Amalgamated Financial: A Bank You Can Love

Social research analysts are known to say with some frequency that “there is no perfect company.” Every company, no matter how wonderful, has imperfections. And while Amalgamated Financial Corp. (ticker AMAL) is no exception, we find ourselves unusually excited about this bank’s environmental and social practices.

Amalgamated Financial (the holding company for Amalgamated Bank) is the largest publicly traded bank that is a B Corp. It was formed by the Amalgamated Clothing Workers of America in 1923 to serve its union members and has evolved to focus on being a socially responsible business and making a positive impact on the world. It aims to serve individuals and organizations committed to being a force for good.

The bank is particularly focused on reducing its environmental impact, being recognized as an inclusive employer, and using its platform to spark positive change. The bank has been carbon net zero for three years, has committed to using 100% renewable energy, and is setting a science-based greenhouse gas emission target in alignment with the Paris Climate Agreement. The bank does not loan to or invest in fossil fuel companies, and it uses its rights as a shareholder to push other companies toward net zero.

In 2020, Amalgamated committed to being an antiracist organization and became the first bank to publicly support H.R. 40, the federal reparations bill. The company’s 12-member board includes four women and two minority members. It reports comprehensive workforce diversity data and is committed to performing a pay equity audit every three years. The company recently raised its minimum wage to $20 per hour and its ratio of CEO to lowest paid worker is notably small, relative to other banks.

Amalgamated is committed to using its platform for good. It does this through public policy work, shareholder advocacy, and its lending practices.

In public policy, it advocates for LGBTQ+ protections, expanded reproductive healthcare, improved worker protections, and support for worker cooperatives.

Its shareholder advocacy priorities include promoting diversity, encouraging adoption of net zero climate change targets, and eradicating supply chain slavery. On the lending side, 23% of loans were related to energy efficiency or climate protection and 22% were for workforce housing.

From the investment side, though the company has had some difficulties over the years, Amalgamated seems to be on a good path. A new CEO joined the company in May and has considerable experience in marketing and brand building. Given the bank’s expansion to Boston last year and a likely San Francisco entry this fall, that skill will be important in gaining a foothold in new markets.

While we have some concerns about Amalgamated’s credit quality and its reserves for potential loan losses, the stock’s valuation is substantially below that of its peers. As a result, we find the risk/reward tradeoff to be extraordinary amid the most expensive stock market on record.  Furthermore, the stock has been overlooked by most investors, which we always prefer. We have begun adding AMAL to client portfolios.