Earlier this year, Cadence Design Systems made a purpose-driven investment of $50 million to address racial wealth inequities. The investment is in a fund managed by the Royal Bank of Canada (RBC) Global Asset Management (GAM) Group. It has been deployed for affordable housing, promoting home ownership and supporting small businesses in marginalized communities.
Cadence’s substantial commitment is part of its dedication to creating more equitable opportunities on a broad scale. The company’s impact strategy centers primarily on supporting underserved Black and Latinx communities in the United States and globally.
Cadence has concentrated the investments in locations where it has operations and employees—giving back directly to the communities where it does business. That said, not all the funds have been deployed in the company’s areas of operations. A portion of the $50 million is allocated internationally to projects to support women, people of color and climate issues.
I recently sat down with John Wall, senior vice president and CFO, and KT Moore, head of marketing, at Cadence to discuss the company’s $50 million investment. I was impressed by Cadence’s commitment to creating a more equitable future and moved by the incredible passion the company’s leadership has for helping others. Here, I’ll share some of the learnings from my meeting with Wall and Moore.
Why $50 million, and why now?
The move was rooted in what seems ingrained in Cadence’s DNA—the desire to serve others. It has come at a time in history when racial inequities are center stage.
“There were events that were happening globally and domestically in our communities that woke us up to the realization that we can do a better job managing and promoting diversity, equity and inclusion,” Moore explained during our discussion. “And so, we’ve adopted that part of our core culture in Cadence. And we look at it for our employees and how we manage our teams and hire people. It’s also important to remember that there’s a community that we serve, a community that we’re involved in, and this allows us to create opportunities for underrepresented people who didn’t have access to funding or access to certain things they need.”
Moore is a marketing guy (albeit with an electrical engineering degree), but he’s known at Cadence and beyond for much more than that. In my interactions with the company, I’ve witnessed that he’s a doer and a giver—and his generosity influences others. Yet when Cadence decided to invest in an impact fund, it came from something other than the marketing or corporate social responsibility (CSR) department or chief diversity officer, as it often does in large corporations. It came from the office of the CFO.
The decision to invest $50 million in an impact fund happened in a meeting Wall had with a group of fellow CFOs from publicly held global companies. Remember, these are people who face Wall Street every quarter, give results on earnings and are accountable to investors and the board of directors for everything they do. The question came up: are they accountable for making a difference?
At that time, Cadence’s market capitalization was around $50 billion. Wall decided that would help set the amount of the company’s initial impact investment at $50 million. The plan was to increase the investment as the company’s market cap grew.
Wall took inspiration internally—from folks like Moore, who is often behind the company’s most aggressive social good initiatives—and externally from peers, customers and friends.
“It really takes a village to drive a project like this, and I thank many internal and external parties for their support, advice and help putting the program together,” Wall said. As well as being particularly thankful to Cadence CEO Anirudh Devgan and to Moore, Wall expressed his gratitude to RBC, his senior advisor at Cadence James Haddad and the treasury, marketing, HR and legal teams at Cadence.
“We had so many other influences that were instrumental in getting the fund off the ground,” Wall added. “Frank Holland, host of the Worldwide Exchange show at CNBC, was such an inspiration—so kind and selfless in his help and advice. I’m also thankful for the amazing help and advice received from fellow CFOs and friends.” Wall specifically named Kevan Krysler of Pure Storage and Tarek Robbiati, CEO at RingCentral and former CFO at HPE, along with Robbiati’s wife Andrea. Wall also pointed to Maggie Wilderotter, chairwoman of DocuSign, and two ServiceNow executives—senior vice president of strategic finance Paula Delaney and treasurer Tim Muindi—for being what he called true “servant leaders.”
When Cadence was making plans for the fund, Wall looked to those peers for advice. He asked Muindi, a font of knowledge on treasury matters related to the Racial Equity Fund who had been through the process before, what he would change if he were to do it again. Muindi responded that it should be scalable and not restricted geographically. As Wall explained, “That’s how we decided it should grow with market cap and that it would be better if we weren’t restricted to specific communities where the company operates so other companies could easily adopt it.”
