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Episode #28: Katrin Kaufer

Episode 28

Katrin Kaufer is an expert in values-based banking.

Kaufer, a research affiliate at the Massachusetts Institute of Technology, directs and co-created the Global Alliance for Banking on Values Leadership Academy. She is also the director of the Just Money Program at MIT’s Community Innovator’s Lab and has co-authored two books on sustainable finance.

Kaufer talks with Bryan and Becca about how she got into values-based banking, the value of finance as a tool to solve major societal problems and her thoughts on the future of the financial industry.

Featured Guest: Katrin Kaufer

Dr. Katrin Kaufer is Program Director for the Just Money Program at the MIT Community Innovators Lab (CoLab) and Executive Director of the Presencing Institute. Her work includes a research focus on leadership, organizational change, values-based banking as well as on participatory action research. Her 2013-book coauthored with Otto Scharmer is titled “Leading from the emerging Future: From Ego-system to Eco-system Economies”. In 2021 she published: “Just Money. Mission-based banking and the future of finance.” (Cambridge: MIT Press, 2021) which was translated into four language and won the AXIOM award for best business books in 2022 in the area Philanthropy / Nonprofit / Sustainability.

Becca Hoeft

As a marketing, public relations and corporate communications leader, Becca (only her mom calls her Rebecca) started her career in consulting and has been involved with six startups ranging from film, fashion, technology and food, with her first startup being a social enterprise importing leather fashion accessories made by single mothers in Nairobi, Kenya. Speaking across the country, she is known for leading award-winning teams and has received recognition from the Cannes Film Festival for Best Media Campaign, Hermes, MSPBJ Women in Business, and most recently, the Top Women in Communications awards. When the day is done, you’ll find Becca behind a good travel book planning her next adventure, plunking a tune on the piano or laughing with her blended family.

Bryan Toft

Bryan Toft is Sunrise Banks’ Chief Revenue Officer. In this position, Bryan oversees commercial banking/lending, treasury management, mortgage and fintech partnerships. He has been with Sunrise Banks for more than a decade. From 2014-2017, he served as president and CEO of Community Bank Owatonna.

Bryan has held a variety of roles at Sunrise Banks including credit analyst, commercial loan officer and EVP regional manager of commercial lending in Minneapolis.

Bryan received a B.S. in Computer Science from Buena Vista University and an MBA from the University of St. Thomas. He is a board member of the Minneapolis Chamber of Commerce, Twin Cities Metro CDC and Charter School Property, Inc.

Featured Music

Alright Years

"Something I Can Dance To"

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Episode Transcript

[00:00:00] Katrin Kaufer: Finance has a responsibility in society. Finance is not a normal business. Uh, financial institutions are intermediaries and we will not address the challenges we face, the social, ecological challenge, without finance.

[00:00:21] Becca Hoeft: Welcome to the NextGen Banker podcast, where we explore what’s next in banking and talk with the innovators responsible for creating positive change in the financial sector. We are your hosts, Becca Hoeft and Bryan Toft and are excited and welcome Katrin Kaufer. Bryan and I had the privilege to be taught by Katrin in a leadership program.

Um, man, it’s been like I went in 2019. And when did you attend the program? Bryan?

[00:00:49] Bryan Toft: Uh, mine was last year. So during the pandemic.

[00:00:52] Becca Hoeft: Okay. So Katrin I know we’re both super excited to have you join us today. Thank you for being on the podcast.

[00:01:00] Katrin Kaufer: It’s wonderful to be here. And it’s so wonderful to see the two of you again.

[00:01:03] Becca Hoeft: Likewise. It’s good to see you. It’s been too long since the pandemic, right?

[00:01:09] Katrin Kaufer: Yeah. Yeah, definitely.

[00:01:11] Bryan Toft: Well, let’s start with a little background on Katrin. So Katrin is a research affiliate at the Massachusetts Institute of technology or MIT. She is the director of the Just Money program at MIT’s Community Innovators Lab.

She’s also co-founder and executive director of the Presencing Institute at MIT. She’s co-authored two books, including Just Money: Mission Driven Banks and the Future of Finance, which we’ll be talking a little bit about today. And she is also the co-founder of the Global Alliance for Banking on Values Leadership Academy, which Becca had just referenced.

We have both attended. So we’re excited to talk about all those things today.

[00:01:44] Becca Hoeft: Yeah. So before we get started, I just wanted to remind listeners to stick around for a musical feature at the end of the podcast. Each NextGen Banker podcast showcases one musical artist from somewhere around the globe representing a wide range of genres.

