 So I know our time is short for this really rich discussion, so I'm going to get us underway. Hi, everyone. Welcome to Redefining Risk. My name is Yi Wei, and I serve as the Vice President of Impact Capital at IFF, a community development financial institution serving nonprofits in the Midwest. I will serve as your moderator today for a conversation about the role of systemic bias and how financial institutions conduct due diligence in underwriting. Whether it's a foundation, a CDFI, or a commercial bank, we all have certain requirements for investment needs to access capital, be it a minimum annual budget, a certain composition of the board, and in many cases, existing wealth to serve as collateral. While these requirements may appear to be very neutral at surface level, we know that the outcomes are not. Why is this, and how do we fix it? To impact these questions, I am joined by a wonderful group of panelists representing a diverse group of capital deploying institutions. Deborah Schwartz, Managing Director of Impact Investments at the MacArthur Foundation. Matt Roth, President of Core Business Solutions at IFF. Neil Richardson, Vice President and Director of Business Impact Group at US Bank. And Neve Christopher, Head of US Business Banking at BMO Harris. I want to emphasize that we are all on a journey and at different places in our journey. We seek your feedback and input as well. Please type any questions you have in the chat box, and we'll try to get to a few of those at the end, including weeding those into the conversation. So diving right in, the nature of this conversation can be very personal. So by way of introduction, I'm not going to read all of your Lester's bios. All of our audience members can find those online. But I want to start by asking you to share your personal story of what brought you to this work, and how has the most recent Tamil Inner Society affected your sense of purpose at work? Deborah, can I start with you? Sure. Can you hear me okay, Neve? Yeah? Yes. All right. I haven't done too many of these virtual conferences. So it is a little hard to get your bearings, but I love that I can see my co-presenter faces here on my screen. I can see my notes on another screen, and I have no idea who I'm talking to because I can't see anything. So I'm just going to talk to Neve and Neve and Matt and hope that works. So I would just say that the arc of my own journey to this place, and I've been asked many, many times because I used to teach as an adjunct at the University of Chicago. I taught undergrads a class called the business of nonprofits and the social sector. And a lot of them wanted to know how did I make my way through my career to land up at the MacArthur Foundation, which is admittedly an amazing place to have landed. And I actually got there 25 years ago. I've been heading the impact investments team for 20 years. And I would just have to say that there was no plan. There was no career path. There was no prescription. And I think there seldom is for any of us who sort of live in this funny hybrid world between money and mission, where we are driven by mission, we're driven by purpose. My grandparents, who are such inspiration to me, were just driven to make the world a better place any way that they could. And my father carried that passion forward and I think gave it to me. But I was also always fascinated by the power of the market. I am just an admitted finance nerd or I wouldn't be on a panel about how do we combat systemic racism with different kinds of due diligence. Like that's that's for finance people, right? So I think I stumbled and found my way through the opportunities that presented themselves. And sometimes they weren't so obvious. So I have counseled women who were victims of domestic violence who were on the path to recovery and employment. I worked with a child welfare agency to turn around a pretty troubled financial situation. I was an investment banker working with hospitals and municipalities. And now I'm a proud member of what we call at MacArthur team platypus because we are just like our grant making colleague philanthropic institution dedicated to doing good in this world. But our instruments are loans and equity investments and guarantees. So that's why we're a little bit odd. So that's my journey. Wonderful. Thank you. I love that platypus image. Injecting. If I go into my other room, there is a stuffed platypus that we are still planning to send to the president of our foundation who started not that long before the COVID crisis. Thanks to one of our amazing team members Alison Park, who Matt knows very, very well. One year, every one of us found ourselves with a stuffed platypus puppet. And that's one of the things I love about the impact investing space is a very wide tent for people who traditionally looks look like ducks or beavers or those that look like both or whatever else. Yeah. Neil, can I go to you next and can I ask you to unmute first I had to meet some of you because of background noise so just make sure you guys unmute yourselves when you guys speak. Sure. I'm Neil Richardson as you spoke to I am the director of the business impact group here at US Bank. My team really focuses on creating product services and experiences and evaluating our business development strategies at US Bank to ensure that we're creating greater access to capital for women people of color and low income communities. And most recently we've had a strong commitment and a direct focus on how we serve the black population to close gaps in economic outcomes and remove historic barriers to have systemically disenfranchised and marginalized people of color. What really brought me to this work as being one, as it's very evident I'm a black man in America. And so this work is not just something that I do every day but it's something that's part of my identity of how I show up and where I show up. And so growing up in a low income community, a household that was low income but also a community of color that was systemically and racially divided. And so I live in St. Louis, Missouri. I grew up in the north side of Delmore, which is very well known across the country as the Delmore divide where 99% of the population on the north side is African American and on the south side is 70% white. And also along those lines are many economic inequities that exist on the north side of Delmore, the home values are averaged at 70,000. And on the south side, they more than quadruple. And that has had negative impacts just on myself, but also my family and my daughter as I look to pass down wealth onto her. And I think that's what we're here to talk about today around how do we disrupt intergenerational poverty through dismantling inequitable practices as it relates to underwriting lending and investing. I also started a nonprofit organization in St. Louis to address many of those economic inequities by working with youth in the inner city to rehab homes and also take ownership of those communities. So 30% of the profits of the home sales actually goes to those student scholarship fund. So some of the work that I am able to leverage at US Bank understanding finance kind of as Deborah spoke to. But using that experience and that creative juices and my passion for serving the communities of color specifically has really brought me into this role at US Bank and finding ways in which I can leverage my platform, my purpose, my time and experience to create greater access to capital for all people. Wonderful. Thank you so much for sharing a little bit about your home. A lot of what you talked about really is that the heart of this conversation. So we'll dig in. Can I ask you to go next? We had to unmute. It's like panic the minute someone tells you you have to go find your cursor. So I meet Christopher. I'm the head of US Business Banking for BMO Harris Bank. So we're in eight states across the nation. Primarily when we say business banking, our focus is on the small business customer. So revenues in size from 100,000 to let's say 5 million with lending even capping out of 10 million. So sometimes we creep up higher than the 5 million in revenue size, but it's primarily the segment served through the branches and the small business sales force. I came to the role. I came out of commercial lending traditionally and even work out. So I've seen kind of the default side of the bank, but a small business is truly my passion. I was raised by small business owners. I was raised by immigrants who started from scratch with nothing when they got here and knew my dad's banker primarily because my dad didn't like banking and he was intimidated by it. And so my mom did a lot of it. And then at 12, my mom said, here, you take it