Features | May 19, 2020

Beyond Buybacks: 10 ways to put corporate cash to work

Amy Cortese and David Bank
ImpactAlpha Editor

Amy Cortese

ImpactAlpha Editor

David Bank

ImpactAlpha, May 19 – Even in the new stakeholder economy, suppliers, communities, customers and employees largely still lack the clout to steer the use of corporate cash reserves in a new direction.

But that hasn’t stopped them imagining where it might go if they could. Corporations looking to build a business environment of shared prosperity have a range of options before them. Here are 10 ways they can deploy their cash:

    1. Forging a new social contract. Now that retail clerks, warehouse workers, delivery drivers, caregivers and other frontline workers have been deemed ‘essential,’ it’s time to treat them that way. In the face of worker strikes and protests, Amazon said it will spend $4 billion this quarter on worker health and safety (though ‘hazard pay’ raises are set to expire next month). Better: living wages and benefits that value employees’ contributions, along with employee ownership plans that align incentives and build wealth. 
    2. Strengthening supply chains. COVID showed the importance of resilient supply chains. Corporations can look out for their suppliers by paying promptly and extending loans or credit to see them through the downturn and help them prepare for the recovery. Whole Foods for years has made loans to small, local producers to support the development of products it wants to carry. 
    3. Paying taxes. The major factor driving the huge cash reserves amassed by corporations in recent years: tax cuts and tax avoidance, concluded a Harvard Business Review analysis. That’s money shifted to corporate coffers that could have gone for healthcare, infrastructure and education. Just pay it. 
    4. Mitigating systemic risks. Inequality, health, and climate change are systemic risks that, if not addressed, undermine the very foundation of the economy that companies and investors operate within. Furthering Sustainable Development Goals that generate “systemic returns” are a good investment. Microsoft, for example, launched a $1 billion Climate Innovation Fund. 
    5. Deploying corporate venture capital. Impact is the new strategic imperative. From Salesforce to the oil giant BP, corporations are looking to impact ventures to tap innovation, access new markets, and drive their own sustainability efforts. Meat industry giants Tyson and Cargill are following consumption trends by backing lab-grown and “vegetarian meat” companies.
    6. Investing in place. Corporations operate in geographies that face racial wealth and educational achievement gaps, crumbling infrastructure and health inequities, and a shortage of small-business financing. Place-based investing through community development financial institutions, or CDFIs, and other lenders, nonprofits, and support organizations can start to address local challenges. To help underserved businesses get through the COVID crisis, Google committed $125 million from its balance sheet to CDFIs via a partnership with Opportunity Finance Network. 
    7. Financing affordable housing. Tech giants have driven up housing costs from Silicon Valley to Seattle and beyond. That makes it difficult for the companies to attract and retain talent. Apple, Google, Facebook and Microsoft have together committed more than $5 billion to affordable housing funds and development. Microsoft in January added a $250 million line of credit for the Washington State Finance Commission. Affordable housing has proven to yield steady returns even in downturns. 
    8. Greening the business. Renewable energy prices are dropping. Greening data centers, vehicle fleets, and manufacturing plants can help corporations save money and support the transition to a low-carbon economy. As part of a negative emissions commitment, payments company Stripe is spending at least $1 million a year to offset its emissions and help create a market for carbon removal by being an early customer of new carbon capture technologies. 
    9. Parking the cash. Interest rates are low. So why not find a way to leverage green infrastructure banks to spur investment in clean energy and energy efficiency, waste and stormwater management, broadband access and climate adaptation? The public or nonprofit financial institutions operate in two dozen countries and a dozen U.S. states. 
    10. Building new markets. The next billion, or four billion, customers for 21st century goods and services will be in Africa, Asia and Latin America. Corporations that can’t spot investment opportunities more attractive than their own shares should explore energy and broadband access, small business financing and universal education.

Stakeholders stake new claims on corporate cash to finance an inclusive recovery

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