Before we get started, you know, Bryan, you said something that, uh, triggered a thought here of Katrin. Um, she’s the co-founder of the GABV Leadership Academy. I don’t think I knew that. And I’m really curious, like, how did you, like, how did you even get started? In all of this, like, like mission values-based banking, and then you’re, you’re building this leadership program for bankers, like Bryan and I, how did, how did, like, did you grow up wanting to do this?

[00:02:35] Katrin Kaufer: Oh, no. So I wanted to study, um, language and write novels, like all of us. No. Um, I thought I had two thoughts, one, I thought as a woman, I need to understand finance. And the second thought I had was to address the challenges we face in society, we need to change our monetary system. So these were my two kickoffs into my, um, educational journey.

And then I first worked in the bank and then I did, studied economics and did a PhD on the topic of values-based banking. That’s quite some time ago, and nobody was interested in that. So I thought, um, okay. Um, and then I thought if I want to change society, if I want to address the challenges. Maybe I need to learn more about change.

So, um, I did get a postdoc stipend to, um, work for a year at the MIT organizational learning center where we talked about, um, learning change leadership. And, um, there, I worked with a team where we started, especially with Otto Scharmer where we, um, started, um, to explore the question, you know, learnings usually it’s called a cope learning cycle.

So that’s a, you know, traditional learning theory where you usually look back at, you know, what happened in the past? How do I improve it? And that’s my way forward. And we asked the question. If the future is completely different from the past, how do you learn you know, how do you learn in moments where things are so disruptive that your experience of the past doesn’t help you anymore?

And so I had these two pieces in my hand, my whole banking experience and values based banking experience and the leadership experience. And then. Um, I was, um, I actually did my PhD in South Shore Bank in Chicago, which was one of the founding banks.

[00:04:47] Becca Hoeft: Oh, I did not know that. Did you know him from the south side of Chicago?

[00:04:50] Katrin Kaufer: Exactly. I traveled during my PhD. And that’s. So, yeah.

[00:04:57] Becca Hoeft: South Shore, they’re like one of the first mission based banks in the US, right?

[00:05:02] Katrin Kaufer: Exactly. And Southern Bancorp in Mississippi and Arkansas is, um, modeled after that. So, um, yeah, so then they knew me and Triodos and GLS all these German and European banks knew me.

And then when they start thinking about starting the Global Alliance for Banking on Values, they reached out and that’s how the whole thing started.

[00:05:27] Becca Hoeft: Wow. Wow. I did not know that story. Thanks for sharing. Um, I know you’ve done a lot of work at MIT. So how would you describe how you’re helping the next generation?
Just learn about the future of finance through the Just Money program and the Presencing Institute that Bryan referenced earlier.

[00:05:49] Katrin Kaufer: I think there’s a lot of angst around money, money, and finance, and, you know, because it can be really complex. But, um, one of my, um, inspirations that probably both of, you know, uh, Tamara Roman, who used to be the CEO of Vancity Credit Union, the largest credit union in Canada. She once said, you know, the way, you know, the decision on finance, what we finance, what we do not finance, who receives capital, who doesn’t receive capital is basically writing the story of our future. And that’s the purpose of my work at MIT that, um, for students, but also for the general audience, I want to make finance accessible to, you know, give people the aware also to increase awareness about, um, how important finance is. So at MIT we run a free, um, massive online course. That’s called Just Money: Banking as if Society Mattered. So everybody can just go there and, um, see, you know, watch some case studies on values-based banking, explore some concepts because at the end of the day, everybody is a banker.

Everybody has money and everybody invests or uses banks. So, um, that’s the core idea. I deeply believe we cannot address the challenges we face without the financial sector. So it’s, it’s a leverage point. And, um, that’s where I see my, my role.

[00:07:32] Becca Hoeft: Well, I’m glad you’re doing it.

[00:07:35] Bryan Toft: Yeah, really. We believe money is a catalyst for change and, um, in your latest book, Just Money: Mission Driven Banks and the Future of Finance, which I love the double meaning of that.

You talk about the, just money where it’s a, it’s just money, but also just as in fairness. Right? And so, um, you take readers on a, kind of a global tour of these different financial institutions throughout the world, and what they’re doing to work on a better future, as you just mentioned. How are, what are some of the stories from that?

Or how are you, how did you see money and banking being used for good today? It’s obviously a topic that we’re interested here at, in here at Sunrise and think a lot about banking on values and banking for good. What did you learn when you were writing the book?

[00:08:19] Katrin Kaufer: Um, first the first thing I learned is, um, as long as we’ve had a monetary system, there were attempts to, um, yeah.

