Controlling more than $18 trillion in assets, the U.S. banking industry holds the reins to private credit, lending, and other financial services — and its decisions and practices determine who has access to the capital necessary to start businesses, buy homes and vehicles, and build generational wealth. Unfortunately, the industry has a long history of creating barriers to those services among women, people of color, and other underrepresented groups.
Today, innovative banks aim to contribute to the work toward a more equitable world. Among them is Beneficial State Bank, a Certified B Corporation and Community Development Financial Institution (CDFI) that serves low-to-moderate-income populations and communities.
With branches in California, Oregon, and Washington and about $1.9 billion in assets, Beneficial State Bank has operated since 2007 with a model to provide more people with financial services. By donating the capital for the bank and establishing Beneficial State Foundation as the majority owner of the bank’s economic rights, Founders Kat Taylor and Tom Steyer embedded a commitment to positive social and environmental impact. As a bank owner and community advocate, the foundation is uniquely positioned to help other financial institutions understand that socially responsible policies and practices can lead to better financial outcomes and stronger relationships with all stakeholders. This governance model enables the bank to serve more than shareholders, structuring its products and services for positive long-term social and environmental impact. That means no predatory lending or investments in extractive industries such as fossil fuels, prisons, and arms.
As part of an ongoing series highlighting B Corps that are using business as a force for good, Bark Media spoke with Francis Janes of Beneficial State Foundation and Manny Barragan-Alcaraz, Craig Hill, and Terra Neilson of Beneficial State Bank to learn more about their impact-oriented financial services.
“Banking is about more than money,” says Barragan-Alcaraz, Vice President, Client & Treasury Manager. “The value comes from the relationships we build with our customers. As a triple-bottom-line bank, every relationship we build helps create a stronger local economy and a better future for our community and planet. That’s why we take the time to understand each customer’s goals and work alongside them to achieve them.”
Barragan-Alcaraz adds that Beneficial State Bank’s dedication to building authentic relationships is appealing to customers looking to align their dollars with their values. The bank makes it easy for customers to see how the bank invests their dollars to benefit stakeholders with its Deposit Impact Calculator, an online tool that displays how deposits are part of lending for people, the planet, and greater overall prosperity. These relationships also help ensure long-term resilience. Beneficial State Bank weathered the 2008 recession and other challenges, building financial success over the last two decades. “The number of banks in existence now is a third of what it was 20 years ago,” says Hill, Vice President, Client & Treasury Manager. “The industry has changed through massive consolidation and, in a few cases, collapse. Through it all, community banks like ours have proven the power of institutions that combine strong financial fundamentals with deep local roots and a commitment to responsible banking.”
Broadening the View of Business Success to Include All Stakeholders
While conventional banks focus solely on building financial gains for shareholders, Beneficial State Bank stakeholders include employees, communities, the environment, and more. Along with demonstrating a new way of banking, Beneficial State Bank is partnering with Beneficial State Foundation to create tools and resources to help other banks follow its lead.
“We have a bold and ambitious vision whereby all banks evolve to behave more like Beneficial State Bank,” says Janes, Industry Relations Director for Beneficial State Foundation. The foundation’s initiatives aim to equip banks to make progress toward achieving better outcomes for the communities they serve and the planet, he adds. For example, the foundation developed the Equitable Bank Standards, a robust ESG framework designed explicitly for financial institutions, and launched a two-year learning pilot for lenders as part of its Underwriting for Racial Justice initiative.
Organizations such as the World Economic Forum and the Business Roundtable have endorsed broadening the business view beyond shareholders. In recent years, these and other groups have called on corporations to realize that short-term financial gains come at a high cost — one that threatens the long-term viability of the environment and society. “Sustainable business requires sustainable capitalism,” Hill says.
Embedded systems such as typical measures of creditworthiness create barriers to economic mobility for many people. “Beneficial State Bank is constantly examining new ways to lend equitably,” says Neilson, Chief Impact Officer. “This includes participating in our foundation’s Lender Pilot Program with 20 financial institutions, including CDFIs and credit unions, to consider how we can together evolve our underwriting practices to achieve more equitable outcomes. The banking system has decades of inequity built into its underwriting standards, and we need curious and creative folks to help us unwind and rewrite a more equitable future.”
The bank’s inclusive financial services include Individual Development Accounts, which help people build financial stability by having federal, state, or charitable organizations match the funds in the account. Programs like this assist customers in building their savings and credit history — two factors for long-term financial stability.
“As a mission-driven bank, we believe everyone deserves a fair shot at building credit and achieving their financial goals,” Neilson says. “That’s why we combine responsible lending practices with financial education and support — because access to credit isn’t just about numbers, it’s about creating pathways to economic opportunity for all members of our community.”
How Beneficial State Bank Is Working for and With Stakeholders
Alongside its banking customers, Beneficial State Bank’s stakeholder-minded approach to impact includes employees and the environment. The bank’s impact strategy broadly considers how its employee policies support economic mobility, investing in employee well-being to innovate and inform economic mobility for its customers and communities. In an industry that often pays low wages, Beneficial State Bank employees receive at least 125% of a living wage along with other benefits, including 401(k) plans and paid volunteer time. In 2021, the bank’s employees became the first in 40 years to unionize — a step that gives them a greater voice in the organization’s operations and their collective future.
Beneficial State Bank also puts dollars to work for the environment through financing and loans for clean, renewable energy and the environmental sustainability sector. Its Earth Services team focuses on solar power, financing loans for installation and solar development for mission-aligned companies and organizations. Since 2007, the bank has funded $144 million in renewable energy loans. Beneficial State Foundation also previously partnered with the California Air Resources Board to administer the Clean Vehicle Assistance Program, designed to help low-income Californians, primarily in the state’s Central Valley, purchase electric or hybrid vehicles through grants of up to $5,000.
Through all of its initiatives, Beneficial State Bank aims to lead the way toward a banking system that positively impacts more stakeholders. “The banking industry was built on an inequitable foundation over centuries,” Neilson says. “And it will take years of creative and hard work to unwind and rebuild. It will require us to examine our existing policies, habits, assumptions, and practices, and develop ways to do it differently. Then comes the hard part: bringing people along in that change. It’s a long road, but that’s how we change this system to generate economic mobility, regenerate the environment, and create a model for banking that serves us all.”