Giving and Investing by Financial Institutions Examined

Two new reports shed light on giving and investments by banks and other financial-services institutions:

• Sixty-five members of the Financial Services Roundtable, which represents the nation’s largest banks, donated 6.3 percent more to nonprofit groups in 2002 than they did in 2001, according the roundtable, a Washington trade association made up of large banks and other financial companies.
• Contributions made by so-called socially responsible investment companies to economic-development loan funds in low-income neighhborhoods nearly doubled from 2001 to 2003, according to the Social Investment Forum, in Washington, a trade association of 500 investment companies and financial professionals. The Social Investment Forum’s “2003 Report on Socially Responsible Investing Trends in the United States” shows that its members and those of similar trade associations invested $14-billion last year in loan funds, credit unions, and venture-capital funds that work to improve predominantly low-income neighborhoods. In 2001, a total of $7.6-billion was invested in such funds.

Although volunteering among employees and officers of financial-services companies fell from record-high levels in 2001, the 8.2 million hours donated in 2002 still represented an increase of 11 percent over 2000.

“Many chief executives from these companies have told me that they encourage community service and giving, but their employees insist they do even more of it,” says Steve Bartlett, president of the Financial Services Roundtable. “The energy of employees is really what’s driving a lot of this.”

Giving by banks and investment and insurance companies is considered separate from the investments required by the federal Community Reinvestment Act, a law passed in 1977 that calls for financial institutions to steer money into the neighborhoods where they they operate, says Mr. Bartlett. “It’s above and beyond those requirements,” he says.

But some nonprofit leaders view reports such as the one by the Financial Services Roundtable skeptically, because corporate donations are self-reported and the federal government does not require donors to verify the amounts of their gifts.

“What does this really say about corporate giving? That’s hard to say, because it’s all reported by the companies themselves,” says Jeff Krehely, research director at the National Committee for Responsive Philanthropy, an organization in Washington that advocates more giving to needy people and social-justice causes. “It’s really hard to put the study’s figures into any kind of meaningful context,” says Mr. Krehely.

Community-Development Banks

The Social Investment Forum study found that giving to community-development banks has grown 130 percent in the past two years, from $3.1-billion in 2001 to $7.2-billion last year, says Todd M. Larsen, spokesman for the organization. “That’s a sign that there is more awareness of socially responsible investing and more institutions offering vehicles for it,” he says.

The Financial Services Roundtable’s “2003 Annual Survey on Community Involvement,” is available free on the organization’s Web site, http://www.fsround.org. Print copies can be obtained by sending an e-mail to kate@fsround.org, or by calling (202) 589-2409.

Copies of the Social Investment Forum report are available on the organization’s Web site, http://www.socialinvest.org.