Dear reader,
Welcome to the seventh edition of The Forum File. In this edition, we are highlighting our members’ work in advancing financial opportunities for women and minority entrepreneurs and business owners, as well as their work in supporting children’s mental health.
Thank you for reading and please do not hesitate to share your feedback.
Kevin Fromer, President and CEO, Financial Services Forum
Penny For Your Thoughts
Carla Harris is a Vice Chairman at Morgan Stanley and Co-Head of the Multicultural Innovation Lab.
Can you give an overview of the funding gap problem for diverse entrepreneurs?
It’s no secret that a very wide funding gap unfortunately exists for female and diverse founders. The average investment in a typical business startup is nearly $1 million, yet for women and minority-owned businesses that figure drops to just $213,000 and $185,000, respectively. Additionally, investors reported capitalizing multicultural and women-owned businesses at 80% less than businesses overall, and our research shows this translates into roughly $4.4 trillion in missed opportunity.
And it’s far from a “supply issue” – these diverse founders are out there, but the investment community has chosen to overlook the huge depth and size of this market. I talk through this issue in greater depth on my podcast, Access & Opportunity, while also highlighting the leaders doing the work to provide solutions and diverse entrepreneurs changing the game.
Tell us more about the Multicultural Innovation Lab.
We at Morgan Stanley are working towards a more equitable funding landscape for women and entrepreneurs of color through our in-house accelerator program, the Multicultural Innovation Lab (MCIL). The MCIL is a 5-month accelerator for technology and technology-enabled startups that targets companies with a multicultural or woman founder, co-founder, CTO or other C-suite in the post-seed to Series A funding rounds. Simply put, the Lab’s mission is nothing less than to transform the investing landscape to be more equitable for diverse founders.
In addition to an investment of $250,000 and office space within Morgan Stanley, the founders receive support from a dedicated Morgan Stanley team delivering comprehensive programming across various topics and access to industry leading mentors and connections. The accelerator was launched in 2017 to close the funding gap for diverse entrepreneurs that investors claimed they “couldn’t find.” Since inception the program has expanded so that we now support up to 20 companies annually, with 2 cohorts per year.
After four successful years with six cohorts under our belt, the program has proven to be successful as evidenced by resulting company acquisitions and additional funding rounds following participation in the program. And we are continuing to make strides in the fifth year, motivated by our mission of increasing access to capital for diverse entrepreneurs. Highlighting these great companies with diverse founders and leveraging our expansive and global networks and resources will hopefully widen their universe and attract the capital needed to scale.
Learn more here.
Value Add
Member program spotlight
COVID-19 and its repercussions have taken a massive toll on children’s mental health, with depression and anxiety in youth already at a two-decade high in February of 2020, according to the CDC. To make matters worse, support for children’s mental health and wellbeing was already severely lacking, especially in vulnerable communities. Now more than ever, we need urgent, coordinated efforts to prevent the existing global crisis in children’s mental health from escalating.
For more than 50 years, the Morgan Stanley Foundation has supported healthy starts and solid education for the children in our communities, and has continued to expand the reach of those initiatives globally for the past 20 years through the Morgan Stanley International Foundation. Our latest initiative, the Morgan Stanley Alliance for Children’s Mental Health, combines the resources and reach of Morgan Stanley with the knowledge and experience of our distinguished nonprofit member organizations to help deliver positive, tangible impact on the critical challenges of stress, anxiety and depression in children, adolescents and young people.
This year Morgan Stanley launched the Morgan Stanley Alliance for Children’s Mental Health Innovation Awards, which aims to identify and fund mental healthcare solutions for children and young adults across the United States. The Innovation Awards program specifically addresses the lack of both private and public investment in children’s mental health and the dearth of effective ways to connect innovative ideas with capital. The resulting systemic funding gap has only increased with the deepening crisis in children’s mental health due to COVID-19 and ongoing social injustice issues.
Five winners of the inaugural Innovation Awards were recently selected after a robust review of over 850 applications by mental health and grant-making experts from the Alliance for Children’s Mental Health. They address a diverse set of communities, geographies, and needs through their transformative and culturally responsive models. The selected winners now have the opportunity to showcase their innovative solutions to a broader audience, including other funders, during the Innovation Awards Showcase on November 11, 2021. Learn more about the winners by registering for the virtual Innovation Awards Showcase here.
Capital Gains
What we’re doing in Washington
The Forum submitted a letter to the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) on the proposed interagency guidance on managing risks associated with third-party relationships.
The Forum joined other organizations in requesting a meaningful solution that offers fair, equitable and consistent treatment for all tough legacy contracts in support of the LIBOR transition.
Following the release of the Financial Stability Oversight Council’s (FSOC) report on climate-related financial risks and financial stability, the Forum welcomed efforts to advance climate change risk management.
