Keith Mestrich, Amalgamated Bank
"In addition to the trillions of dollars of workers’ capital, there’s $70-100 billion in labor-managed or affiliated investment houses and banks. And, btw, there's $1 trillion in non-ERISA funds in unions, mostly invested in treasury bonds, money markets, etc. These pools of public, labor, private funds could be transformative. These investments could make the city more livable. Think about it, we could take the lead in rebuilding our cities. We just need to organize our money to do that." -- Keith Mestrich
This has been an exciting time, it seems, for Amalgamated Bank. You’ve really done an amazing job at the bank in just a short time. Please tell us how you personally become interested in banking, workers’ capital and the pension fund world and, prospectively, progressive corporate governance and responsible investment?
I started working in the labor movement as a researcher at 20 years old for the AFL-CIO’s Food and Allied Service Trades or FAST. That’s where I learned how to read corporate financial statements and conduct other financial assessment tools. In 1995 when President Sweeney became the AFL-CIO’s President, I went to work for the Federation’s newly created Corporate Affairs Department. There, I had the pleasure of working on the Farmworkers strawberry campaign, Gulf oil workers campaigns, and organizing drives in Las Vegas.
Later, I was assigned to the AFL’s Change to Organize Initiative, working with UAW, USW, and then UNITE. During my work with UNITE, there was a deep conversation about how to address the change in the clothing industries, etc. I worked on the CINTAS campaign against a multinational laundry that was anti-union. I moved to UNITE HERE and became an advisor to the President, working on union building and organizing efforts. In addition to gaining critical experiences and working with terrific and brilliant people, this work was transformative in how I viewed the world and allowed me to be a part of fights I truly cared about.
So, when I came to Amalgamated, I took with me a specific view and ideal of the working world and I sought to apply some of the lessons and beliefs I had gained through my years in labor. With Amalgamated I saw a longstanding, labor-backed organization with tremendous opportunity for growth if it could fully embrace the foundation and ideals upon which it was built. I was sent to Washington, DC in 2012 to rebuild the bank’s business in the district and region and by focusing on issues we had long believed in and rebuilding a bit of a narrative around the bank we were able to triple our business. Since then, when I became Chief of Staff of the Bank and was named the CEO/President I have tried to further this mission by very publicly embracing the very nature, history and ideals that we, as an institution and as employees, that we have always believed in.
In short, we are a 100-year old progressive institution and stand for very progressive ideals and policies. As its leader, I have made a very concerted effort to engage those communities that support these ideals and to carve out a new place in the progressive movement and in the banking industry. So far, we are pleased with the results but there is much, much more work ahead.
We know that Amalgamated Bank is labor’s largest banking institution. How did it survive all these years, when many similar institutions did not? From an article in the Washington Post, we know that a very positive turning point for you came a year or two ago when the Democratic National Committee (DNC) announced that it was moving its funds out of Bank of America and into Amalgamated.
The Bank was started in New York City, founded in 1923 by the Amalgamated Clothing Workers of America (ACWA). Amalgamated was New York City’s first labor bank. Until this time, banks were responsive almost exclusively to the needs of corporations and wealthy individuals. Sidney Hillman, the founder and President of the ACWA, believed that hard working people and their families deserved access to affordable banking, and it was from this principle Amalgamated Bank was born. There were 30 labor banks, most didn’t make it out of the Great Depression. Hillman said it would be run like a real bank, not tool of the rich. It would generate returns for working people.
For much of our history, we were a service provider to the labor movement and its members in New York City. But has banking has changed from a technology perspective, we have also evolved and see ourselves becoming a financial partner to the broader progressive movement as well as labor unions. When the DNC moved their money, that’s really when our renaissance began. We were able to carve out a space as a bank for progressive politics. Since then, Washington area deposits have grown tremendously – from $70 million in 2012 to nearly $300 million. Hundreds of unions, non-profits and Democratic Party campaigns have opened commercial accounts at the bank, which also handled funds for President Obama’s second inauguration. Amalgamated now has nearly $4 billion in assets and 17 retail branches in New York City, California, and Washington, D.C.
It’s our progressive history and credentials that allow us to talk to some of the folks, but at the end of the day we also have to provide them with the top notched services they expect and rightly demand. By marrying our progressive ideals with first-rate services and rates we have found that people really do want to bank with a company that they trust and actually believe in.