To, to combine impact and finance, uh, impact and the monetary system. Those is, I mean, in all monistic religions, for example, there are, you know, some restrictions on finance and, um, there, you know, there’s this credit union, history, um, there’s this history of cooperative banks, um, the impact investment history ESG.

So, you know, the, the story of trying to connect finance and impact is, is long. And, um, what I’ve seen is actually that, um, there’s a paradigm shift that’s happening. So since the financial crisis of 07, 08, this idea that finance is not neutral, but that finance actually creates an impact, um, has moved into the mainstream.

And unfortunately, what we are seeing is that there’s not a deep understanding of what that actually means. And we see a lot of add on small projects that are green and social, and I think what you guys are doing and a lot of banks in the GABV are doing is to move this idea of impact into the core of the business model.

And that’s where I see the biggest distinction. Is this a nice add on a little bit of, you know, actually greenwashing here and there recycled paper, community project, or is it core to your business? Do you make money with this? And the moment you shift towards core of the business, you have a completely different relationship to your customers.

Customers come because of it. And you also, um, have a different require, have different require requirements, for example, in regard to transparency. So you have to communicate differently. So the, this is the biggest shift. And then, you know, there are two additional smaller shifts that I see, which is one. A lot of banks that, um, operate on impact are smaller banks.

So in order to increase their impact, what I’m seeing is that they operate more and more strategically. For example, you are trying to go, you know, um, Sunrise, you know, the FinTech is, is your, one of your focus areas. Um, Southern Bancorp, it’s, it’s really about job creation and, um, the social aspect and, um, um, addressing, um, multi-generational poverty is, is a focus.

So, so banks start to think more strategically, where do I? What’s my acupuncture point in, in all of that and the latest development that I have been seeing in the last three, four years, is that a lot of banks in this alliance move more towards a systems perspective. So they’re not just financing trans, uh, transaction one client and us.

But they realized we need several people at the table to, to, to finance a solution. For example, Triodos Bank, uh, in the UK, um, trying to find solutions, um, against flooding issues, putting municipalities, um, insurance companies, house owners at a table, developing a financial product around that. And, and that’s a different approach, a multi-stakeholder approach.

[00:11:57] Becca Hoeft: That’s really, really interesting. Um, you know, and I see, you know, if I, if I look back at, um, the experience that I had at, through the GABV Leadership Academy that we were talking about earlier, what’s been really great, is being able to connect with other banks around the world and ping them and ask them how, how are you working on.

On this problem and how can I learn from you? And in fact, it makes me think about, um, it makes me think of something, a statement that was said during the leadership academy, which for me, it was pre pandemic. It was very much an immersive experience, um, in different parts of the world. And there was a statement made around being, um, be interested, not interesting.
And I will tell you that has impacted me so much in how I lead as a leader, but it also, it speaks to the concept that I learned in the academy around egosystem versus ecosystem. And Bryan, I know you you’ve went through the leadership academy as well. I’m curious. What was your favorite learning?

[00:13:19] Bryan Toft: Yeah, it is hard to pick one.

Uh, one thing that came to mind when you were talking Katrin was um GLS Bank. I believe that they, when they’re looking at a loan request, they don’t just look at the credit repayment, history, like, you know, a traditional bank would do. They also look at well, how does this impact the environment? And how does this impact the people that are gonna be affected by this loan?
And so there, there are things that I was able to learn by talking to all these other banks and how they look at finance. And it’s not just you, the traditional, how are we gonna make money at this? And are we gonna get repaid? But it’s, how are we actually gonna make a difference? It goes back to what you said at the very beginning of.

We wanna make sure that the loans are making our catalyst for change in the future we wanna see. And what is the, how are we gonna deploy this capital to the future that we wanna see? Are we doing it and it’s detracting from that future and we’re just doing it to make a buck or are we doing it because it’s actually gonna improve the surrounding whether it’s environment, community, however you look at the world.

I think that’s the most important thing that I learned was there’s so many different ways to look at a loan or banking or financial service. It’s not just the one way that most bankers were taught when they grew up.

[00:14:32] Katrin Kaufer: Definitely. And, um, the bank, you were quoting, um, GLS Bank recently, they, they recently, they stepped even into a next level of this.

Um, they, um, Created a new form of impact assessment in their bank where they, um, in, for example, in regard to renewable energy, they’re not just saying, oh, everything we do is renewable energy finance, but they say what they’re located in Germany, what does the, what’s needed what needs finance so that Germany can shift to net zero by day X.

