June 30, 2020
Netflix on June 30 disclosed it is putting more money behind its activism. Going forward, Netflix is allocating 2% of its cash holdings — initially up to $100 million — into financial institutions and organizations that directly support black communities in the U.S.
The move was disclosed in a blog post by Aaron Mitchell, director, talent acquisition, and Shannon Alwyn, director, treasury at Netflix.
“Stories like Ava DuVernay’s 13th and Explained’s ‘Racial Wealth Gap’ show how systemic racism in America has sustained a centuries-long financial gap between black and white families,” Mitchell and Alwyn wrote. “As part of our commitment to racial equity, we are turning understanding into action.”
Netflix co-founder Reed Hastings and his wife last week pledged $120 million in personal funding to United Negro College Fund and two private black colleges in Atlanta.
Mitchell and Alwyn wrote that bringing more capital to underserved communities could make a meaningful difference for the people and businesses in them, helping more families buy their first home or save for college, and more small businesses get started or grow.
They cited FDIC data that showed banks that are black-owned or led represent just 1% of America’s commercial banking assets. Mitchell and Alwyn contend this is one factor contributing to 19% of black families having either negative wealth or no assets at all — more than double the rate of white households — according to the U.S. Federal Reserve.
“Black banks have been fighting to better their communities for decades but they’re disadvantaged by their lack of access to capital,” they wrote. “The major banks, where big multinational companies including ours keep most of their money, are also focusing more on improving equity, but not at the grassroots level these black-led institutions can and do.”
As part of Netflix’s $100 million commitment, $25 million will be moved to a newly established fund called the “Black Economic Development Initiative.” It will be managed by the Local Initiatives Support Corporation (LISC), a non-profit with a track record of developing underinvested communities. They will invest the funds into black financial institutions serving low and moderate-income communities and black community development corporations in the U.S. Another $10 million will go to Hope Credit Union in the form of a “transformational deposit” to fuel economic opportunity in underserved communities in the Southeast.
Mitchell and Alwyn suggest that if every company in the S&P 500 allocated 1% of their cash holdings into efforts like the Black Economic Development Initiative, it would represent $20 billion to $30 billion of new capital to help build stronger communities, offering more black families pathways to prosperity and a more equitable future.
“This capital will fuel social mobility and opportunity in the low- and moderate-income communities these groups serve,” they wrote. “We plan to redirect even more of our cash to black-led and focused institutions as we grow, and we hope others will do the same.”