Investing to Stop Mass Incarceration

Written by: Sonia Kowal

Date: January 29, 2016

It is clear that our justice system is designed for control rather than healing. And with the alarming demographics of national incarceration rates, it’s also clear that it helps facilitate an economy of exclusion that considers many people of color to be unemployable and disposable.

As a global top-down investor, Zevin Asset Management approaches investing by looking at the big picture of what’s going on around the world. We can’t ignore how mass incarceration affects – and undermines – the financial health of our institutions by shutting people out of real economic opportunity and driving income inequality. Foundations committed to social justice are uniquely poised to address this social and economic issue both in their work, and in their investments.

For example, the widespread and often irrational use of criminal background checks in employment decisions fuels a vicious cycle that pushes many formerly incarcerated people back to prison. This is something that investors are starting to chime in on – educating companies about this issue and then urging them to take action. We recognize their legitimate concerns about the risk of hiring workers with criminal histories, but companies and the people who work there must understand their role in recidivism. Providing formerly incarcerated people with paths to employment is one way to break the cycle.

Ban the Box is a great example of reform to end discrimination in the workplace. The campaign has persuaded more than 100 cities across the country to pass legislation that removes criminal history checkboxes from job applications. However, private employers are largely exempt. To maximize the impact of improving the employment prospects of people with records, companies must instigate a more thoughtful review of their hiring processes. Concerned foundations should have their investment managers investigate where the companies they invest in stand on this issue.

Sadly, for-profit prisons have an interest in maintaining the status quo, not rehabilitating inmates, to drive more repeat business. The more people that are in prison, the more money they make. Other companies also benefit from our system of mass incarceration – banks and municipalities fund prison construction, some companies use prison labor to lower costs, and others like CenturyLink charge hugely inflated prices for inmates to keep in touch with their families. As noted in “Why We Must Divest from Mass Incarceration,” featured in the November 2015 issue of NCRP’s Responsive Philanthropy, there is a whole system that profits from incarceration – especially devastating to communities of color.

The American Friends Service Committee’s recent mapping of all of the main corporate players involved in the privatization of punishment, ranging from for-profit prisons to privatized services, can be used to put shareholder pressure on these companies, shaming them in the way that the climate change movement is starting to do with fossil fuel companies.

As investors, we should work to:

  • Divest from companies that profit from mass incarceration.
  • Understand the institutional racism in company practices.
  • Engage companies on prison labor.
  • Ask companies to thoughtfully review their criminal background check policies.
  • Urge companies to pay a living wage.
  • Urge companies to locate facilities in low-income communities and provide good jobs there.
  • Consider social impact bonds that target recidivism.
  • Support worker-owned cooperatives and other social enterprises that employ formerly incarcerated individuals.

On a practical level, foundations can:

  • Talk with their investment managers about why these strategies are important and challenge them to think about these issues from a moral perspective.
  • Update their investment policy statements to integrate how their investment managers should consider their mission.
  • Communicate changes to their managers and let them know that they will be held accountable.

As investors but also as citizens, we need to educate those outside of our echo chamber, and act on issues of racial equity and economic justice. This last part is the most challenging as we need to build new economies and systems not yet in place. We must recognize that finance is fundamentally about serving society, and therefore, serving people – not the other way around. We all have a role to play to ensure that our society doesn’t lose sight of this.

Sonia Kowal is president of Zevin Asset Management, LLC. Follow @ZevinAssetMgmt on Twitter.

CC image by Jonathan McIntosh.