over. So I was doing their banking at age 12 and running their books and talking to the accountant. Well, that was good or bad. I'm not so sure. You know, and like I always try to tell my people that work for me just because someone knows how to run a hair salon is really good at cutting hair doesn't mean they understand banking. And people are intimidated. And so and they're intimidated by do they qualify for a loan? Do they qualify for credit card? And sometimes, you know, they make bad decisions, not from just out of lack of knowledge, you know, leaning too much on their personal credit in the beginning, because they don't think they would qualify for debt. And so when we look at that, that's the general small business problem. But that problem is really exasperated in the in these communities we're talking about today, because they don't have the networks often to lean on. And in all honesty, like, I don't think the banking industry is entirely trusted by that group, right? So I think we're here today to kind of really discuss like, how do we bridge that gap? I'm excited to hear Neil's look at Neil nodding his head because I think we both can agree there's work to be done. And I think we have always looked at CDF eyes and nonprofits to build that gap. And now I think we're looking at stronger partnerships to say, you know, how do we educate? How do we become more embedded in the community? And how do we step up to fill that gap? Wonderful. Thank you. And last but not least, Matt. Hi. Good afternoon, everyone, or good morning or good evening, depending on where you are calling in from. But so my formative years were growing up in the Bronx in New York and attending public schools elementary through high school in the Bronx. My high school had the distinction of being the largest public high school in the country at the time, 5500 strong. And that was my first also exposure. We were about, we were almost evenly one third white, one third black, one third Puerto Rican. And then I through marriage deepened my connection into the Latino community. And at my 10 year mark at Harris Bank and in my career, Harris Bank in Chicago, I was getting some career coaching from our CEO, who told me it was time to start my own lemonade stand within the bank and see what I was interested in. And I knew we had an interest in the Latino market, even though we had never done much there. So I asked them if, if we had approved a budget, if I could run it, start it and run it. So I did that for five years. And then I wanted to do the next thing and I cold called Shore Bank, the largest and oldest community development financial institution that Deborah knows well in Chicago. I started consulting with them for five years and doing a lot more work on the south side of Chicago, which then led me to want to start and spend five years in a grueling uphill battle to start a black owned bank on the south side of Chicago that got very close and did not get to the finish line. But when I was getting close at the end there, I had the good fortune to make my way into IFF. And so IFF is a half billion dollar CDFI that serves the Midwest. We have seven offices across the Midwest were focused on the nonprofit community. And we really sit at the intersection of finance and facilities. And it's a pleasure to be with everyone and with my co panelists. Great. Thank you all for sharing a little bit of your stories. It's amazing how all of us have come from different places that are converged at the same point because we're interested in answering some of the same difficult questions. So I'll start off easy in terms of the questions. Matt and Deborah, as a foundation and as a community development financial institution your institutions have mandates of serving the underserved. So tell us a little bit about how your organization is trying to ensure equitable access to capital specifically communities of color. Deborah, can you start just briefly giving some overview of what you guys do. I'll be happy to. And I just posted into the chat a link to the MacArthur Foundation website. And under our work, you'll see all our programs and elected in my journey. The rest of you were much more organized. We spoke about your organization and your journey. And I did not. So you can see whatever you need there on the MacArthur website. Our impact investments work is an integral aspect of the foundation. And we've been doing impact investing for over 35 years. And shore bank which Matt just mentioned was the very first organization to receive what we call program related investment. This is a tool that the internal revenue service allows private foundations to use. And it's a tool that really is so perfectly suited and was kind of grew out of the desire to bridge the gap. But Neil was talking about and that animates so much of our work, whether it's with CEFI partners like IFF partners, like the banks that are here today, or with other kinds of investors. So we have a number of programs and initiatives. One that I would just call out as maybe an example to illustrate the way that we do this work is a collaboration called Benefit Chicago. And that's a hundred million dollar fund that we launched back four years ago. We're just about done with all of the deployment and investing work. And half the money in that hundred million dollar pool comes from MacArthur's own allocation for impact investments. We have a $500 million allocation that my team and I manage. And the other half comes from a whole range of other investors channeled in through a note issued by Calvert Impact Capital. And the key partnership also with the Chicago Community Trust, and many of their donor advice funds are actually channeling dollars into this fund to support what we would consider to be very high impact investments. So let me just give you an example. There is a real estate developer named Leon Walker, who's really creative and really bold, working on the south side predominantly in a neighborhood called Woodlawn but in Englewood and some other very hard hit neighborhoods in Chicago. That struggle to access capital. And that's where he's focusing his real estate work and he was still early in his trajectory with his company. So we were able to provide $5 million through our Chicago LLC and that's the fund we created to implement Benefit Chicago. And just let me share one transaction that has followed since we made that $5 million loan. Leon focused on vacant shopping center on Chicago south side. It had an empty target store. Like a lot of property of this kind. It was really delighting the neighborhood and inhibiting development and deteriorating the quality of life around it. Well in that one project he was able to bring in Blue Cross Blue Shield as an investor to put in a customer care center, a call center. They're going to put $20 million into the improvements for that site and they expect to employ over 500 people on just that site. So the vision and the ability to execute the fact that we are able to support a really mission driven black lead firm working to benefit the city's black communities. This was for us and exactly the reason that we created this kind of fund. Great. Thank you. And Matt just so people can get to know ISF a little bit more to tell us how we are trying to make sure the capital ends up in communities of color. Yeah, so when we you know among the manifestations of systemic racism is around access to tools and resources and so when we were thinking about access. We partnered with the JPMorgan Chase Foundation and with an organization called Fiscal Management Associates which is a consulting firm on financial matters to launch a program aimed at nonprofits led by people of color. We're doing these in cohorts of 10 organizations organizations each the commitment the organizations make artists to send two to four of their executive team members. Over the course of a 14 month training cycle and it's classroom setting with with Fiscal Management Associates. It's peer to peer learning. There's customized counseling. We provided IFF real estate consulting. We provide facilities assessments. So it's a really rich and robust program really aimed at increasing access to those tools and resources that best position nonprofits to be successful. We've had two great cohorts in Chicago two cohorts in Detroit were launching cohorts in Milwaukee and Indianapolis and St. Louis and in Ohio next year. So we're really pleased about that. But and that's again just an example of one way that we're trying to address that issue. Yeah so I think it's not a surprise that CDFI's and foundations target communities that are traditionally underserved. I'm curious as publicly traded companies commercial bank representatives