JPMorgan launches $500 million AdvancingCities initiative

JPMorgan Chase CEO Jamie
Dimon originated the idea for investing heavily in Detroit, and
wanted to build upon lessons learned there.
Scott Olson/Getty Images

• JPMorgan Chase launched AdvancingCities, a $500-million,
  five-year initiative for investing in emerging cities around the
  world.
• It is an outgrowth of the multi-million dollar investments in
  Detroit, Chicago, and DC that began in 2014.
• Up to half of the allocated money will be used for low-cost
  loans, with the rest used for philanthropic purposes.
• This article is part of Business Insider’s ongoing series on
  Better
  Capitalism.

JPMorgan Chase announced Wednesday that it is now accepting
applications to participate in its new $500 million
AdvancingCities initiative, which will invest in cities that
are overcoming years of hardship.

It’s a major expansion of a plan that began in 2013, when
JPMorgan CEO Jamie Dimon pushed for a way to help
Detroit after it declared bankruptcy. Starting the next year,
it began closely working with Mayor Mike Duggan in distributing
low-cost loans, renovating affordable housing, and training
workforces. Since 2014, the bank has invested more than $100
million into the city.

Following success in Detroit, the bank then began investing in a
similar way in Chicago and Washington, DC, and expanded the
Entrepreneurs of Color Fund from Detroit to Chicago, the South
Bronx, and San Francisco. The AdvancingCities competition is a
way to bring learnings from these prior experiences to a new set
of cities.

“I think the biggest thing that we have concluded is that the
only places that we can be really effective in is where you have
real collaboration on the ground with the political leadership,
the private sector, the nonprofit sector,” JPMorgan’s head of
corporate responsibility, Peter Scher, told Business Insider.

The $500 million will be split between low-cost loans offered
through the AdvancingCities Investment Fund, and philanthropic
spending.

Investments work best when partners identify opportunity

Scher explained that Detroit has been an ideal case study for the
new initiative, and that it only took off once JPMorgan started
responding to specific requests from partners. “I think the
Entrepreneurs of Color is a great example,” Scher said, referring
to the fund that offers loans to businesses owned by people of
color.

The JPMorgan team set up quarterly meetings with Mayor Duggan to
discuss its investments, and in one meeting about a year in,
Duggan said, “The problem I see in the city is there are a lot of
black, Hispanic, Asian entrepreneurs who can’t get access to
capital and want to start businesses.”

The bank then partnered with the W.K. Kellogg Foundation to
respond to this. Scher said it demonstrated that his team had the
capability to toss money around, but that to actually accomplish
something it needed to have partners, like the city’s mayor,
identify a challenge and then find a solution.

Duggan told us that, “Pretty much everything’s worked,” in
regards to JPMorgan’s investments, noting that for both his city
and others that will partner with the bank, “as long as you’re
disciplined in what you’re doing, you can have a major impact.”

JPMorgan is looking to build long-term value for its shareholders

Scher said that over the next five years, data suggests that
conservatively speaking, the $250 million from the
AdvancingCities investment fund will leverage a total of $1
billion in spending when factoring in outside investment
attracted by JPMorgan’s activity. He said the initiative can
support “up to 30” cities, but that the number is less important
than the potential for impact in a city, and that there will not
be an equal portioning of investments to each winner.

AdvancingCities is overseen by Scher and his team, as well as an
advisory council of former mayors and business leaders, and will
utilize an estimated 200 JPMorgan executives working 3-4 week
shifts in particular cities.

Scher told us that if the program were solely about building
goodwill, there were plenty of easier options to pursue, and that
he considers AdvancingCities to be a business investment. “I
would argue to our shareholders that if the economy of Detroit or
Chicago or Washington is growing, and more people are getting
jobs and more businesses are being created and you’ve got small
business growth, that’s a good long-term bet for JPMorgan Chase,”
he said.

He continued: “And so I actually think that this is kind of a new
way of thinking about business investments and thinking long-term
about the viability of success of our communities. And our
general view is that if the economies of these cities is growing,
JPMorgan will grow with it.”

Manny Ocbazghi contributed reporting.