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‘Fiscal Justice Ratings’ fights police brutality with finances


The ratings also recognize the potential costs of police misconduct, which traditional rating agencies tend to ignore. In one exception that illustrates how police killings can destabilize city budgets, Moody’s cut the bonds of Ferguson, Mo., after a white police officer shot and murdered Michael Brown, an unarmed black teenager, in 2014. Moody’s cited “the potential financial impact of ongoing litigation costs,” legal settlements and negotiations with the Justice Department to overhaul the city’s legal system.

“The ability to clearly and accurately distill all of the many tax fairness risks into outlook is much needed in this market,” said Mr. Wallace.

Activest, which Mr. Wallace founded six years ago with Ryan Bowers, a racial equity advisor, plans to publish research reports and assessments for as many as 50 U.S. cities. The first aim is to expose police schemes, both public and private, and identify cities most at risk of failing to pay or meet other obligations.

But the ultimate goal is to use the bond market to curb police brutality and make cities more equitable. While investors look for socially responsible investments, Mr. Wallace believes Activest’s tax fairness ratings can influence bond prices and thereby interest rates. By attracting more investors, a city would lower its borrowing costs, improve budgets and potentially allow politicians to lower taxes or at least spend money elsewhere. And that could be an incentive to treat citizens more fairly.

Municipal bonds were the original socially responsible investment. In ubiquitous TV commercials running in the 1970s and 1980s, bond seller Jim Lebenthal stood in front of landfills, power plants and bridges to spread the idea that investing in local government debt was putting money into a better America.

But the modern iteration of socially responsible investing, known as the environmental, social and governance or ESG movement, has largely driven the muni bond market, and when ESG investing tactics are applied to muni bonds, the focus is usually on the environment. issues.

One of the reasons for this, muni market experts say, is a lack of data. Larry Bellinger, chief of municipal bonds research at AllianceBernstein, which manages $55 billion in local government debt, said he had found relatively adequate research on carbon footprints and natural hazards, but that “data poses a problem on social and judicial issues.”

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