on this panel. How do you make a business case for serving those underserved and what are you guys doing to make sure the capital reaches communities of color. Well I'll take a stab at the first step. So we are actually just going to launch in Nova in this fall a minority business vertical in the small business segment that actually creates a special purpose credit program which broadens our risk appetite parameters. And so when you look at that business case when traditional underwriting always ties credit scores to losses. It's the only history we have so if it is or is not accurate it's the way that we model. So when we look at the so it does drive higher losses whether you believe they happen or not in a theoretical moment that that's all the data we have so it does drive higher losses to broaden your risk appetite so we have put a business case together. That looks more at for lack of a better term a break even scenario. And then we align that to our purpose as a bank. And so when we looked at the value we do lend to CDFI's we do donate dollars and we actually looked at our role in the community. And how empowering it would be for a business owner to go into the branch around the corner from their business and qualify for alone. And so we find that there's a really big gap today between who qualifies at a CDFI and then how long a journey they have to have before they qualify in banking. And so we're trying to bridge that gap because there is in my own experience and I truly believe it is very empowering for a business owner and their employees to see that they get a full relationship, their children to see that they have a full and robust relationship, and the banks aren't just there to collect deposits, but that we're willing to put the deposits back out into the community. So from a day one business case. We looked at it more as part of our, our purpose to boldly grow the good, and to not look for this type of returns we look at from other portfolios. And I also would say we probably did, we're very conservative on upside. We do believe like, we will collect more deposits they're valuable deposits and they do pay a return so I actually believe that by being in the forefront of the community, showing our commitment to the community that not only will we attract minority business owners who were outside of our traditional risk appetite, we will attract more, we're inside our traditional risk appetite so because there's a commitment to the community. We actually believe our worst case business case that you put forward for the risk and the regulators. We will beat it. And so, you know, you put it out there to explain it. But I think when you actually get behind the purpose and the momentum, it will pay for itself. I think 10 fold. And for me, what's really mission critical and what we look at when we when we launch a program, which it is piloting in Chicago, with an expectation to go to all of our markets is that what's mission critical is the partnerships with the CDF eyes. We're looking for partnerships with the city of Chicago as well. Because to really make this work, we have to lean on the strengths of everyone involved, because they're things that we don't do well, we're good at banking, we're good at financial content but you know CDF eyes are better at than us. And so we're going to train our bankers to help them as much as we can. But we also know that there's other things that CDF eyes do better than us. And then city of Chicago like working with them on licensing, like they're really good at licensing in the city. So why aren't we throwing joint education programs with them on licensing so as far as a business case. Yeah, it's not as profitable as you know commercial lending but we find a home for it you find a purpose behind it. Call a state of spade and then beat that business case so you can just grow it. Oh, Neil, what are you guys doing at US Bank. Yeah, so I know we all talk about you know the racial wealth gap, which is, you know, 10 to one as it relates to black households, first white households. I know McKinsey recently did a study showing that you know if we were investing equitably, that would add an additional value of $1 trillion in our GDP to black by investing equitably in black led businesses and organizations and supporting and uplifting the black community. That's the best business case there, but also we can't just look at the business case we have to look at what is the right thing to do as well by our community by stakeholders. And so what we've done at US Bank, specifically within our CDC is develop what's called our racial equity. We leverage our new market tax credit investing, our affordable housing and investing as well as our community development financial institutions that we are partnering with deeply that understand and have closer proximity to the everyday issues that these small business companies are having. We recently invested and provided a grant of $1.1 million directly to the African American Alliance of CDFI CEOs, in order to help uplift them, get greater capital to those CDFI. It also helped them create a collective strategy and vision about the importance of that land CDFI's and supporting our small business across the country. They are a new coalition that just coming together, but we want to make sure that we are able to support and fund their priorities to reach their collective goals and have a shared voice as they're allocating and looking for greater resources to serve the most vulnerable communities. And unfortunately, due to COVID and due to the racial injustices that are really a two pandemics that we're facing right now in America, we must intentionally invest in those communities in those businesses that understand those challenges that these communities face every day. What we are also doing is looking at all of our business development practices as well and to understand what are ways in which we are not just continuing to go back to the same customers every day. While we value those customers, how do we expand that box? How do we work with other industry groups? How do we make sure that we're funding organizations like the Urban League, like the NAACP, Operation Hope, really strong nonprofit partners across the country who are trusted partners in these communities, help fund them, uplift them. And as Naomi said earlier, we want to build that trust through those relationships, but also understand that when they are ready for a US bank loan or more conventional financing, we want to be that partner with them to help guide them into the future. Some of the things that we weren't able to do because we are a highly regulated, publicly traded financial institution is not appraisal lending, and that that's the great work that NAACP and ISF is able to do. So what we bring to the table is to help fund those innovative deals and structures and projects that ultimately will be proof points that changes legislation that ultimately impacts the systems that are deeply causing the root issues of racism and disinvestment in black and brown communities today. So those are just some of the ways in which we are partnering with TDFIs across the industry as well as evaluating our internal processes to ensure that it's equitable and it's just. Great. Thank you all for sharing a little bit more backdrop for the specific programs initiatives your institutions are taking to make sure capital gets into community. I want to move into the heart of this conversation, which is about the underwriting and due diligence process itself, because I think it's very related to a social consciousness that we as a community have come to started to come to terms with which is systemic bias and systemic racism. And I've heard it described as the air we breathe or the water we drink and it's just we're swimming in and we don't even know because it doesn't necessarily have a face right it's not just a racist individual but it's the. At the surface level, race neutral policies and rules and requirements and documents that's needed that apply to everyone so it must be fair but on the other end of the sausage making factory the results are not equitable. So Neil referred to something called non appraisal based lending I'm wondering Matt if you can speak to that a little bit as an example of what we're talking about in terms of systemic bias in the system. Sure. Thanks. Yeah, so IFF we were founded over 30 years ago as a non appraisal based real estate lender. And honestly it's a little bit shocking to me that we're still one of a very few CDF eyes in the country that is that that is a non appraisal based lender and it is a way, you know we did not use race explicit language over the course of those 30 years and