So this is what we finance. So they focus and, and I think that’s a really interesting approach. So it’s taking a systems perspective, Germany as a whole net zero. Now, this is our goal and this directs our finance decisions, um, assessments, decisions of, um, loan applications. So, and, um, also touching on, on the point, Becca, that, that you mentioned, um, ego to eco, um, I think this is something that’s happening now I talked earlier about there is I think we are in a moment of a paradigm shift and, you know, traditional economic theory, and I don’t want to be too academic here, but basically says, okay, there is a market, there’s a price we optimize, we optimize. And then everything will be perfect, obviously that failed. And, um, so what we are seeing and we see this in the US, for example, was the recent Supreme Court decisions that businesses stopped being neutral.

So businesses start taking a stand, we will, um, support voting rights for example, or we will no longer do businesses business in Russia. So, um, we can’t work with, um, child labor. So, so there’s suddenly a shift where this, oh, we are neutral. We are just following one guideline. This paradigm comes to an end, but I think what’s staying is this entrepreneurial piece.

You know, it, it is our ego, that’s creative and it is our ego that comes up with new idea and that’s entrepreneurial. So I think what’s happening here is that our ego becomes wider. So, and it’s almost like an awareness shift. Yes. I want to make money. Yes. I want to be a successful business, but I don’t want to destroy the planet while doing it.

So how can I combine these? And, and I think it’s simply a shift in awareness. I keep my creativity, my entrepreneurial spirit, but at the same time, I have a broader awareness about impact. And I think this is a paradigm shift that’s happening right now, where we don’t have a name for, and that we describe as ego to eco thinking.

[00:17:42] Bryan Toft: Yeah. You mentioned before about the authenticity of someone’s purpose. Maybe it’s a CEO or owner of a bank or the leadership of a bank that is being authentic in their purpose and what they’re driving towards. And that, that could be, let’s say it’s climate, for example, and they’re passionate about climate and they’re gonna make their decisions based on climate.
That’s gonna attract certain customers and it’s potentially gonna repel other customers, but at least that mission and that passion is authentic and that’s going to propel that business forward. I think that’s what we’ve seen. Um, going back to the leadership academy just for a second, um, as one of the co-founders and, and one of the main instructors, um, what, when you think about the leadership academy and training this next generation of banker, uh, and training leaders from all across the world, what is your hope and aspiration for the program and some of those leaders, what are you looking to do with this, uh, with this program?
What kinds of lessons are you hoping to teach?

[00:18:41] Katrin Kaufer: So, so the starting point of this was the recognition that a lot of these values based banks are smaller and it’s hard for them to create a learning path for their leaders. And there are succession issues. And so we wanted to create something, um, that, um, addresses this. At the same time, I’m convinced that when you, you know, you are an innovator in the field, you are always a little bit at the margins. The news doesn’t start in the middle of something, you know, not in the middle of the organization and not in the middle of a sector. So to create a network and a community of banks that are actually, um, doing things differently and are innovating and rethinking I think is, is really essential. So that was one starting point. And the second starting point was, um, my work at MIT. So I’ve learned that, um, you cannot develop a leader, a leader has to develop themself and, um, that requires to create a space for a leader, young leader, high potential to step into their potential.

So, um, and, and that’s what we are trying to do in the leadership academy. So we, we are trying to create a, a community of innovative leaders and at the same time to create a space for, for leaders for folks with high potential to find their own potential and to explore that and step into this and then supporting, we are supporting these leaders with, um, tools and methods, but at the end of the day, it’s um, allowing them to ask the question. Um, what’s my potential, what’s my work with the, um, capital w and, um, who am I as a leader? What’s my intention?

[00:20:52] Becca Hoeft: I have a feeling that a lot of our listeners are gonna be interested if, um, in this program, is this something that anyone can apply to, or do their bank have to be part of the Global Alliance for Banking on Values?

[00:21:06] Katrin Kaufer: In, um, each program, we reserve a few seats for, um, non-member banks and, um, we’ve had usually two, three non-member banks each year in the program. Yeah.

[00:21:21] Becca Hoeft: Great. And so if you’re interested in learning more, check out gabv.org, and you can, uh, find more information about the leadership academy that Bryan and I went to, um, that Katrin leads.

And so, you know, I have to admit, I, I would like to think that the class of 2019 was your favorite cohort and I’m sure Bryan thought the same thing. Do you have a favorite story? From any of the classes that you’ve taught or any of the cohorts?

[00:21:52] Katrin Kaufer: I mean, tons of favorite stories, but, um, maybe one comes to mind at the moment, which yeah, I, I just shared it’s so we were talking about, um, financing child labor or not, and how to identify that.

