The social unrest following George Floyd’s murder in the spring of 2020 pushed Connex Credit Union ($868.6M, North Haven, CT) to more closely examine its role in advancing issues related to diversity, equity, and inclusion.
Although the credit union already conducted internal DEI training, CEO Frank Mancini explains that several board members wanted Connex to make a stronger outward push, with an eye toward helping close the racial wealth gap and serving the underserved. Four board members launched a social justice committee chaired by a cultural anthropologist from Yale. The group began by setting objectives and ensuring board and management were on the same page, but the task quickly turned to aligning these issues with the bigger picture of running the credit union no small challenge in the early months of a global pandemic.
They understood we had an aggressive set of credit union objectives already and were balancing normal business issues layered with pandemic complexities like staffing challenges, cost increases, supply chain issues, and more, Mancini says. They felt adding this commitment was a critically important statement of what we stood for and a mechanism for future growth. That dial is continually being adjusted to set the right expectation level, while conveying the board’s sense of urgency for action.
With the board’s input, Connex identified several areas that impact the racial wealth gap:
- Housing finance.
- Education and human capital.
- Personal finance.
- Wealth management.
Its plan for tackling those issues varies by each topic. In some cases, explains Mancini, Connex reexamined products and services, such as 529 college savings plans and financial literacy courses. In other instances, such as wealth management broken into entrepreneurial finance, estate planning, and intergenerational wealth transfer opportunities arose for Connex to work with partners that have different areas of expertise than the credit union and its staff.
Connex is already well-positioned to address these issues, Mancini says. The credit union has a long history of providing mainstream financial products for low-income and underbanked consumers, and it expects to release a mobile app to help members with budgeting later this year. Connex also rolled out a checking account with relaxed standards for approval and overdraft forgiveness features last year as part of a broader initiative, known as Pathways, aimed at meeting the needs of consumers who mainstream banking has overlooked. That suite of products also includes a credit-builder loan, secured credit card offering, and prize-linked savings account.
Connex already hosts an extensive series of webinars and other financial literacy sessions for members, including first-time homebuyers and also improving credit scores, among others. We can also make online education available through one of our partners, Mancini says. That can build a solid foundation for people that might have had challenges in the past or are new to banking.
Newly Designated As A CDFI
Connex also recently received certification from the Treasury Department as a Community Development Financial Institution and is applying for grant funding this year. The goal, says Mancini, is to fund $30 million in a suite of real estate mortgage products, for first-time homebuyers/revitalization loans, down payment assistance, and home rehabilitation loans for low-income consumers. These are particularly in high demand right now because of affordability issues in the real estate market where Connex operates.
The board members on the Connex social justice committee are (clockwise from top left): Malcolm Ellis, Global Director of Enterprise Architecture at Diageo; Annie Harper, a cultural anthropologist at Yale University; Corey Stone, entrepreneur in residence at the Financial Health Network; and Matt Turner, planning and performance consultant for Yale New Haven Health System.
The credit union has also hired a community development specialist a newly created position to build partnerships with local organizations that can help better position Connex as a trusted financial partner and raise awareness with low-income and unbanked markets. That role will also build out additional financial literacy materials and identify local charitable organizations where Connex employees can volunteer.
Plenty of new elements are in the works, but Connex also has existing projects and partnerships that benefit consumers in need. One is a partnership with the United Way and includes a savings product for consumers going through tough times. Data from the nonprofit has helped Connex better identify economic vulnerabilities many of the state’s residents face, and the ALICE account an acronym for Asset Limited, Income Constrained, Employed is intended to help make it easier to build savings.
Notwithstanding those products and ideas, we are also making thoughtful improvements to our overdraft policies and currently writing software program changes that will reduce the amount of overdrafts that members currently pay, Mancini says. We often hear that overdrafts disproportionately affect people of color or of modest means. These changes will give back to members another $2.5 million in overdraft fees over the next five years. We hope by being one of the first credit unions in Connecticut to make such changes, we will encourage others to do so as well.
CU QUICK FACTS
Data as of 12.31.21
HQ: North Haven, CT
12-MO SHARE GROWTH: 14.5%
12-MO LOAN GROWTH: 17.3%
Taking Action For An Impact
Intent is nothing without action, and Mancini has a plan to ensure Connex’s good works have an impact. For starters, Connex is committed to making $30 million in new loans to Black and Hispanic consumers in the communities it serves in the next three to five years. Discussions are under way with groups like Experian to examine alternative scoring models to be sure members with thin credit files have access to loans.
Additionally, changes to its overdraft policies and core system will result in a $2.5 million reduction in fees during the next five years. And a new 501c3 nonprofit the credit union is launching will receive $500,000 in charitable donations from Connex over five years, driven from incremental income earned on $5 million of credit union investments. The credit union will track member participation in Pathways and ALICE as well as staff actions such as volunteer hours, financial literacy courses, and more for inclusion in the Connex Member and Community Impact Report Card, which it expects to publish for the first time later this year.
Connex was one of the first institutions to join Callahan’s Impact Network, because we wanted to be at the forefront of credit unions developing substantive measurements that made a difference, Mancini says. But that’s only one facet of the credit union’s impact journey. Participation in other Callahan programs, such as Sustainable Business Strategy, in partnership with Harvard Business School Online, helped connect Mancini and other Connex leaders to a network of credit union professionals focused on DEI and impact.
Callahan’s impact initiative empowers credit unions to better articulate their value through a mission-focused lens with the help of new metrics and best practices. The Impact Network is growing every day. Join today and help evolve the credit union story.
Mancini acknowledges that starting a DEI journey can be daunting but says it’s not insurmountable.
As I learned about ESG metrics, the Sustainability Accounting Standards Board, and the UN Global Compact these are not traditional financial metrics but there is increasing evidence that these types of metrics are correlated with financial returns, he says. So like any mountain you’re trying to climb, you have to take the steps to get there. We won’t be a VanCity in the next year or two, but we have our own aspirations.
And at the end of the day, the CEO adds, what matters most is the impact the credit union makes on its members, and hearing the individual stories from people who Connex had an opportunity to help.