talking about why we did not but it really is with an equity lens that that that we do that and it does help unlock capital into communities of color that have structural barriers to accessing that capital. And I do and we do proselytize all the time Neil is absolutely right like for regulated financial institutions they can't. But CDFI loan funds can and it's a matter of really allowing yourself to know like for us we you know at IFF we have. We're one of five CDF eyes in the country that have the top rating from errors which is the S&P of the CDFI industry. We feel like we have now proven out the case that you can successfully do non appraisal based lending and have strong asset quality and move money into communities. So we we push that and rely on cash flow lending that's what we underwrite to the strength of the nonprofit's leadership team the management the board the revenue streams. And all that said we're still like we're we're happy we do that it allows us a lot of flexibility and by no means are we even close to you know stopping there we realize we are. There are so many things that we haven't really done an audit of in terms of our practices to see where our own biases have kind of muddy those waters for us and had us contribute to systemic racism so we're we're auditing everything we do. Our target market has been for years. You need to have 500,000 of revenues you need to have been in existence for five years as a nonprofit with three years of audited statements. We make exceptions frequently but that's still our target and now we're doing we're going back and doing an audit to say of the ones that we've approved with those exceptions how did they perform. Maybe they're not so critical to asset quality and maybe we can remove that lens and have another way to increase the flow of capital into communities of color. That's one example of through our underwriting that we're doing that there's a whole other source of conversation around sourcing of opportunities and making sure that IFF is showing up in communities, which is equally as important, but I'll stop there. That's a non appraisal based approach is something that I think a lot of people don't even realize is a big barrier. And it's only recently that we started to use that with the race equity lens and that's just one thing in the process right and there could be so many more. Deborah, can you speak to a little bit about what you guys are learning and MacArthur in terms of how your processes are or are not leading to reaching your target communities and what barriers are high profit size still may exist. Thank you. So I think something that Matt pointed out is that you could be doing something for a long time in the impact investing space but maybe not reflecting on it and understanding it to be part of the pathway to greater equity and inclusiveness because one of the things that's kind of come to the four for me over these last several months in all the many different kinds of conversations many of them quite challenging and very important is that we have always seen our impact investing as a way to bridge gaps, but we've been pretty technocratic in thinking about it we talk about capital gaps, not just the appraisal piece, but we talk about track record and the ability to get behind an organization and an entrepreneur who maybe doesn't have the track record that a traditional bank might be able to support. We talk about innovation risk and how that can be a barrier to making progress on climate change let's say for example because we don't want to get behind a business sitting on that valley of death we want to wait for them to get to the other side. If we're a traditional investor, our opportunity is to get in front of that gap and to try to leap over it with them so we've always had a practice of stretching. We've always understood that our type of impact investing was all about pushing the envelope and being more creative and flexible when it comes to things that others might see more traditionally as you know insurmountable conditions or challenges. Let me just say a little bit about the due diligence practice that we actually use because I think that is part of what folks are asking about. And I will say that even though we often structure things in ways that are very flexible and bespoke and customized to accommodate the needs of an impact driven enterprise or fund. Our diligence is pretty traditional, I will say that and we use for example if we invest we just did a set of investments in equity funds. We took the ILPA standard due diligence template, we adapted it to include more impact oriented questions. I will say that that questionnaire actually includes a lot around ESG and also around DEI. And so we were asking questions about whether you have whistleblower policies and whether you have policies around advancing diversity within the workplace retention and so forth. So it's a very comprehensive look at those equity funds. I want to give an example of why this matters. Because we noticed with one fund we were considering not for this investment within just I think the last two years that they didn't have many women there wasn't much gender diversity in their organization and we asked about and commented about it. In the course of doing our due diligence review. And one of the things that happened soon after is they added a woman to their investment committee. And so we sort of saw that as a reminder that what might not seem all that influential or super innovative or creative. The act of due diligence the act of asking the question of interrogating what an organization is thinking when it comes to diversity and equity. That can be a powerful way to shape things as an impact investor for our loan funds and things that are not the typical kind of venture and private equity fund. We take more of a camel a traditional camel approach is very holistic. We're looking at the right. Do they have the management team what's the staff look like what's the governance look like what's the capitalization. What are the earnings trends their liquidity their systems you know nothing there's nothing. Blazing or new here is very hard to let. In our terms lower interest rates no collateral less track record longer time horizon all those things that we can do as a catalytic capital investor. Part of what that requires is doing that deep due diligence and getting really comfortable that we are partnering with folks that we really believe in and that we're ready to support because that's what's going to make that more non traditional more catalytic investment succeed and we do have a good record of repayment over the years and considering the unconventional profile of many of the things that we've done. We feel like the due diligence is what really underpins that. So it's a conversation always. This is for us not a cookie cutter process this is all about relationships and trust. I saw some comments and questions in the chat about whether outside folks come into that conversation. We do very often engage experts who are familiar in a domain that we might not know as well. So education or agriculture or SMEs in Latin America I mean there are a lot of things that we've actually been working on over the last few years solar energy in India. That go beyond what my team of eight people know. And in those cases we do seek to find people that are either in country, because we think that's important, or in sector and really have them in those issues. We do not use what I would call participatory methods for our impact investing, we have done some of that in our grant making. We're currently in the process of a special grant making initiative related to a bond issue that we put out in the summer and we raised additional money for grants to address what Neil so correctly named as the twin crises right of COVID-19 and racial injustice. That's what those grants are about and we have a whole cross foundation group working on those grants we announced the first 25 million of them not long ago, including some grants around voting democracy in the election with a focus on organizations that are led by BIPOC individuals and working in those communities that they are seeking to advance so. So we don't use the participatory method for impact investing. We are using external advisors around this bond issue grant making we've done this in with our arts. Equity culture in the arts in Chicago we've done some participatory methods there it's a really interesting question about how you can how you engage community voice. We're going to be reflecting on our impact investment policy statement this year, we just begun that it's going to take us a while. And so I'm excited to have had this conversation with