We understand that the Bank was a founding signatory to the UN PRI. How did you implement the responsible investment framework?
Amalgamated Bank is proud to play a leadership role in successful corporate initiatives and aggressive shareholder activism, holding corporations to rigorous environmental, social, and governance standards. Amalgamated Bank founded The LongView Funds in 1992. Through our LongView Funds, with over $13 billion in assets, we use our power as investors to encourage corporate boards to pursue sound governance policies, hold portfolio companies to high standards of social and environmental practices, and enhance shareholder value. We’ve taken strong stands on PRI, shareholder returns, tackled golden parachutes, classified boards, clawbacks, and other tools to get corporations to return capital to investors and all the stakeholders.
Historically, we have pushed for stronger measures protecting garment workers after the tragic accident in Bangladesh's apparel manufacturing sector. The Tazreen factory fire and Rana building collapse killed over 1,000 people. Shareholders of manufacturing companies need to keep the pressure on. Last year, a coalition of institutional investors, including Amalgamated Bank, with combined assets of over $1.35 trillion, called on fashion and apparel companies to track who their suppliers are, ensure compliance with safety standards and fully disclose their supply chains. The tragedy also spurred efforts to improve individual companies' manufacturing and supply chain policies. These have been good first starts, but achieving lasting change will require a long-term commitment.
Last proxy season, we experimented with forcing corporations to disclose who they give money to politically—using our bullhorn of holding big well-known companies accountable. So, yes, it’s safe to say we are very active in putting our money where our mouth is because we believe in what we are saying and we believe in making a fundamental difference in the world.
You’re also managing other programs that invest in local economies, i.e., real estate, mortgages, small businesses. Can you describe some of those?
The Bank provides a number of traditional banking, investment and mortgage tools to help customers buy homes, save for the future, invest in their communities. For example, we just approved $100 million to invest in affordable housing in NYC and we’re putting in several million for rehabs as well. We’ve been talking to NYC Mayor DiBlasio and Comptroller Stringer about capital partnerships, possibly seeding this effort with NY City or state public funds. (Editor’s Note: See the related articles about the Bank’s responsible banking initiative).
What are your thoughts on the progress that has been made in the longer term around responsible investment? What is possible?
There’s $70-100 billion in labor-managed or affiliated investment houses and banks, and trillions in pension funds. And, by the way, there are billions of dollars in non-ERISA funds in unions, mostly invested in treasury bonds, money markets, etc.
So, even with all of those resources available, one of the fundamental questions in the world of commercial banking is how do we organize our money? One of our problems as a progressive movement is that we need to come up with new ways to organize, but we don’t have enough traction and size to make a difference sometimes.
How do we leverage more capital, when there’s a better idea, or organizing idea? How do organizations grow more like successful businesses - come up with a good idea, test, and scale quickly by borrowing money? Can we grow a source of credit enhancement from a leverage stand-point? These are core issues we grapple with and help our clients understand and work together to find solutions.
In our new book, Heartland will be exploring the idea that the capital stewards of peoples’ retirement trusts should work together to defend and expand retirement security and also grow profitable and responsible economic impact investments in the real economy. How do we do that?
Think about what would happen if, instead of spreading our money out and supporting every imaginable, we decided on one to two priorities to put money on, because they are truly transformative. For this targeted strategy, we could focus and pool extraordinary investments and staff time, to jump start a new transformative idea. Infrastructure might be one area of focus. We could move capital to rebuild old infrastructure that need to be replaced, retrofitting every home, ensuring broadband to every home. We could pool large funds to clean up blight.
There collective actions--organizing capital--might need to deemphasize some of our current priorities. But over time, we could approach these collective capital strategies as we do critical political campaigns.
Labor could partner with national urban livability groups, progressive politicians, community development alliances and we could put some of our best minds on corporate boards to carry the message to the boardrooms. We could make a concerted effort so that every worker-influenced fund made significant investment in infrastructure, for instance. We could lever greater amounts and work with governments to insist on the development of a high-speed rail network. These pools of public, labor, private funds could be transformative. These investments could make cities more livable.
Think about it, we could take the lead in rebuilding our cities. We just need to organize our money to do that.