Company helps banks see opportunities amid challenges.

DEVELOPMENT in Los Angeles is often a minefield, with businesses seeking city subsidies, environmentalists pushing green buildings, and residents protesting gentrification and displacement. The stew is enough to stop even good projects as it provides endless but unfortunate entertainment for political observers.

Yet profits and social purpose need not be counterposed so dramatically. I discovered this when I decided to profile examples where business and community interests were coming together for "sustainable" development. I had expected to focus on a community organizer holding up the banner of justice, or a non-profit creating affordable housing. Instead, I found myself visiting the offices of a private company with a unique mission: helping banks see new investment opportunities in poor communities.

It's called Emerging Markets Inc., and it is unsurprisingly about emerging markets, not the sort in developing country dynamos such as China but rather those in the neighborhoods that make up our city. Started by a dogooder named Elwood Hopkins, who is the former head of a foundation-sponsored community initiative, the company proudly wears a for-profit emblem on its altruistic sleeve--it charges banks for its services. The reason, he argues: Banks will only take seriously that which speaks the language of profits and squarely serves their own business model.

The strategy is simple (although the implementation is hard). Banks have historically pulled away from neighborhoods with low incomes and seemingly low possibilities. And while some banks find themselves pressured by community groups to return, they don't really know the neighborhoods. If they do return, they may establish branches but find it hard to do local lending--and since that's where the profit lies, success is elusive.

Neutral interface

Into the breach has stepped Emerging Markets. Since its first project five years ago helping establish a Wells Fargo branch in Pacoima, it has defined its role as being a neighborhood delivery system, a sort of neutral interface between the large and often anonymous system of a bank and the smaller-scale intimacy of the neighborhood.

This means not just doing the market research that establishes the need for a branch but "growing the market" by collaborating with local non-profits, churches and others to create financial literacy classes, offer small business training, and enhance other community assets. The education is two-way: Banks also need to learn how to better integrate their retail and lending operations so clients in poor communities can move up the ladder from opening an account to securing a mortgage to taking out a business loan. Working together, they grow not only the market, but community leaders and organizational capacity as well.

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And it's not just Wells Fargo that has gotten into the game. Bank of America has launched an "American Block-by-Block Initiative" that is working in Westlake and in the third year of operation in the Vernon-Central and Boyle Heights neighborhoods. This past summer, Washington Mutual launched initiatives in Baldwin Village and Leimert Park, and other financial services companies are beginning to recognize that to have a profitable business, you need a strong customer and therefore a strong community.

Lifting up

Emerging Markets is, my mother might say, special but not that special. It is actually part of a family of efforts that is recognizing how we can move the needle on economic vitality and family poverty all in the same breath. Locally, Genesis LA has been working since 2000 to package deals and secure finance for job and real estate development in poorer neighborhoods. More recently, the Los Angeles Community Foundation has created a land trust that can shore up the foundation for affordable housing in neighborhoods experiencing new price pressures.

Those of us concerned with lifting up low-income neighborhoods have sometimes been wary of markets--our friends, allies, and families have so often felt the stresses of unsavory employers and predatory lenders. We also know that if it were not for organizing by activists like those in the San Francisco-based California Reinvestment Coalition, many banks would not have been forced to consider a return to those neighborhoods. In the balance between stick and carrot, the stick has a role.

But so does the market, and it is clear that at least some who argue that it makes sense for businesses to expand into these same neighborhoods--not from charity but from opportunity--are finding out ways to make the market work for good. And that is a real recipe for sustainability in the new economy.

Manuel Pastor is professor of geography and director of the program for environmental and regional equity at the University of Southern California.