all of you today because these are ideas that we can bring into our work and reflection going forward. And that's a really long answer ye I would just say one last thing I mean I think for us. This falls under something we call the just imperative at MacArthur. And this is a journey that we've been on for a number of years as an organization starting under Julia Stash when she was president and now with John Palfrey as president, and the just imperative and I'll throw a link into the chat. And it's been on us to interrogate everything we do from the perspective of equity and justice. So that's our diversity of our supplier chain. Are we going to restructure the way that we do certain parts of our grant making work. What does our employment and our staffing look like who is on our board all the aspects of the organization fall under this umbrella. And what this conversation brings for is that the way even though our impact investments in our view are quite catalytic. We still need to reflect on and interrogate every aspect. This is a really rich overview of the aspects of the organization you guys are trying to deconstruct we're getting a lot of engagement from the audience and questions about the details of each institutions underwriting processes and criteria. Two things that I would throw out to the panel to start tackling. One is, should we be looking to redefine risk, right this is the topic of this conversation. What have we learned about who is risky, or what looks like risk, or what we have preceded to be risky but really isn't and is just bias and other questions around the onerousness of the due diligence process. We like to think we reduce risk and mitigate risk by doing a thorough underwriting. And that is how we ensure that we make good decisions and make sure that the debt is responsible both for the investor and the investing but that process requires a lot of resources to be able to address this question so how do we think about that as a systemic barrier. If you were nodding a lot I'm going to ask you to jump in after you meet yourself. Yeah, I'll take a stab at it. So, you know, I think we have ideas on it and to quote the beginning we're all on a journey, right so right now we look to broaden the risk appetite based on for lack of a term the old fashioned way of underwriting which is credit scores. And then we observe how the portfolio performs based on those credit scores but if I would look at where the industry is going overall and where banks have to catch up is in this way the FinTechs have been a really great leader in this area on how do you underwrite cash in the last 90 days that really predicts what's happening in a small business versus looking at a score and a tax return that might be nine months to a year old. So, when we look at like where we are today is automating and working and opening our old kind of a methodology with a lens on how do we get more dynamic and more like our FinTech partners that looks at what are the cash inflows and outflows in a small business which are more predictive of what's going to happen in the next nine months, six months, or a year. And then at the same time there's product development that can happen at the same time FinTechs have been really good about building products that collect on cash flow and do intermittent pay downs based on that cash flow. So there's garbage about the product. Now what FinTechs have also done is charged a lot of rate for those products to get the payback for their technology. And because they're not deposit gatherers so like we don't have to charge those rates as a bank, if we develop those products so we can step into that gap. So that is a multi year journey, you can only imagine it's like we're a big bank, big banks are like almost like the Titanic and takes a while to change the mindset and change the technology to catch up with that so we're on a journey what we could move quicker on was broadening risk appetite and educating our bankers. I call it demystifying banking, our bankers in the field have always been fill out the app, someone in underwriting underwrites it and they get a decision back. So educating our bankers on what are the inputs and underwriting so they can have better conversations with the client. And so we're taking the initial steps in the hopes that it will inform us and then we can build better technology in the journey. Cash flows are a lot more transparent and take a lot of bias out of it. They're not score based and they can tell us what's really happening. You know because what's a big burden for almost every small business owner is we underwrite to tax returns, every good business owner limits how much they pay in taxes. So if that's the same document we use to prove underwriting, we've kind of gave them a catch 22 if you pay the IRS a lot more you can qualify for debt. But then you have less cash flow right so it's this really vicious cycle that is small business underwriting. So when you tie that's the proof of cash flow to a credit score that is already proven by the system to be depressed for people in the minority community. It's kind of a double ding. So we're in a journey, we're very early in our journey, but there's more work to be done, not just by the bank but by the whole industry. To add to that, I think our job collectively is to really tease out perceived risk versus actual risk. Right so you know I mentioned that in my bio I started Hispanic Bank and Harris Bank I opened branches in Latino communities. The first branch I opened was hitting a wall because we were literally rejecting 70% of the Latinos who wanted to open a savings account. Because at that time not unlike other banks we had you had to have two credit cards you had that a credit score like all these things just to open a savings account. So we actually we had a mandate that once I elevated that to the CEO we had a mandate to resolve that and we did. And the industry has moved right even taking banks used to rely on the credit scores from the mainstream but now we know like rental payment history is really valid. Whether you're paying you know other utility bills is really valid. So we've moved but that takes intentional effort to tease to take those apart. And I think that's where again with IFF we feel like we've proven on the appraisal side what's real versus perceived risk. I mentioned some of the other things we're looking at there are other pieces right even you know we had a really interesting credit committee meeting about a year ago, a very small nonprofits in St. Davis and one of our questions is always about board and who's on the board and we realize like there's there's bias and even that question and what does it mean to be a strong board and who's on the board and the commitment to the board. And so kind of unpacking that we believe there's real rich pay off to getting capital into where it needs to go if we can pull those two apart. Yeah, a US bank. We've been really focused on our new market tax credit lending specifically. We received $65 million of new market tax credit allocations in the latest round, and we've made a commitment to leverage those resources to address the racial wealth gap. And that included gathering a in developing a advisory committee, which is 11 community members that have that have expertise in racial equity, but also in tax credit financing and finance. So they understand not only the financing structures, but also racial inequities that exist and the type of projects in which we should be allocating our limited and scarce resource of new market tax credit towards to really address the racial wealth gap. And so we've been really focused on that and our advisory committee actually has control over what goes to our credit approvals. And so they review those documents, they review those transactions, and if it doesn't meet our racial equity characteristics, then those deals get rejected. And so that's how we're trying to hold ourselves accountable to the work, but also bringing in people who don't look at risk or look at these communities from a disadvantage from a scarcity mindset, but they look at it from an asset based mindset. And I think that is the advantage that a lot of CDF eyes actually have that we work with is that they're more relationship focused, and they understand the value of that business that brings to that community itself. It's not just about, you know, how much revenue they're earning. It's about how many jobs are creating. If that if that community business is no longer in existence. How does that cripple the economic structure of that community or that neighborhood itself. And those are the intentional decisions that we're making by bringing in community members to not only hold