” Data collection also allows us to internalize the objectives of our communities and stakeholders and drive toward fulfillment of them. This year, to our output metrics, we will add eight new outcome measurements that will evidence how many units of affordable housing, kilowatts of renewable energy, and living wage jobs your crowdfunding has maintained or created, plus more.
So beneficial depositors and borrowers, arise to take your rightful place in the making of the new economy! We are not even kidding. We all now have a bank model that is reliably profitable, producing to the benefit of all and harm to none, and changing the banking system. At this stage of our evolution, we may be still small and incapable, yet, of replacing the dominant actors among banks. But by awakening depositors to realize that their choices matter, we can first migrate deposit capital to the beneficial banking model. Then, by trying to “pay for performance,” we can attract the highest performing borrowers in the new economy. And throughout, we can recruit the brightest human capital to a new banking system that realizes our collective vision.
That’s what we call beneficial banking and you deserve nothing less.
Kat Taylor & Tom Steyer
Co-Chairs, Beneficial State Bancorp