D&IInvestment Management

A Starbucks Fund Blends Racial Equity, Environmental Resilience 

By March 10, 2022No Comments

The company selected CDFIs for its Community Resilience Fund to achieve specific goals. 

During a NeuGroup Diversity and Inclusion Working Group session held during Black History Month (Feb.), presenters from NeuGroup member company Starbucks shared insights on a $100 million fund the company launched last year to advance racial equity and environmental resilience.

  • The fund is part of a trend of increased commitments by corporates to promote D&I following the murder of George Floyd in 2020. The initiatives include a racial equity fund managed by RBC Global Asset Management launched by ServiceNow as well as companies tapping the IntraFi Network and CNote to help funnel deposits to financial institutions serving communities with historically limited access to capital. But Starbucks in this case has created a framework to select the community development financial institutions (CDFIs) it funds rather than working through an intermediary.
  • The Community Resilience Fund commits Starbucks to investing $100 million by 2025 in small business growth and community development projects in communities of people of color. The first year focused on 12 US metropolitan areas and involved allocating funds to local CDFIs that will provide borrowers with access to capital, ongoing mentorship and technical assistance. In its first year, the fund successfully closed on $21 million in loans to seven CDFIs

Structure, tools and process. Starbucks team members Maggie Kellogg, a business analysis manager in treasury, and Amini Khanna, a government affairs and public policy project manager, led a discussion moderated by NeuGroup’s Andy Podolsky, director of new membership offerings and peer groups, that included the process Starbucks cross-functional team followed and the carefully designed structure of the project.

  • This was no impromptu effort. The initiative featured the time-honored management tools of a governance structure, strategic framework, due diligence and extensive communication to stay on course.  
  • The effort involved connecting over 10 internal functions, outside entities (including third-party advisors, CDFIs, partners and national civil rights and sustainability stakeholders) and the community to achieve tangible results rather than a statement of broad goals to demonstrate their support of D&I efforts.

Direct control. Starbucks’ effort stands out in part because of the company’s decision to directly manage the fund and not rely solely on the strong list of outside firms that coordinate and make impact investments easier for corporations. While those groups are extremely helpful, valued and used by Starbucks, the company saw this project as another opportunity to adopt a hands-on effort and work directly with its communities. 

  • Ms. Kellogg said, “We wanted to form these direct partnerships with CDFIs to have greater visibility and influence as to how our specific requirements and goals for the program could be achieved.”
  • The discussion included an overview of how Starbucks filtered the broad list of potential investment opportunities using input from expert partners, and a detailed impact questionnaire. Members also discussed the implications of pursuing projects (like this one) that seek to include both D&I and environmental aspects, a combination that few companies have been able to integrate in a single effort. 
  • “Racial equity and environmental and climate justice in general are very much intertwined,” Ms. Khanna said. “We know that CDFIs are beginning to incorporate the environmental angle into their operations and impact strategies.”

Lessons learned. Key lessons learned by Starbucks included the importance of spending time to build, maintain and expand internal and external relationships, recognize that CDFIs can be very different and require customized solutions, and the importance of adhering to tight governance while maintaining an ability to nimbly adjust on the fly. 

Justin Jones

Author Justin Jones

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