Courtney Robinson is the global head of financial inclusion for Block (formerly Square, Inc.)
Private sector can inspiration from public sector book on how to invest purposefully in communities.Mark Blinch/Reuters
You’ve probably heard the popular refrain that the private sector has a lot to teach the public sector, particularly in the innovation arena.
But, when it comes to social-impact investing, the opposite is true – the private sector can draw inspiration and learn from the public one.
I learned these lessons first-hand during my time as counsel at the Center for Responsible Lending and as senior counsel on the financial services committee in the U.S. House of Representatives.
When Block’s treasury team was looking for a purposeful way to invest, I was able to share my experience in the public sector working with community development financial institutions.
What began as a pilot US$5-million Community Development Financial Institution (CDFI) investment, led by our treasury and government-relations teams, soon evolved into Block’s US$100-million commitment to racial equity and social impact.
At Block, our purpose is to help our diverse audiences – sellers, individuals, artists, fans, developers and all the people in between – overcome barriers to access the economy.
That’s why in the fall of 2020, our leadership decided to invest 3 per cent of Block’s cash reserves to accelerate financial empowerment to historically under-resourced communities.
Because social-impact investing is about generating repayment over time to allow for reinvestment, it can’t be driven by the usual business objective to generate and maximize corporate financial profit.
Instead, a company’s social-impact investments need to serve under-resourced communities with a purpose, a protected, standalone budget and built-in accountability and governance. This approach is modelled on social-investment strategies in the public sector.
Serving under-resourced communities
Following the public-sector model of serving these communities, our team looked for investments to support them.
Investments included the Black Economic Development Fund, which supports Black-led banks and businesses, and deposits at CDFIs and Minority Depository Institutions (MDIs) to bolster their abilities to lend in underserved communities. We also earmarked funds to support future programs – including an investment in the Indigenous Growth Fund, Canada’s largest Indigenous social-impact fund.
Creating a protected, standalone budget
At Block, we decided to park our earmarked social-impact dollars in government money-market funds with the ultimate goal of deploying capital across four key areas and allocating 10 per cent of the US$100-million commitment for international investments in countries like Canada.
Accountability and governance
Since establishing our social-impact investment plan in 2020, we’ve also followed the public-sector model of seeking stakeholder involvement, feedback, collaboration and co-creation.
We speak to stakeholders to learn about investment opportunities and stay in close contact even before we have officially partnered to ensure purpose and progress alignment. We also stay connected with our investment partners on impact goal progress and the opportunities that have been created: jobs, affordable housing, small business capitalization and more. We deepen our partnerships by creating programming and outreach alongside other internal teams (community affairs, talent, procurement, etc.).
We also hold ourselves accountable by transparently communicating results across our company.
Drawing inspiration from public-sector not-for-profits such as the Local Initiatives Support Corporation and the American Civil Liberties Union Foundation that document their costs and how they use their annual operating budgets, our team publishes a detailed annual review of our social-impact investment commitments and progress.
To date, we’ve funded 20 partners and grown our initial socially responsible money-market exposure five-fold to more than US$500-million.
Like our public-sector mentors, when it comes to social-impact investing, we’re not looking to turn a profit for Block, it’s about the communities benefiting.
After all, we’re looking to help rebalance systemic barriers in financial services.
And that’s good business for everyone.
This column is part of Globe Careers’ Leadership Lab series, where executives and experts share their views and advice about the world of work. Find all Leadership Lab stories at tgam.ca/leadershiplab and guidelines for how to contribute to the column here.