Investors must pledge to stop exploiting and extracting from the poor and communities of color. One relatively straightforward and easy approach would be not to invest in the construction of prisons and jails.
The municipal bond market finances essential infrastructure that generally enhances our collective well-being. Aiding, abetting and investing in the construction of jails and prisons is a glaring and horrific exception.
We, as an industry, have a unique opportunity to foster and uplift respect for human dignity in a world that features less and less of it on a daily basis. There is a broad, deep and robust opportunity set of available investments that lift people up, do not contribute to incarceration, and do not sacrifice returns. It is not difficult to avoid investing in prisons and jails and the harm they inflict on communities; investing in incarceration is largely a conscious decision, since the use of proceeds is detailed in every municipal bond offering.
Knowing what we know, asset managers and capital market participants must ask and answer a relatively simple question: How will we choose to make money on behalf of ourselves and our clients?
Reclaiming the purpose of public finance
The municipal asset class is the original impact investment, as the purpose of government is to respect, protect and fulfill the human rights of its citizens. Access to health care, affordable housing, education, clean water, sanitation, low-cost mobility and renewable energy are foundational human rights directly provided by municipalities and supported by “we the people.”
This is the municipal bond market’s calling card. We build stuff! That “shining city upon a hill?” Municipal bonds financed its construction and fostered economic opportunity for individuals and the collective community.
At a tenuous moment in history where politicians and pundits are intent on promoting division and building spaces of incarceration, we as investors have the agency and the responsibility to uplift and center generative, sustainable and transformative investments that foster abundance for all people.
Divesting from prison construction
In addition to wearing my investor hat as the founder of Clarion Call Capital, I am the co-founder of The Investors Circle Toward Decarceration. We work with investors, civil society and system-impacted people and communities to advocate for divestment from projects of harm, exploitation and brutalization — i.e. prisons and jails — and invest instead in infrastructure that spurs societal and environmental benefit for marginalized communities.
Our country is on the precipice of a new prison and jail boom. In September, Ohio issued over $100 million of tax-exempt bonds to fund the construction and rehabilitation of adult correctional facilities across the state. More than $30 billion in projects is planned over the coming years, including over $10 billion for jails in New York City to replace Rikers Island. The vast majority of these facilities will likely be funded with municipal bonds. Yet a plethora of evidence suggests that the criminal legal system fails to rehabilitate while entrenching white supremacy and controlling communities of color.
The construction of prisons and jails represents a tiny slice of the market, but a huge source of harm. The municipal sector is approximately $4.5 trillion, with outstanding prison and jail bonds making up a very small percentage of the overall market. Even if the additional $30 billion of projects being planned were entirely funded with municipal bonds, the prison and jail infrastructure would remain a minimal proportion of the overall market. Investing in it would have a negligible impact on performance while exposing investors to claims of financially benefiting from an industry well known for human rights abuses.
We have a choice: Build opportunity or fund harm
As an impact investor, I challenge municipalities to think more creatively about infrastructure. The municipal asset class builds opportunity and lays the literal and figurative groundwork for growth and prosperity. Constructing prisons and jails is society’s admission that it has failed to address people’s basic health and well-being at the front end of the life cycle.
Instead, market participants and community residents should be in a deep discussion around creating a built environment that promotes prosperity. Jails and prisons are the antithesis of “palaces for the people.” They are places of abuse, cruelty and control that no amount of supposed carceral humanism can offset.
Racism and abuse are distinct features of the criminal legal system, not bugs. The municipal market ecosystem of bankers, underwriters, bond counsel, municipal advisors and, of course, investors must acknowledge the harm that “correctional” systems inflict on individuals, families and communities. Participation in the next boom of prison, jail and detention center construction would be a money grab for bond market practitioners seeking league table dominance within a zero-sum game.
Our industry can and must do better.
Eric Glass is the founder of Clarion Call Capital and the co-founder of The Investors Circle Toward Decarceration.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
