By Bruce Farr
An article posted on the website of financial and investment giant, McKinsey & Company, back in the early days of the COVID-19 pandemic highlighted a hopeful development in corporate and individual philanthropic giving. It said, in part: “Confronted with the global pandemic, individual and institutional philanthropy has been responsive, engaged, and nimble. The challenge — and opportunity — for the sector will be to make those features stick.”
Now, some two-plus years since that article was published, we sat down with one of California Bank & Trust’s (CB&T) leading philanthropy-focused executives to examine how the bank has adapted its policies and practices regarding corporate giving during what has become a highly challenging period of time. In other words, how the bank is helping to ensure that “those features stick,” as McKinsey noted.
Ramping up Giving
Steven Herman is CB&T’s senior vice president and manager of its Community Development Finance division. He says that there has indeed been a shift of philanthropic policy during the pandemic, and the economic strain it has put on the country.
“I think what comes to my mind — and it’s similar to the way the bank approaches credit risk during times like these — is that there is a related approach to how we should handle giving and philanthropy,” Herman says. “There is a ‘flight to quality’ approach that becomes operative.
”According to Herman, over the last few years with COVID-19 and the economy being what it was, some of the larger, well-organized nonprofits had the internal mechanisms and capacity to weather the storm.
“Many actually got bigger. So, when I think about where we are today [in terms of philanthropic giving or activity], donors want to make sure that they’ve done their homework. If you’re a ‘giver’ making contributions to particular organizations, you want to be sure that the recipient satisfies the basic criteria of being financially solvent, that they’re able to take your dollars and invest them meaningfully and impactfully to their cause. Over the past few years, there have been a lot of groups out there—nonprofits, I mean—that just didn’t make it; they didn’t survive.
”Rather than backing off and waiting for better times, Herman believes that “giving” organizations should either ramp up their activity or at least maintain their status quo. “During harder times, it becomes even more important to give and support the worthy causes,” he says. The impact of those tougher times on communities is even greater than it was pre-pandemic, for example. So, you can make the argument that corporate giving is even more critical today than it was during less stressful times.
”Herman cites three specific areas in CB&T’s sphere where the bank has identified a more pronounced need for giving, and where it has turned its philanthropic focus.
Economic Development
“This mostly falls under support for small business development. For one thing, [CB&T] outperformed a lot of other banks when it came to our administration of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) that was initiated in 2020. Additionally, we complemented that with corporate giving efforts focused on Community Development Financial Institutions (CDFIs). A lot of that took the form of helping small businesses that perhaps couldn’t get financial help through a bank. So, effectively, we were hitting businesses from both sides. Those that couldn’t get loans through traditional channels but, instead, were able to work through a CDFI nonprofit.”
Housing and Housing Security
“We did a lot of giving around supporting organizations that help low- and moderate-income families stay in their homes during these tough times has been a real focus for us. Then, we did a lot of giving around homelessness and homelessness services. Additionally, my group does a lot of lending around financing new, affordable housing for formerly homeless people and low-income families.”
Pandemic Relief and Food Security
“We supported nonprofits and other organizations that function as food banks, helping people become more food secure.”
What About the Economy?
Another recently looming issue that has impacted philanthropic giving is the nearly unprecedented rise of inflation, and the ripple effect that inflationary conditions are having on the economy and virtually every other segment of our society.
For some insight, we turned to Emily Young, the executive director of the Nonprofit Institute at the University of San Diego. The institute’s mission is to support and champion the nonprofit sector through leading-edge research. Additionally, Young and her team work to strengthen leaders and organizations committed to social good.
Young’s 20-plus-year background in nearly every aspect of philanthropy and giving provides her with a unique perspective on the cultural and economic issues that may affect it. She describes how, very early into her tenure at the institute, Herman and CB&T sought out her organization and how, subsequently, the two entities have created an enduring partnership.
As an example, Young highlights CB&T’s support with the organization’s educational programs and its efforts to generate research and provide it to the non-profit community, board members, elected officials, and funders. “We all have a very strong stake in having and maintaining a healthy nonprofit community, so we’ve partnered with CB&T in that regard,” she says.
Young adds that, especially during the pandemic, the institute partnered with CB&T on educational outreach to nonprofits that were interested in PPP funding. “CB&T has been really committed to working with these nonprofits to ensure that first, they could apply, and second, be successful in securing PPP funding.
”Young’s research bears out Herman’s philosophy of ramping up corporate and individual giving during hard times. “Particularly after a fairly rocky 2020, we saw giving increase. We also saw foundations open up their purse strings to give more and, importantly, to become more flexible in their criteria for giving,” she says. “Additionally, among community foundations, we saw a real effort to partner with corporations and government, to pool together resources quickly for immediate COVID-19 relief.
"Last October, when the institute released its annual State of Nonprofits & Philanthropy Report, it indicated that nonprofits were better off financially than they had been the prior year and that many were predicting better than average financial prospects.
“Many had an unanticipated cushion from the PPP funding,” Young says. “Now that we’re looking at 2021 and the data is coming out from national studies (such as Giving USA), what we’re seeing is that giving is relatively flat, and that’s due to inflation. Any gains that were made were wiped out by the rate of inflation.
“The one bright spot,” Young says, “is that giving by corporations has picked up its pace significantly in 2020 and 2021. Giving in that time period increased by 24%, which is quite a gain.”
“Corporate giving constitutes about 4% of all philanthropic giving,” she adds. “But it’s important to look at the vital role that corporations such as California Bank & Trust can play. It’s positive for a nonprofit community.”
Tips for companies or individuals interested in giving this year
Mission alignment. “One of the things that we’ve done as a company is to identify our own passions and missions, and then seek out organizations that align with our goals,” said Herman. “It helps ensure that there’s a DE&I (diversity, equity, and inclusion) dimension to our giving.”Charity begins at home. “Another is to identify and support organizations that might be helpful to your own employees. Of course, that all depends on where you are and what you do as a business, but, when it’s possible or viable, this can be a very good approach to giving.”
This content was originally published in our award-winning magazine In Your Corner. See issue 13 of In Your Corner here.