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1% for the 99%:
Corporate Leaders’ Golden Opportunity to Recharge US Communities

By unleashing the corporate balance sheet, finance teams can provide resources to nurture local entrepreneurial talent, improve climate resilience and build housing — all with minimal risk.

US corporations have an unprecedented opportunity to help struggling communities across the country thrive just by changing the way they manage a sliver of their cash reserves. All it takes is a willingness to look beyond business as usual.

S&P 500 companies collectively held $5 trillion in cash as of 2020, according to HIP Investor’s analysis of FactSet data. If these firms allocated just 1 percent of that liquidity to loan funds or deposits at community finance institutions, they could drive real progress on addressing the nation’s racial and economic inequities — while minimizing risk in their portfolio.

This goal is entirely feasible in 2022. Already, two firms — collectively worth $500 billion in stock market value — are investing in this way: PayPal is moving to deposit $135 million into mission-driven financial institutions and management funds that help underserved communities of color break barriers to economic equity; that’s more than 1 percent of PayPal’s estimated $10-plus billion in cash. And Netflix has pledged to allocate 2 percent of its cash holdings on an ongoing basis to financial institutions and organizations that directly support Black communities in the US; and it just hit its initial $100 million goal.

If every S&P 500 company allocated 1 percent of its treasury cash — about $50 billion — to community development financial institutions (CDFIs) nationwide, that would raise CDFIs’ current total liquidity of $222 billion by 22 percent. Ongoing percentage allocations are ideal: They share the wealth generated by corporate growth and assure community institutions that cash will be there when they need it. That certainty could fund and scale a new wave of entrepreneurship and job growth in communities of color and underserved communities. It could also provide money for affordable housing and climate-justice projects, including Equitable Climate Action Plans such as the one the City of Oakland has published.

The next frontier for ESG evaluations

Companies that are serious about diversity and inclusion are integrating initiatives throughout their business operations, and many see their cash management and community investments as the next frontier — with insured deposits, limited risk from loan defaults and a multiplier effect on social impact. Mastercard, for example, used CNote’s Impact Cash™ platform to deploy $20 million to communities that need it most, and sees that investment as a key part of its commitment to racial equity and small business advocacy. Putting cash to work for social equity at CDFIs, minority-focused deposit institutions, and low-income designated credit unions is also a step toward meeting the growing expectations of ESG (environmental, social and governance) investors and their increasing emphasis on the social equity dimension.

Environmental ratings have long considered a company’s entire supply chain; and that’s starting to happen with social ratings, too. The window on corporate diversity, equity and inclusion is expanding beyond personnel and procurement to include how and where companies allocate their treasury cash and non-R&D investment dollars.

Corporate treasury practices are likely to be the next factor included in ESG ratings, just as banks’ loans are. Investors are starting to demand disclosures of how companies use their cash — is it generating climate emissions and exacerbating injustice, or is it creating positive social and environmental outcomes? We know several financial firms that are seeking to rate money market funds for social impact. Shareholders are asking corporate finance leaders how their companies are addressing financial inclusion, both broadly and in the headquartered community. Institutional investors and major asset managers such as BlackRock are pushing corporations to publicly share EEO-1 Reports on workforce diversity, and many want the same data on supply chain partners. Balance sheet scrutiny is next.

Balance sheet actions can go a long way toward meeting social impact goals

Concerns about racial justice, ESG and diversity, equity and inclusion are merited and here to stay. CEOs of corporations that have signed onto stakeholder capitalism are under pressure to act, and many have also committed to UN Sustainable Development Goals, including gender equality (SDG 5). They’re looking to their finance teams for leadership.

CFOs typically play a major role in strategic planning, which includes addressing SDGs — and using the tremendous power of the corporate balance sheet is a natural path forward. This can and should be a long-term strategy: Community financial institutions, especially those serving the job creators who are most excluded from traditional finance, need multiyear allocations and long-term capital.

And while private equity, venture capital and private credit funds require deep due diligence, allocation of cash deposits can be an easier entry point for treasurers: Underwriting is typically a lighter lift if treasurers use a federally insured program that spreads deposits out across the country to the institutions that need them most. This is a key point: Cash deposits should be distributed over time and geography, rather than dumped in indigestible chunks to a few well-known institutions.

Investments in racial equity and community wellbeing can become business as usual for the S&P 500. Deploying 1 percent of corporate cash to institutions that are set up to serve close to 99 percent of the population — especially those who have been historically excluded — is an authentic way to address the inequities these communities face and forge a path to sustainable impact.


Catherine Berman is CEO of CNote. R. Paul Herman is CEO of HIP Investor and co-editor of the Global Handbook of Impact Investing (Wiley 2021).