Amalgamated makes environmental, social values part of bottom line

The leaders of Amalgamated Bank in New York had shared a fundamental challenge facing many well-meaning heads of public companies: how to do good in the community and in regard to the environment without shirking their duty to shareholders.

The $6 billion-asset bank, which has longstanding ties with unions and a reputation for political activism, says it has found the answer. In a corporate overhaul that took effect Monday, management has formed a holding company — Amalgamated Financial Group — and gotten it certified as a public benefit corporation under Delaware incorporation law.

That status enshrines a commitment to social and environmental values in the holding company’s charter and offers its board legal protection to balance financial and nonfinancial interests when making business decisions. While a number of other U.S. banks are PBCs, Amalgamated is currently the only publicly held financial services company in the U.S. to hold this designation, according to the nonprofit group B Lab.

“Becoming a public benefit corporation continues that responsibility to shareholders, but it also commits the corporation to considering the company’s impact of its decisions on other stakeholders, which could be the workers at the bank, our customers, the community at large, the environment, etc.,” Amalgamated Chief Financial Officer Drew LaBenne said.

A public benefit corporation is a type of for-profit entity that’s recognized in 38 states and the District of Columbia. Unlike C corporations or S corporations, which must place primary focus on short-term financial gains, PBCs can consider other factors when making decisions about which business activities to pursue and how it will treat employees.

For example, if Amalgamated chose to exit a certain business — say, to better meet the conditions of the Paris climate accord— then its board could cite its environmental justice mandate in making that strategic decision.

“Increasing shareholder value is still a focus of our board of directors, but we have different lenses that we now formally put on that decision-making as well,” LaBenne said.

Amalgamated Financial is also certified as a B corporation, which means it has met certain social and environmental standards set by B Lab. Other financial institutions certified as B corps include Sunrise Banks in St. Paul, Minn., and Beneficial State Bank in Oakland, Calif., which are both also public benefit corporations.

In an interview with the consulting firm McKinsey, B Lab CEO and co-founder Andrew Kassoy described both the B-corp status and the PBC structure as attempts to establish a formal structure for balancing shareholder value with the needs of other stakeholders.

“When you really put people’s feet to the fire and talk legal commitment, that conversation can slow down,” Kassoy said in that piece. “The big challenge ahead of us is to turn that cultural energy into structural change in the market — companies and investors need to go beyond nice statements of purpose by making themselves legally accountable to create value for society.”

Its status as a public benefit corporation shouldn’t make Amalgamated any more or less profitable, although it could make the bank more competitive in terms of attracting talent, LaBenne said.

“There are a lot of reasons to do it. It may mean you attract different customers or different shareholders, but it’s certainly a clear distinction, especially for our employees and our customers,” he said.

In Amalgamated’s release Monday announcing its PBC status, Kassoy said: “In a country that needs more responsible financial institutions, I hope that other banks will follow Amalgamated’s extraordinary leadership on stakeholder governance.”

Amalgamated took its name from the Amalgamated Clothing Workers of America, which founded the bank in 1923. It was New York’s first labor bank and for many years the nation’s biggest union-owned bank. Unions, including Workers United, still maintain a significant ownership stake.

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