Investor in Focus: PayPal | The Social Enterprise Magazine



Non-financial companies in the US alone are sitting on US$2tn in cash holdings. If those corporations were to put only a fraction of this into impact investing, that would grow the impact investing market significantly, currently estimated at US$1.16tn. This was the reasoning behind the creation of the GIIN Corporate Impact Investing Initiative in October. Its aim: help companies keen to meet environmental and social goals to invest their financial assets in impact, by sharing best practices and research.


Among the founding partners is PayPal, the online payments platform that spun out of eBay in 2015. It now has a market value of more than US$90bn and annual revenues reaching US$25.4bn in 2021.

Unlike other corporations that have set up a separate foundation or social investing body to do their impact investing, PayPal is doing it straight from its treasury – using the cash reserves held by the company to create impact. 


While that could be a bold step – most corporate treasuries tend to keep their cash in the bank – it was voted through by the board and PayPal made its first impact investing commitment in 2020.

We talk to Joanne Gan, head of impact investing and ESG at Paypal’s treasury.




Pioneers Post: What do you invest in and why?

Joanne Gan (pictured): We have two impact investment commitments. The first is the Economic Opportunity Fund. We started it in 2020, and that was PayPal’s first foray into impact investing. The pandemic was laying bare the economic inequities and racial disparities here in the US. You had the murder of George Floyd, Breonna Taylor, Ahmaud Arbery and too many others, and it’s forced a moment at the company to really think about: what are we doing to advance racial equity here in the US? 

So we made a US$535m commitment to advance racial equity. US$35m of that was in grant funding, and looked at more short-term immediate needs, particularly for Black-owned small businesses and the pandemic; then we set up the US$500m Economic Opportunity Fund, which is an impact investment programme to address the medium- and longer-term investments to help close the racial wealth gap. 

The other was launched in 2021 at the UN Generation Equality Forum: a US$100m commitment for gender equality, which focuses on women’s economic empowerment and financial inclusion, which we will start deploying next year.



PP: Which types of investments do you make?

JG: [With the Economic Opportunity Fund], we’ve done debt, equity and deposit capital. Our investments generally fall into two buckets.

One is in depository institutions: we have made a set of deposits into minority depository institutions (MDIs), that are also community development finance institutions (CDFIs). They’re Black-owned, Black-led and Black-serving banks and credit unions, who are primarily serving low-income communities of colour, providing essential financial services in those communities.

Then the other set of partners are funds – venture funds, private equity funds and real estate funds – with an aim to build a more diverse venture and tech space. We invested [an aggregated] US$100m into 19 Black and Latinx-led venture capital funds in 2020 and 2021; we also have investments into some growth equity and some real estate funds, which have slightly different impact theses, but all focused on helping to close the racial wealth gap.


PP: PayPal is making impact investments from its own treasury – not through a separate corporate foundation like many companies do. Why did you make that decision?

JG: PayPal has consciously made a choice to embed social impact within our business rather than have a separate foundation – that goes back to the days when we separated from eBay, it was a very strategic decision, early on. So we have naturally housed the impact investing practice within the parts of the organisation that do investing; and we’re making impact investing commitments from our balance sheet. It allows the impact investments team to sit within the other investment functions within the corporation, which just makes it easier from a decision-making standpoint. It’s very embedded into the way we do business, in the DNA of the company, where our mission is to democratise access to financial services.

PayPal has consciously made a choice to embed social impact within our business


PP: What are the main challenges you’re facing?

JG: One of the challenges is that impact investing, and investing in these types of opportunities, is new to PayPal. We have banking relationships, but we don’t have banking relationships with small, US$100m to US$500m banking institutions. So there’s extra diligence and extra hurdles that we have to go through in order to get those accepted and in line with our treasury investment criteria. 

The impact of investing or making deposits with those institutions is very clear, so they’re easy hurdles to get over. But it’s just fitting in something new into a business that is running in a certain way, so we’ve had to develop new investment processes and protocols for how we handle fund investments and how we handle deposits into smaller institutions.


PP: What are the constraints of investing from your balance sheet?