us accountable, but actually help us develop strategies to invest in a more equitable manner. And also, we have to look at our internal hiring practices, how we ensuring that our business development officers are underwriters are aware of unconscious bias of racism and how they could be ensuring that they have the proper training to recognize when inequities exist and how to elevate those things across the board. And so one of the areas that we're focused on in US Bank as well as elevating projects, partners businesses that are within our pipeline that are led by people of color. So to understand if we're not able to lend them capital today, why not. And then start creating a toolbox of solutions to help address those inequities. And one example of that is partnering with foundations to provide foundation that guarantees on some of our lending efforts. And so if we understand that there is a wealth gap in America, we must also understand that there is a collateral gap as well. And so if we are lending on the base of collateral on assets, then we also must understand that those inequities that exist on the wealth gap standpoint will create inherent inequities in the lending field. And so one way one solution that we found to close that gap is working with foundations and bringing them in on transactions with with black lead businesses that have that challenge. And I know a lot of foundations are looking to leverage their balance sheet. I think this is the most impactful way for us to address that racial wealth gap is by providing those assets that balance sheet that these minority communities have because of what I spoke to earlier around generational poverty and generational wealth not being passed down to help create opportunities for black lead businesses for minority lead businesses to be on a more even playing field, which is the center of equity. Yeah, go ahead to breath. So, you know huge plus one meal to what you just shared and it made me just think about again our friends at shore bank that Matt mentioned at the beginning of the call because when the reason we made our first investment ever as an impact investment in 1983 in shore bank was because that bank was sitting in the midst of what had been a redlined community. Redlining began in the 1930s it was really a government practice that literally said to banks and insurance companies do not land do not do business in these communities. And what that did was not only deeply harm the communities there's research showing that even 80 years later after the Fair Housing Act everything else that has happened, those communities that were redlined still disproportionately fight against disinvestment in economic challenges, but, but what that did was it left those communities with no track record. So that even when a bank like shore bank wanted to do the mortgage lending, if anyone wanted to do the mortgage lending they could no longer look at a history of homeowners paying mortgages to be able to gauge how to think about that particular credit. And so they had to be able to leap over that chasm and be able to start doing that lending, and nobody was going to give them money to do that. If they were coming from a traditional mindset. And so that was for us the opportunity to use a program related investment and to give them capital to build that record of success. The financial crisis hit in 0809 mortgage credit dried up again, and neighborhood housing services of Chicago came to us because they had a very successful lending program focused on lower and moderate income home predominantly people of color. And the capital was going to dry at the moment that we needed those homeowners to be able to help stabilize their communities to be able to hang on to their homes to refinance their homes, and there wasn't going to be any mortgage credit. We used guarantee. And that's Neil you made me think of that as you were just, you know, emphasizing the importance of the guarantees. In that case we use the guarantee partnering with a CDFI to do a very major long term home mortgage program. So, you know, we've used guarantees to help save big transformational projects with the mortgage lending. There are other many, many other applications as you point out for guarantees and it is a powerful tool. But I would also underscore that it requires the same kind of mindset as doing direct catalytic impact investing you have to be able to think beyond just the traditional metrics. We're not comfortable to lend without collateral because oftentimes as we've noted that's the barrier, no credit score, no collateral, maybe no track record, maybe an uneconomic, you know, scale of operation that needs time to grow. So those are all the challenges. And it just does underscore for me that while we absolutely need to interrogate the due diligence as we've talked about in the underwriting and to think about what's hidden inside of that. The reality is that every program choice we make in setting up a program, whether it's in a bank or in a CDFI or in a foundation, we're sort of trying to decide what are we trying to accomplish, and who are we going to serve. And so we are always at risk ourselves of leaving people out, you know, whether whether the bar for the due diligence is too high or the collateral requirement or whatever it might be. So we're just always in, I think a situation where we need to be asking ourselves, are we doing everything that we can. Can we add another program of this program is for this purpose and serving this group of entrepreneurs. Can we add another program and partner in a different way to fill the gap that that's leaving. So I think we just have to recognize that this is a very long term journey. The good news is there's such great partners out there wanting to do this work more than ever, I think, and and we all need to just find the flexibility that each of us might have and it will look different like what's flexible for us may not be possible for Neil and me, but something else might might work there. Yeah, and I think one thing that's bad this conversation is that we're all recognizing and accepting that the problem exists. I think my question, you know, as a person coming from IFF and investee of the other three panelists here. Now that we've all acknowledged the need to take on and redefine risk, take on more risk potentially or redefine it and making sure that definition is more inclusive. How do we do so in a way with our partners, so that we don't feel like it's a catch 22 right because when I go out and raise capital. I love that I'm able to say that we've had a sterling track record in our 33 year history of never been delinquent on a repayment to an investor. And I'm sure as investors, that's great news. But that could be put at risk as we start experimenting and trying new things. How do we cross that chasm and how do we lean in with our different comparative advantages to do so. Well, we have a thing in our segment that when we try to do Ptl is just as powerful as marketing dollars, which is provisions for credit loss. So if you go into mode and know that I'm trying something new, and I'm going to take on extra losses. They're the cost of doing business and learning, and then you have to kind of figure out where do you change what what isn't isn't working. And so you kind of have to be okay with it not being pristine. And, and that's why we pilot things right and so we do that like we're going to go digital online with credit cards for small business this year. And with some markets, we're going to have a different risk appetite to see what works. And so I think instead of thinking Pcl is this dirty word. It's, it's a learning, it's the cost of learning. And so as we learn for new methodologies, or we test risk appetite to see what's really a barrier, and then giving us a little bit of leeway to say, yeah, it's maybe not as large of a portfolio as I want off day one, but I'm going to take a smaller portfolio, put different parameters around it and learn from it. And then just accept the loss is the cost of doing business. Instead of being so risk adverse and so afraid to have that conversation with the regulators or investors to say Pcl when it's deliberately used is very different than Pcl because I mismanaged my book. And I think as bankers we have to get away from it just being a dirty word. I'm lucky enough to work under leadership that thinks Pcl can be a tool. And so that's kind of where we are in our journey is that we were willing to put some aside in testing versus it always just being a bad thing. Yeah, from a loan fund perspective, you know, we're fortunate that we and again the first piece I'd come back to like separating out the real versus the perceived