And, um, and then we had one participant from a bank in Africa and he then said, if I hadn’t had the opportunity to work as a child, I wouldn’t sit here. And that’s, that was really powerful. That doesn’t mean we support child labor, but I think what it did was it made us realize when you, um, bank with impact, um, things become complex and that’s part of it.

So you have to put yourself into the shoes of, um, those you finance. So there is a certain complexity that we, as, you know, bankers often like to ignore, you know, money. So money is, you know, something that makes it so easy to be abstract. So money is in a way too efficient for us human beings. It can race around the world in seconds and, and, and I think there is a systemic issue with finance to disconnect from our communities.

So what values based banking really means is to, um, step into the customers into the client’s perspective and to, um, also accept, you know, nothing is perfect, but, um, that’s what we have to learn in this next phase of, you know, our economic development

[00:23:38] Bryan Toft: As someone who is thinking about banking, written books on banking, degrees, and values based banking, I’m interested to know.

It’s kind of an interesting, Becca and I talk about on this podcast, a very interesting time to be a part of financial services with FinTech and cryptocurrencies. And I’m curious your thoughts, uh, you know, if we have an audience that has some bankers, some entrepreneurs, where do you think banking is headed?

Uh, it could be FinTech you could touch on, it could be cryptocurrency you could touch on. I’m just curious as someone that’s in the space and thinking about the space a lot, where do you see it going?

[00:24:15] Katrin Kaufer: Um, I definitely think banking is changing radically. So we see these high investments in FinTech. Since I would say the, I mean, we always knew that was happening.

I think the last three years really showed an acceleration. So, um, I, I definitely believe that, um, this will have a huge impact on the classical way of how we, uh, um, operate, but I think you also probably saw, um, that, uh, Deutsche Bank in Frankfurt got raided three weeks ago because of greenwashing. And, um, so I think that’s the second development that, um, this idea that you just make up impact and pretend, you know, put some nice labels on, on things is coming to an end and customers, but also auditors, um, are now more seriously looking into what are you actually doing with the money? So I think, um, FinTech is a huge movement at the same time, this, um, development towards transparency, um, and understanding what really happens with the mon- with money and investments is, um, is accelerating. So I would, you know, describe these two developments as, as dominant. The whole cryptocurrency piece. I. Honestly, I don’t, I mean, I don’t know, but at the end of the day, I think it will come through either the state or, or through Amazon. Amazon already developed a system.

If Amazon gives every customer, whatever 500 Amazon points or whatever it has created immediately a global bank. So that’s, you know what I’m watching at the moment.

[00:26:14] Becca Hoeft: Well, Katrin, I am so excited that you were able to join us today. We always leave our guests with the same last question. And so that question is, um, what do you think the next-gen banker looks like?

[00:26:31] Katrin Kaufer: Um, I think I’ll need to express a hope here, which is finance has an ex has a responsibility in society. Finance is not a normal business, financial institutions are intermediaries and, um, we will not address the challenges we face the social ecological challenge without finance. And what I think is happening that bankers don’t want to go to work and, um, um, not, you know, without this awareness of the, the, the impact they can create and the opportunity they have to be part of the solution.
And I think that’s, that’s what I’m seeing.

[00:27:19] Bryan Toft: Well, thank you so much for everything you’re doing and for teaching us both in the leadership academy and for sharing your insights with us today, uh, we really appreciate you being with us.

[00:27:30] Becca Hoeft: Yes. Thank you so much.

[00:27:32] Katrin Kaufer: Thank you so, so much for having, having me and, um, I love the work you’re doing and support it wherever I can.

[00:27:41] Becca Hoeft: Thank you. And likewise, you taught us.

[00:27:44] Katrin Kaufer: Great. Now we stop here.

[00:27:46] Becca Hoeft: Thank you, Katrin.

[00:27:47] Katrin Kaufer: Thanks so much.

[00:27:50] Becca Hoeft: For this episode’s musical feature, we’re showcasing Alright Years.

A collaboration between Josiah Prince and Dane Allen, Alright Years is a guitar-driven group inspired by the youthful energy of 2000s pop/rock. Here is “Something I Can Dance To” by Alright Years.

(music plays)

That was “Something I Can Dance To” by Alright Years. Find more of the band’s music on Spotify. If you would like your music featured on the NextGen Banker podcast, email David@nextgen-banker.com with a link to your music and website.

Thanks for listening to the NextGen Banker podcast. We’ll see you next time.

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