Despite the focus on stakeholder management from leading actors such as the Business Roundtable (BRT), and large investors such as Blackrock’s Larry Fink, in reality, companies can only lead with purpose and long-term benefits when their governance aligns with their objectives.
Recently, companies such as Amalgamated Bank (NASDAQ: AMAL) have recognized this. Last summer, Amalgamated became the first public U.S. company to add environmental and societal commitments to its corporate organization certificate — a change that required a shareholder vote, passing with overwhelming support.
Today, Amalgamated announced a corporate reorganization whereby they adopted the Public Benefit Corporation (PBC) structure, organizing as for-profit corporations that also commits to consider the impact of their decisions on stakeholders such as workers, customers, suppliers, community, the environment, and society. Earlier this year, Veeva Systems, a cloud computing company serving health care companies also made such a conversion.
“The creation of Amalgamated Financial Corp. as a public benefit corporation is an extension of our mission to be America’s socially responsible bank and a leader in driving social change that builds a more just and sustainable world,” said Drew LaBenne, Chief Financial Officer of Amalgamated Financial Corp. “Our incorporation as a benefit corporation will enable us to consider the social and environmental impacts of our business when making key corporate decisions, while the holding company structure will provide us with increased flexibility to pursue strategic opportunities to drive long-term growth.”
I recently interviewed LaBenne via email about the importance of this move as part of my research on stakeholder-focused businesses. Below are the highlights of that conversation.
Christopher Marquis: Why is the PBC model important for Amalgamated’s mission and strategic direction?
Drew LaBenne: As the first publicly traded bank to utilize a PBC for its holding company, we believe that this move will allow us to seize strategic business opportunities that complement our current platform and further build on our mission of supporting an economy that is just and sustainable.
As a bank holding company with a public benefit corporation status, we will be able to explore new business lines that expand our ability to serve our customers and focus in specific mission sectors, like the environment, the rights of workers, and more.
Marquis: How will becoming a PBC impact your financial sustainability?
LaBenne: As a socially responsible financial institution, we believe – and prove every day – that doing good and doing well are not mutually exclusive. In the long run, making decisions that are good for the environment and society is also good for business. Taking this step to become a PBC enables us to intentionally and purposefully actualize these goals in a more comprehensive manner.
For example, under this new structure, we will be able to issue corporate debt in new ways and pursue complementary business lines that better serve our mission-driven client base. Previously, as a chartered bank, we were not able to take full advantage of these opportunities.
Marquis: What issues particular to the fields of banking and financial services do you think can be well addressed by the PBC model?
LaBenne: Lending and investing are key areas that are ripe for further alignment to ESG and the B Corp principles. There are great opportunities to do so when financial institutions decide to make that commitment. Within our lending and investing work, Amalgamated has committed to aligning with the Paris Climate Agreement, measuring and disclosing financed emissions through that framework, working with the Science Based Targets initiative (SBTi) to reduce emissions, and setting Net Zero goals.
We continue to explore new strategies for supporting organizations which are owned and operated by women and persons of color, expanding our work with Property Assessed Clean Energy (PACE) financing, affordable housing, and much more.
The other major asset and resource for financial companies is our talented and devoted employee base. Our team is laser focused on driving our business and mission forward. At Amalgamated our team members are continually asking themselves, and the Bank’s leaders, “how are our actions positively affecting social change?” I’ve been excited about how our team members have stepped forward over the last year to respond to COVID and the racial reckoning within our country. In addition, our employees have provided insightful ideas of how we can continue to integrate our strong mission further in-house, and build greater inclusion and equity within our own walls.
Marquis: Where do you see the market heading with your conversion and the other B Corp and benefit corp IPOs and conversions this year? (e.g. Lemonade, Vital Farms, Veeva, AppHarvest, etc.)
LaBenne: I can’t comment on specific companies, but we definitely like to see other companies join the movement to build a more sustainable and just economy through the benefit corp pathway.
The successful B Corp and benefit corp IPOs are further proof that investors realize the value that companies can provide if they have a societal mission and a broader point of view.
Marquis: In what ways will this incorporation change your operations at Amalgamated?
LaBenne: The day-to-day operations of the Bank won’t change day one. You may see a new corporate name, Amalgamated Financial, used in some places, but this structural change is really about seizing new opportunities to build our franchise, better serve our customers, and further our mission as America’s socially responsible bank.