JG: In a typical investment, you’re looking at the balance between risk and return. In treasury, we’re looking at risk, return and liquidity – and then we add impact onto that, so we evaluate all of the investments on a risk, return, impact, and liquidity standpoint. Preservation of capital is key: this is cash of the business. So the preservation of capital as well as the depth of the impact are the strongest things that we’re balancing. 

Preservation of capital is key: this is cash of the business


PP: How do you know you are creating the impact you’re looking for?

JG: When we screen the investment, we look at the track record of the fund manager or bank in reporting on impact. We’re also looking at other factors, like who the decision-makers are – especially with respect to the funds: are they representative of the communities that we want to serve with this capital? 

In terms of measuring our impact, as our overall goal is to drive financial health and financial wealth for Black and other underrepresented communities, we are tracking different metrics based on each different organisation. For the minority depository institutions and CDFIs, we will track things like the number of loans, mortgages and jobs that they’ve helped create. From the fund manager perspective, our impact thesis here is how we’re really helping to diversify and build a more inclusive VC and tech ecosystem, so we’re looking at the diversity metrics of the fund manager on its leadership, on its team and on its portfolio companies.


PP: How do you make sure that the investments you make are based on the real needs of beneficiaries?

JG: Partnership is key. We know that we are not the experts in this – just because we hold the money doesn’t mean that we know the answers – so we have to choose the right partners who have been doing this work for years. Most of the financial institutions we’ve invested in are decades-old institutions who know how to serve these communities – and our capital is helping them grow so they can serve more individuals.

From the fund manager perspective we’re trying to help build a more diverse ecosystem. You have to look for different organisations and different backgrounds and experiences in order to bring that diversity to the sector. 


PP: Are there any successes you are particularly proud of?

JG: We’re still in the early days on our impact investing journey, and closing the racial wealth gap and empowering women are very, very large and lofty goals.

But of the successes that I see, one is the ability to catalyse other capital into this space. For example, one of our partners, Optus Bank, is a CDFI and MDI in Columbus, South Carolina. It was a less than US$100m institution when we first decided to make a US$50m deposit with them. They have since grown to almost US$400m in assets. They said that PayPal coming in and making that big commitment – the first large corporate commitment they had – ushered in other investors. And we’ve seen that in most of our investments.


PP: What lessons have you learned?

JG: When we first thought about how we can diversify tech, we looked at what our ventures team [which is not focused on impact] could do. But our ventures team primarily does investments in Series B and onwards, and entrepreneurs of colour typically face a lot more hurdles with that early-stage seed financing. 

We realised that we could, one, scale more quickly and two, reach those earlier-stage founders, if we invested in funds [rather than doing it ourselves]. That partnership approach has proved really to be key in all of our impact work.


PP: The Global Impact Investing Network has launched a new initiative on corporate impact investing, and in its latest research identified it as an area with strong growth potential. What do you think can be achieved?

JG: We made a US$600 commitment from our balance sheet… we have developed a portfolio that includes deposits, debt and equity. Now, some of those are more “treasury-like”, like a deposit, than others – you don’t see a lot of treasuries investing in equity fund investments. 

But there are so many different impact investments that you could have, so depending on its risk appetite, any corporation could build a portfolio of impact investments. That’s what the goal of the GIIN Corporate Impact Investing Initiative is – to see what models are out there of what’s being done, and to figure out if we can coalesce and share different ideas among corporates, and usher in new corporates to think about how they can use dollars to have impact.


PP: What would you tell other companies that are considering impact investing?

JG: Based on whatever you want to invest in, there is a product for you. Corporations can make a bold commitment to this and you can find the right investments within your risk appetite to achieve impact goals. All you need is the will to do it, and a leadership at the top that is supportive of it – and then you’re off to the races. 


PayPal at a glance

  • Established: PayPal: 1998; first impact investing commitment: 2020
  • Location: California-based, invests across the US
  • Sectors of investment: financial services, tech
  • Objectives: to close the racial wealth gap and to advance gender equality
  • Investees: minority depository institutions / community development finance institutions; venture, private equity and real estate funds
  • Type of investment: equity, loans, deposits, through two commitments made from company’s balance sheet
  • AUM: US$600m dedicated to impact investing
  • Number of employees: two dedicated to impact investing within the treasury team (30,000 PayPal employees in total)


Interview edited for length. 

Top picture credit: rawpixels

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