- Forum members recognize that climate change poses risks to the world’s economy and financial system, as well as offers opportunities to foster innovation and mobilize capital. U.S. GSIBs are undertaking significant efforts to assess and manage climate-related risks and have announced support of the Paris Agreement goals of limiting the increase in global average temperature to well below 2 degrees Celsius above preindustrial levels. Firms are analyzing and developing Paris-alignment strategies to support their clients and the global economy to meet this goal.
Learn more about what Forum members are doing to assess and manage risks associated with climate change and their related commitments here.
Our Two Cents
Research from the Forum
The BankNotes Blog Spotlighted:
- A review of the Federal Reserve Bank of New York and New York University research paper that attempts to estimate climate risk in the banking sector and discussed some of the conceptual and empirical challenges that are highlighted by this work.
- Climate change and its relation to large bank capital and risk-management policies. As in the FSOC report, we find that a focus on risk-management, including scenario analysis, is important to address climate-related financial risk.
- The large bank buffer regime, the experience with buffers during COVID, the underlying problem with the buffer framework, and implications for the countercyclical capital buffer.
Checking the Balance
Members in the news
Bank of America announced its current portfolio of loans, deposits and investments to Community Development Financial Institutions (CDFIs) now exceeds $2 billion. This includes approximately $100 million in deposits to Minority Depository Institutions (MDIs) and investments of nearly $36 million of equity in 21 MDIs as part of the firms’ recent commitment of up to $50 million. These investments build on 25 years of partnership through which Bank of America has provided capital to more than 250 CDFIs across all 50 states and DC.
BNY Mellon’s Chief Financial Officer, Emily Portney, was named to American Banker’s annual Most Powerful Women in Finance list for the second year in a row, and Chief Audit Executive, Paulette Mullings, was named to its Most Powerful Women to Watch list. Additionally, Global Head of Human Resources, Jolen Anderson, and Chief Operations and Technology Officer, Bridget Engle, were highlighted as standouts in their respective roles.
Citi announced the offering of the inaugural Citi Social Finance Bond, a $1 billion bond that supports social-focused developments in emerging markets around the world. The use of proceeds from the bond will finance a range of projects, including those that expand access to financial services, affordable housing, basic infrastructure, healthcare, and education in underserved and unbanked communities in emerging markets. The bond supports Citi’s $1 trillion commitment to sustainable finance announced earlier this year, which includes $500 billion for social finance and $500 billion for environmental finance by 2030.
Goldman Sachs One Million Black Women announced a partnership and a $1 million commitment to Echoing Green to accelerate the impact of Black women social entrepreneurs through its fellowship program. In partnership with Black women-led organizations, Goldman Sachs One Million Black Women has committed $10 billion in direct investment capital and $100 million in philanthropic support to address the dual disproportionate gender and racial biases that Black women have faced for generations, which have been exacerbated by the pandemic.
JPMorgan Chase announced it has deployed or committed more than $13 billion of its $30 billion goal to help close the racial wealth gap. The progress is largely driven by homeownership refinancing and affordable rental housing preservation, which were existing products and processes where the firm took immediate action to do more. While noting there is more work to do, the bank has hired more than 20 diverse senior business consultants to provide free one-on-one coaching for business owners in 13 U.S. cities and have mentored more than 900 small business owners so far. JPMorgan Chase has also invested more than $100 million of equity in 14 diverse-owned or -led MDIs and CDFIs that serve more than 87 communities in 18 states and the District of Columbia, among other steps.
Morgan Stanley Wealth Management sponsored the Black Wealth Summit with Andy Saperstein, Co-President of Morgan Stanley and Head of Wealth Management and Carla Harris, Vice Chairman and Managing Director, as featured speakers and over 50 Financial Advisors and managers participating. The mission of the summit was to offer the exposure, learning and encouragement needed to make prosperity accessible to Black people through wealth literacy, investment education, networking and mentoring. The summit shared a similar mission with Morgan Stanley’s launch of a Racial Equity Investing Tool Kit in May.
State Street CEO Ronald O’Hanley and COO Lou Maiuri were named to the 2021 HERoes Advocate Executives List. This list features executives recognized as champions for women in business through initiatives they have implemented and company culture under their management. Additionally, Yvonne Garcia, Chief of Staff to State Street Chairman and CEO and Global Head of Internal Communications, was named to the HERoes Women Executives List, and Marion Bentata, Vice President, Leveraged Loans Analyst, was named to the Women Futures Leader List.
Wells Fargo was recognized at the 2021 Climate Leadership Awards as a Goal Achievement winner for Excellence in Greenhouse Gas Management. Wells Fargo received this award for its reduction in emissions, improved energy efficiency, and initiatives such as Green Teams that develop business plans for local and business environmental initiatives in line with company-wide goals.