It turns out it wouldn't exactly require bankruptcy for corporate leaders and their organizations to put their money where their mouth is in terms of addressing economic and racial inequality in the U.S. If S&P 500 companies allocated just 1% of the $5 trillion they hold collectively to loan funds or deposits at community banks, they could drive substantial change without bringing unnecessary risk into their portfolios. Moreover, the funding could help produce the resources needed to enhance climate resilience, construct affordable housing, and cultivate entrepreneurial talent.
In 2022, it will be the prerogative of these companies to assess the benefits of what such a small percentage of their cash reserves could accomplish. PayPal and Netflix have already made a foray into this territory. The former is set to deposit $135 million into mission-driven financial institutions and management funds that aid underserved communities of color in breaking barriers to economic equity. Netflix will allocate 2% of its cash holdings on an ongoing basis to organizations directly supporting Black communities.
Another savvy use of cash reserves is strategic planning and spending to meet environmental, social, and corporate governance (ESG) goals. Companies showing deep commitment to diversity and inclusion are incorporating initiatives into their practices and operations, and their community investments are a natural progression that includes insured deposits, limited risk from loan defaults, and a multiplier effect on social impact. Mastercard, for instance, utilized CNote's Impact Cash platform to deploy $20 million to in-need communities, and considers the investment an integral part of its pledges to fight for racial equity and champion small businesses.