Royal Bank of Canada’s role
Wall chose RBC GAM because of Cadence’s history of doing business with the bank, along with RBC’s track record in investments that target underserved geographic and BIPOC (Black, Indigenous, People of Color) communities. Over 24 years, RBC GAM has made impact investments in small businesses, global development, affordable homeownership and multi-family affordable housing, with assets under management now totaling $412 billion.
What the investment went towards
Cadence recognizes that affordable housing represents a meaningful avenue for positively impacting both local and global communities. The company has dedicated a substantial portion of its investment to affordable rental housing initiatives to promote housing stability and mitigate the risk of homelessness within these communities.
Homeownership is the primary means through which American families accumulate wealth. According to a Habitat for Humanity research series, homeowners in the U.S. with similar demographics and income levels have an average net wealth 400% greater than that of renters. Home equity accounts for the largest share (34.5%) of wealth among Americans. For this reason, a portion of the investment has been channeled into promoting homeownership opportunities to build long-term financial stability.
The benefits of homeownership span generations. According to the same research series, a $10,000 increase in home equity raises the probability of a kid in that family going to college by nearly 15% for lower- and moderate-income households. Children of low-income homeowners are 11% more likely to complete high school than children of renters in the same income bracket.
Cadence’s investment has also been instrumental in supporting small businesses in underserved communities. For many marginalized groups, starting a business can be the most pragmatic route to financial independence and prosperity. When small businesses succeed, they benefit overall community well-being. These benefits to the community include job opportunities, economic development, reduced crime rates and increased economic mobility.
Solving the most pressing problems is part of the job at Cadence
In my discussions with Wall and Moore, it became clear that the company prioritizes engaging with customers to understand their most pressing issues and then actively works towards resolving them. It’s much the same with this initiative. Cadence has approached making a meaningful impact in the world with the same fervor it does finding solutions for substantial technological problems for companies.
Wall shed light on the catalyst behind this unique corporate ethos. Cadence’s CEO, Anirudh Devgan, often reiterates a powerful mantra: “You tackle the biggest problem. Go to the customer, ask them their biggest problem and then we’ll solve it.” This mantra is deeply embedded in Cadence’s culture, serving as a rallying cry to confront substantial challenges head-on and devise innovative solutions.
Beyond the $50 million impact fund, in 2022 alone Cadence donated more than $3.7 million through the Cadence Giving Foundation to impact environmental sustainability, access to STEM education and other local and global initiatives. The company joined the Pledge 1% community to contribute 1% of employee time, Cadence technology and company profits to drive change in its core focus areas. Cadence also partners with other companies, such as McLaren, on societal and environmental impact programs focusing on STEM education, diversity and inclusion and sustainable practices.
Cadence’s contribution to addressing critical global challenges extends beyond traditional norms. In the eyes of long-time employees like Wall, who has been with the company for 26 years, Cadence lives up to its reputation as an exceptional company committed to making a profound impact. As companies address environmental concerns and carbon neutrality, Cadence takes a distinctive route. Its tools empower customers to enhance power efficiency in electronic design, significantly reducing energy consumption in electronic systems—a contribution that amplifies their global impact. Wall believes that at its core, Cadence is not merely a company but a movement, a collective force striving to create meaningful change in the world.
My impact assessment
With this initiative, Cadence has taken on some of the world’s most challenging problems. The company’s leadership knows they can’t solve them alone, but they are on a mission to try. Cadence’s leadership has shown a capacity to prioritize employees, shareholders and communities in a scenario where all parties can benefit.
It is my hope, and theirs, that Cadence’s impact investment will continue to grow. Cadence’s market cap is now $65.75 billion, so the company will likely increase its investment in the impact fund as planned. It is inspiring that Cadence isn’t looking to make this only a Cadence thing, either. The company wants to increase the investment in racial equity by bringing other companies into the fund, recognizing that we all benefit from a more equitable society.
Cadence’s holistic approach to creating positive societal contributions fosters a sense of pride among its stakeholders, extending beyond financial achievements and customer interactions to genuine goodwill and global betterment.
Here, you can see some of my discussions with John Wall and KT Moore on an Insider episode of the Moor Insights & Strategy Hot Desk Podcast.
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