Purpose At Work: How Wells Fargo Is SupportIng Small Business and Minorities During COVID-19
Strong communities build strong businesses and a strong economy. Companies that cultivate community development strengthen stakeholder bonds and financial opportunity. By supporting others to live their best life, especially during a crisis, you will be rewarded with consumer loyalty and goodwill.
An example of a brand supporting such community development is Wells Fargo. Much of the company’s core business comes from assisting small businesses with loans and other banking services.
Small businesses, especially minority-owned establishments, have been disproportionately affected by COVID-19. While the pandemic continues to impact all of our lives, it’s also critical that business and life move forward so businesses and communities can survive. This is where Wells Fargo is making meaningful commitments.
The bank recently announced the Open For Business program. The project is backed by about $400 million, which is funded by gross (rather than net) donations from Paycheck Protection Program (PPP) processing fees. Instead of collecting those fees for themselves, Wells Fargo is donating the money to nonprofit organizations that then provide support to small businesses.
“Wells Fargo’s Open for Business Fund creates opportunities for near-term access to capital and addresses the road ahead to meaningful economic recovery, especially for Black and African American entrepreneurs and other minority-owned businesses,” Charlie Scharf, Wells Fargo CEO, wrote in a statement.
The first $28 million will go to nonprofit lenders, or community Development Financial Institutions (CDFIs). The CDFIs focus on Black owned business, an astounding 41% of which have closed due to the pandemic.
Pillars of the first stage include the Expanding Black Business Credit Initiative (EBBC) and the Local Initiative Support Corporation (LISC).
The EBBC is backing the Black Vision Fund, which will offer capital to CDFIs that support Black businesses. It will also funnel dollars to immediate funding for businesses in hard hit areas.
LISC focuses on low interest loans and grants to over 2,800 entrepreneurs. EBBC will also favor projects that help keep employees on staff, curtail loss of earnings and keep small businesses running in the most impacted regions of the United States.
In addition to the Open For Business initiative, Wells Fargo has committed to contribute as much as $50 million to Minority Depository Institutions (MDIs). These funds will go to essentials like mortgage and small business loans in Black communities.
Access to capital is an essential building block of community development. While always welcome, Wells Fargo’s purposeful actions to help minority businesses and small businesses hit by the coronavirus is critical to post-pandemic economic recovery.
I had the chance to speak with Nate Hurst, Chief Sustainability & Social Impact Officer at Wells Fargo, about how the bank is helping the communities it serves. Here’s what we discussed.
Simon Mainwaring: Do you think business is finally waking up to its responsibility to address society’s most pressing issues?
Nate Hurst: Businesses only survive if they figure out solutions. I like to think of the current momentum as positive innovation, instead of a reaction. I think the real sweet spot is working with businesses, NGOs and governments. We’re trying to take the best of each of those sectors and coalesce around common solutions.
For example, we recently did a big social bond for the Ford foundation. That’s a new innovative model. Big foundations loaning out capital. That makes capital more sustainable than a pure donation, which adds accountability to the system.
If we’re donating dollars or investing in an NGO, we must also hold them accountable for measuring their impact. They need to show progress. If we all do well, we’ll earn further respect from the recipients.
SM: Apart from the Open For Business program, Wells Fargo focuses a lot on housing affordability. Why that issue?
NH: We are the leading bank in the U.S. in terms of mortgage lending. It’s a line of business we are really good at. It’s a space where we can make a dramatic difference.
When there’s an economic downturn and a health crisis, it comes down to basic needs and human rights. Everyone should have the ability to rent and have shelter over their head. Housing is a human right. Hopefully people will be able to eventually afford to own one day.
In response to COVID-19, the Open For Business Fund is just one program. Prior to that, we had already given $170 million to COVID-19 response. We’re looking at every opportunity we have in terms of our size to respond and scale impact.
We’re also providing funds for employees going through tough circumstances. They could have a spouse who lost their job or death of a loved one. We provide funding and support. Additionally, we’re exploring opportunities to use our infrastructure to assist Feeding America. Our parking lots, for example, can serve as food banks across the country to get resources to families that need it.
SM: How have programs like the Small Business Recovery Effort been received internally?
NH: I think it’s driven a sense of pride. It’s helped evolve some of the culture and show that we are a company that is best when we come together.
SM: When your brand is faced with multiple challenges, how do you prioritize them?
NH: These things are connected. Take Katrina as an example. It was a climate related issue. The people that built on flood plains were disproportionately impacted because those were the last plots of land that were given out. It’s also an affordable housing or housing issue.
If you go down the line, these people were displaced. They lost another year of education. They ended up being refugees in other places like Texas. These are the issues, no matter which one you pick they’re connected.
Be authentic and genuine. You can’t work on all of them. Prioritize your business strength. When we leverage our expertise, small changes can compound to monumental change.
SM: What is your vision for the role of business in the future?
NH: I hope to see more sustainability and environmental responsibility. Not only understanding your footprint, but making your corporation a positive for society, that’s where we need to go.
The first step is setting bold commitments. Commit to diversity, inclusion, social impact, environmental impact. Make it inherent to the business strategy and growth opportunities. Businesses that figure that out sooner will be here. Those that don’t figure it out won’t exist in the future.
SM: What are your goals for Wells Fargo’s leadership in terms of impact?
NH: The goal is to bring an equity lens to everything we do. I grew up on a street where I was the minority. In Pennsylvania, my best friend when I was nine years old was a Black kid named Jamal. When George Floyd was murdered, I sat there in tears at my kitchen table with my wife. I couldn’t stop thinking about Jamal. I have no idea where he is. Did he get the same opportunities that I did? Definitely not.
It’s time we do something to address it. I don’t want my son to have to be fighting climate change and the same social and racial inequities when he gets older.
The divide between the haves and the have nots is accelerating. When there’s an economic downturn, or a health pandemic, poor people get hit hardest. If you have wealth and you don’t like what the public school system is putting out, you can send your kid a private tutor.
We have to invest in impactful ways. We have to take on more risk in the short term for real long term impact across all environmental and social issues.