like I think that's job one for us. And then when we isolate the actual potential increase in risks, its partnerships like what we have with Deborah and MacArthur on arts and culture organizations across Chicago where we wanted both of us wanted to get more capital into arts and culture organizations, but it was in a way that was definitely going to be higher risk. And so MacArthur came in with incredible support to enable IFF to be able to do that so working together through strategic partnerships to funnel capital out is is an important part of the toolkit. Yeah, and one thing that you as bank we're prioritizing our most flexible capital that that's most and most patient capital. We're looking at our racial equity work. We're looking at not only just minority led businesses and black led CDF eyes, but also what are other white led CDF eyes doing around racial equity. What are their mission, what are their values and as we're looking to have our limited resources deployed, we want to make sure that we are partnering and investing whether it's grant dollars philanthropy dollars are our patient capital or even our tax credit investment investment dollars with people that are aligned with our core values that are going to continue to work in communities and hope ourselves and themselves accountable to the people who live there and that is what racial equity should be about is when we're investing and low to moderate income communities. How is that investment actually impacting the people that live there. And those are some of the metrics and visions and strategies that we're looking for through the underwriting process, not just for my minority led customers and businesses that we support, but more importantly on our white led customers. Are you going to leverage these dollars to support job opportunities. You're investing into a manufacturing facility. What are their hiring practices. How are they making sure that they're creating diverse workforces that represent the people there and they're not hiring outside of the community. A lot of times we just want to make sure they have a plan in place. And that's part of our due diligence process, who you as bank as we are selecting our partners in our tax credit equity investing spaces today so I think that has allowed us to not just not just understand the universe of ways in which we can improve, but how do we leverage our influence within the industry as being one of the largest tax credit investors. We want to prioritize those customers and businesses that are willing to go on this journey and challenge themselves along with us to invest in racial equity and I think that's how we as a as a industry become better and stronger by partnering with each other and holding ourselves accountable through the influence that we do have and that comes in the form of investment in capital that we deploy. Yeah, I want to build on this concept of accountability because there are a couple questions coming in into the chat. Lots of people are interested in understanding who within your organization set policies and rules and makes decisions to fund. And what we've learned about the gender movement in terms of women's rights is that when women are represented in board rooms, resources get out to more women led organizations. And so there's a question for all of you in terms of how are you reflecting on your organizational structures and the power dynamics and centers of influence in terms of who gets to make these decisions. I'll jump in you just to follow up on something I said a little while ago so for us we have this overarching effort throughout the foundation called the just imperative at the MacArthur Foundation, where we are looking at all aspects of how we operate internally and with our stakeholders and partners externally. So certainly that's the frame within which we are having conversations around these topics. I will say right now we have a pretty traditional structure we have a board of directors. It's posted on our website I will not keep posting links to the MacArthur website in the chat. I'm just very proud of myself because it's my first virtual conference where I've managed to actually post links and talk at the same time I'm feeling very, very accomplished, not as accomplished as I did getting actually into the hop in space that was my big accomplishment for the day. So, so we have a board of directors it's a really fantastic board of directors so I do encourage people to visit the site and see who it is. We have an internal impact investment executive committee. That is chaired by our president and is the other members are the general counsel the foundation our chief investment officer and Ken Jones our chief financial officer. That's the decision making body we put that in place 20 years ago when we started to really formalize some of our institutional practices around impact investing. So for now, the way things work as we design a program we get board approval in general for that creation of that program for example the catalytic capital consortium is a global initiative in partnership with Omidy our network and Rockefeller Foundation which we launched last spring. So the approval comes at the board level more of the implementation details happen at the program level with some oversight then from our committee. Every impact investment we make goes to our internal committee, and if it's over a certain size or it's a direct investment rather than through an intermediary, all direct investments go to our board of directors for approval, which is the same as for all of our grants. There's no essentially it's the same process as we use for the grants with this added layer of a special oversight committee because we're managing this pool of revolving capital the half billion. And as I mentioned before we have been looking at some participatory mechanisms on the grant making side, it has not been something that we've taken up on the impact investing side it is a little hard to think through how that might work. But we are definitely thinking a lot about the issue that I've seen in the chat today which is, how do we engage with community, the bet the intended quote beneficiaries which even itself is a problematic term but how do we think about getting connected, close enough on the ground to make sure, especially when we're making investments in Latin America in India in Africa in a lot of places that are not easy for us to just go to and spend a lot of time individually. How do we make sure that the funds and the enterprises we're supporting really are approximate, if not of the communities that they're seeking to engage so I think that's a really important take away from the conversation and I'm looking forward to both what ideas there already some that I've pulled out of the chat and noted that there's some work that our friends at Dahlberg are doing I really look forward to staying in this conversation and thinking about those things together. Thanks Deborah Neil. You're on mute Neil. That's all good time today only. So a US bank we have been on this journey as we talk about journeys around racial equity for about six years now. And the majority of our efforts actually started internally, looking at our hiring practices, doing many of our anti bias anti racism work as well. And so what we've done is not only elevated the work and train our internal team, we brought some of our investor partners such as ISF, along with us on that journey. So as we're thinking about creative ways to invest in racial equity and build shared understandings and shared experiences around how we can improve internally and externally. I think that's been a helpful process for us. And also we develop a diversity, equity and inclusion council within US bank that evaluates all of our hiring practices of broken development strategies and all of those things to ensure that we are having a diverse representation of US bank across the board, and others that are executive level, and our credit approval levels, and also in our business development teams. And because I, I am really an advocate for if you have somebody that that looks like you and can share those experiences. There are better advocates for you because they inherently understand the challenges that you're faced with, and they can speak in a more direct way on your behalf in front of many of their colleagues internally that are making those decisions. And that's why we focused a lot of our initial work internally, and then over the last really year and a half almost two years through the development of the business impact group, which I have the privilege of leading, we focused on evaluating all of our business practices, processes and reallocating our capital