8 things we learned from moving our capital to Black-led banks
In June, we announced our plan to allocate two percent of our cash holdings - initially up to $100 million - into Black banks and similar financial institutions that build economic opportunity for Black communities in the U.S.. That announcement elicited a lot of enthusiasm, and also some questions from many organizations hoping to take similar action.
Thankfully, Netflix’s Aaron Mitchell and Shannon Alwyn had a lot to share on the subject after spearheading this effort. To help inspire further interest and investments into Black-owned banks and financial institutions, they were recently joined by two of our external partners, Maurice Jones from the non-profit Local Initiatives Support Corporation (LISC), and Bill Bynum from HOPE Credit Union, to discuss the major learnings and takeaways. What follows are highlights from a recent webinar we held on this topic:
Top row from left: Aaron Mitchell, Bill Bynum of HOPE Credit Union
Bottom row from left: Shannon Alwyn, Maurice Jones
"You need to take on more risk to create change," Shannon: “In contrast to Netflix’s normally conservative investment policy, many of these Black-led financial institutions come with more risk so we had to make exceptions to how things are traditionally done to make this investment work. However, every company manages their cash differently and has a different appetite for risk. The key is for each company to determine what level of risk they’re willing to take on."
Getting creative to give back, Aaron: “Sure, companies can make statements and donations, but another area they can be creative is looking at how they currently conduct business every day and how they can change that to tackle these issues like investing in businesses that give quality wages to drive prosperity. Ask yourself, ‘Are there other ways to look at your commercial interests in ways that have a direct positive impact where you do business and your members are being served? We’re hoping that that spurs ideas from all corners of the world.’”
Deposits can also make a big difference, Maurice: These investments can go towards even the most basic necessities like access to healthcare, education and housing to everyday things like quality produce. Maurice laid out four key areas to help people “create and maintain wealth": improving the community, housing, entrepreneurship, and savings/earnings so that residents can get access to credit scores, insurance and other basics.
But big deposits can be big liabilities, Shannon: “Unfortunately, it’s not as easy as just depositing a big chunk of money in a Black-owned bank. The Basel Accords, which were put into place after the 2008 financial crisis, significantly limit the amount of non-operating deposits that banks can take on. Big deposits to Black banks and other minority depository institutions (MDIs) are considered liabilities, not assets, because the banks then have to pay interest back to the deposit holders.”
The importance of moving capital to where it’s needed most, Bill: In the US, the wealth gap between a Black person and a white person is 1 to 10. For those with families, that expands to 1 to 100. That’s why LISC and HOPE are focused on moving financial institutions into these underserved areas. “For minority depositories, 6 of the 10 people in the communities we serve are people of color as opposed to 6 out of 100 for traditional banks,” Bill said. “Just in proximity you’re targeting the investment where it’s going to be most impactful.”
Tracking community impact, Bill: In addition to handling underwriting, we rely on LISC and HOPE to report how our money is being spent and how it’s making an impact in the community. According to Bill, 85% of HOPE’s mortgages are for first-time home buyers and over 60% of business loans go to businesses managed or owned by women or people of color. “We take that stewardship very seriously,” he said.
There are multiple ways to get involved: Bill: In addition to directly investing in these funds, another way to get involved is to become a partner financial institution organization that LISC and HOPE can invest through to do things like provide capital for bridge financing, pre-development financing and co-investments to help ultimately reach Black small businesses.
Flexibility, and patience, are essential, Shannon: Netflix’s treasury team has been hard at work on this initiative since before our June announcement but realistically it will take at least another month or so before this is fully up and operational. Patience is key, as is flexibility in terms of cash and investments, since our cash balance does fluctuate. The goal is, as our cash hopefully continues to grow, so too will the amount of money that is invested.
To find more information watch our Building Economic Opportunities for Black Communities webinar and visit LISC.org and HOPECU.org.
-Aaron Mitchell, Director, Talent Acquisition
-Shannon Alwyn, Director, Treasury