in a more equitable manner to ensure that women and people of color led businesses have a fair chance and equitable opportunities to access that capital. And now we're putting tools and resources in place, as we're becoming more educated on those challenges, such as foundation that guarantees, such as creating funds specifically support the pipeline of affordable housing developers, and other initiatives that are really founded not only on external research and knowledge, but also are founded upon the inherent challenges that we've recognized throughout underwriting practices and putting processes in place to ensure that we address those gaps head on and through partnerships with foundations and with CDF as such as I. Thanks so much, Neil. Neil, sorry, I froze out and we were so prematurely proud of ourselves, Deborah. I saw both you and I got kicked out and came back in but here we are. In the last four minutes, I'm going to wrap us up. It's been a really rich conversation. A lot of interesting questions from the chat we didn't get to all of them, but I think there's a lot of interesting ideas from the audience that we can take from this conversation and as we said it's all a journey. One of the things that we touched upon across the conversation is that we all have different flexibilities in terms of how we experiment and move forward. I'd like to conclude by having a call to action from your vantage point of what you can do as a commercial bank or as a foundation or as a CDFI to help move the ball forward in racial equity in lending. I'll start. I would say our call to action at the bank is we're actually looking at everything from across the gamut. So we're putting targets and plans in place from a small business consumer all the way up through our commercial groups to make sure that not only is our risk appetites working in favor of all people in the community, but also our bankers. So it goes to recruiting HR, not targets, but HR practices, making sure that we're representing the communities we serve. Because while we feel underwriting can be blind, at-bats are not blind, how many times you're putting people through the process at the same time. So if you don't have the boots on the street that are either in the community or all the way up through the commercial, that we, you know, everyone kind of relates to their own as we say, right? So like we have to make sure that we have a good strong pipeline of commercial bankers that are diverse just as much as our small business bankers. So we're looking at our hiring practices as well as risk appetite and programming that is across all of our spheres. You know, banking is traditionally very siloed. So we have formed committees that now are looking at our wealth group, our small business group, our commercial group, and our consumer lending group, and saying how are we crossing the gamut across all of these in a lens of racial equity, as well as HR and as well as supplier diversity, and as well as partnerships. You know, we do a lot of philanthropic work, but how are our philanthropic, and are they working across what we really want them to do? So that group is, I would say relatively new, but that's probably because it's been a long year. That group is since January this year that, you know, we're really coming together and trying to have a cohesive strategy. And it's an extremely passionate group. So it's pretty strong called action and we're actually set up to make some really nice announcements in mid November of what we're really pegging our actions and our commitments in a multi year plan are. But until you do it holistically across an organization which Neal has done at US Bank, you don't move the dial. So you can't just have one call to action it has to be in an organization like ours, it has to flow from the CEO all the way down and all the way across, or you don't get great thank you. Matt. Yeah, so my call to action would be to empower your staff and teams. So when we set out on our journey. Two and a half years ago through our most recent strategic plan and our commitment to this work and Neil and US Bank have been incredible partners for us and helping us get our staff through two and a half day of anti bias anti racism training. But we've intentionally like the empowering staff our staff has our edit team has the ability if they feel that executive management is not listening to them they have direct access to our board. And then empowering and giving accountability to staff. We are having just really robust conversations and credit we have elevated and diversified our voices at the credit committee, we are doing much deeper audits of our lending work that I think we otherwise would have. And there's such richness in the talent pool across the organization we're 115 strong at IFF. So if it's one call to action I would have it would be to empower your teams. It's a wonderful Neil. I know you guys are doing a lot already but what is next. No, I think it's I would just say, the only thing that I want to call it action is to not check boxes, but check your biases. And I think that is the biggest takeaway I want to leave with the group today is we can have these goals and set all these aspirational messaging to have these initiatives and programs in place. I would say we did it we invested, you know, a billion dollars into black communities. But until we change our business practices and chat and tell we change our biases and really recognize the ways in which we are having a more of a negative impact and a positive impact on the black communities across our country. We will not make progress. And we'll continue to fight these issues in five years from now, and 10 years from now and 50 years from now. If we don't fight the biases and the root causes of these issues head on. So again, I think, let's not just check check boxes but let's check our biases in order to address these inequities. And last word for me to a quick. I do not have a super snappy call to action and Neil has nailed it again. So we'll just leave that one where it is but let me say that. For me as a longtime impact investor who always love so cap, because we see the whole glory of our impact investing social enterprise ecosystem unfortunately not in person this year. I really do believe impact investing has an abiding role to play in this racial justice journey that we, you know, must fight and must be on and must, you know, not let it just be a passing fad. So certainly that's one call to action is don't don't let up don't don't let your attention divert. These are crises and problems that have been with us for a long, long, long time. And what's happened with COVID is of course many of the inequities that people were blind to have become just glaringly front and center and then the abuses and killings and things that have brought forth such an outcry we just we have to keep doing what we can to fight for progress. One, this is going to sound like I said from the beginning very technocratic. I believe that catalytic capital, which is the form of impact investing that our foundation has particularly embraced and which foundations are especially well suited to using is an essential part of the solution going forward and not just in the fight for racial justice, because that absolutely is the case, but also in fighting for climate change mitigation, gender justice, and much more because, ultimately, it is what Neil's saying, right, it is about doing investing that's authentic and driven by the impact and the impact of investment and it's not mechanistic. It's not a credit score. It's not a collateral ratio. It is taking each investment case by case and being willing to do the work to be flexible. And as Matt was saying to go argue with the hires up higher up folks and tell them why they should be making the investment it is about really helping impact investing realize it's full potential for positive social, economic and environmental change. And so now I will make one shameless plug since you let me go last year. On Thursday, there will be a so cap panel on the catalytic capital consortium and new grant making opportunities that we announced at the end of last week, and we'll have our colleague from fsg Harvey co who's just published something on the catalytic capital in SSIR speaking and then the three foundations that are part of the consortium so if you want to learn more about how we're going to build the knowledge base around this more patient flexible risk tolerant type of investing. That's your next step on the so cap agenda. Thank you for joining us and have a good rest of your so cash and please be in touch via our social medias and we look forward to hearing from you. Thank you. Thanks to you. Thanks.